Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Transcribed Image Text:E) In this economy, the exchange rate is related to per
capita income, interest rate, inflation rate and
unemployment rate as
Exchange=800+inflation rate-(inflation
rate)2+0.001×per capita income+Interest
rate+Interest rate2+0.11xUnemployment rate
i. Define exchange rate and explain the difference
between flexible exchange rate and dirty-float
exchange systems (2%)
ii. Mention two advantages associated with each
system of exchange rate explained above (2%)
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- Choose the correct answer and give short explaination. 3. Advantages of a fixed exchange rates includeA. Reduction in exchange rate risk for businessesB. Reduction in transactions costsC. Reduction in trading frictionsD. All of the abovearrow_forwardIf the U.S.DOLLAR is determined to be the functional currency, which of the following is usually used to restate to US$ monetary assets and liabilities to the reporting currency? I. The average exchange rate II. The historical exchange rate III. The current exchange rate A) III only. B) Either Il or III, depending on the nature of the item. C) I only. D) II only.arrow_forwardIf $1.68 equals to a pound and $1.39 equal to an Euro, what is cross rate between pound and euro (Pound/Euro rate)?arrow_forward
- Required: h) Determine for each, whether the interest parity condition holds or not, if ES = 1.10 $/€ (American terms) Please select the YES or NO in the last column of following table for your answers. Note: E denotes exchange rate. Interest rate for Dollar (R$) (%) 4 7 ·∞∞ 8 8 Interest rate for Euro (R€) (%) 2 2 6 4 Exchange rate of depreciation 2 5 0 3 (Uncovered) interest parity condition holds? YES/NO YES/NO YES/NO YES/NOarrow_forwardWhich of the following eliminates settlement risk? Trans-European Automated Real-Time Gross Settlement Express Transfer System (TARGET) TARGET2 payment system Continuous Linked Settlement (CLS) Intercompany net settlement systems Real-Time Gross Settlement (RTGS) systemsarrow_forwardF2arrow_forward
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