Let say, the exchange rate is $1.72 per pound, but the equilibrium exchange rate of pounds is $1.70. This implies that ______. A. U.S. demand for pounds would be less than the supply of pounds for sale and there would be a shortage of pounds in the foreign exchange market B. U.S. demand for pounds would exceed the supply of pounds for sale and there would be a surplus of pounds in the foreign exchange market C. U.S. demand for pounds would exceed the supply of pounds for sale and there would be a shortage of pounds in the foreign exchange market D. U.S. demand for pounds would be less than the supply of pounds for sale and there would be a surplus of pounds in the foreign exchange market

Let say, the exchange rate is $1.72 per pound, but the equilibrium exchange rate of pounds is $1.70. This implies that ______. A. U.S. demand for pounds would be less than the supply of pounds for sale and there would be a shortage of pounds in the foreign exchange market B. U.S. demand for pounds would exceed the supply of pounds for sale and there would be a surplus of pounds in the foreign exchange market C. U.S. demand for pounds would exceed the supply of pounds for sale and there would be a shortage of pounds in the foreign exchange market D. U.S. demand for pounds would be less than the supply of pounds for sale and there would be a surplus of pounds in the foreign exchange market

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter20: Short-term Financing

Section: Chapter Questions

Problem 2SBD

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The pressures on the foreign exchange market are such that they cause the British pound to depreciate against the US dollar. If the British pound tries to maintain the exchange rate against the US dollar, which of the following pressures will stop the pressure to devalue the British pound? a. Britain has to sell pounds to buy dollarsb. Britain will have to increase its money supply to create a domestic product c. Britain must buy pounds and sell dollarsd. Britain should do nothing as a fixed interest rate does not change
If US dollars gets lower interest rates in the United States. How would this affect a fundamental forecast of foreign currencies? How would this affect the forward rate forecast of foreign currencies?
Q1) The equilibrium exchange rate of pounds is USD1.70. At an exchange rate of USD1.72 per pound: * A) U.S. demand for pounds would exceed the supply of pounds for sale and there would be a shortage of pounds in the foreign exchange market. B) U.S. demand for pounds would be less than the supply of pounds for sale and there would be a shortage of pounds in the foreign exchange market. C) U.S. demand for pounds would exceed the supply of pounds for sale and there would be a surplus of pounds in the foreign exchange market. D) U.S. demand for pounds would be less than the supply of pounds for sale and there would be a surplus of pounds in the foreign exchange market.
Assume that the current exchange rate for Japanese Yen and U.S. Dollar is 140 JPY per USD. Considering Interest Rate Parity (IRP), if interest rates are higher in the United States than in Japan, what should we expect what for the forward exchange rate? IRP does not apply to this situation. O We should expect no change in the forward exchange rate. We would expect the forward exchange rate to move above 140 JPY per USD. We would expect the forward exchange rate to move below 140 JPY per USD.
Suppose the current exchange rate between the US dollar (USD) and the euro (EUR) is 1 USD = 0.85 EUR. Additionally, assume that the expected rate of return on US assets is 8% and the purchasing price of a US asset is $ 100. Calculate the expected rate of return on this US asset in terms of euros. [5] How does the ability of international investors to quickly and easily switch between domestic and foreign assets impact the relationship between exchange rates and asset prices, particularly in terms of expected rates of return?
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Suppose the Japanese yen exchange rate is ¥105 = $1, and the British pound exchange rate is £1 = $1.34. A. What is the cross-rate in terms of yen per pound? B. Suppose the cross - rate is ¥136 = £1. Is there an arbitrage opportunity here? If there is, explain how to take advantage of the mispricing.
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Suppose that you are a U.S.-based importer of goods from the United Kingdom. You expect the value of the pound to increase against the U.S. dollar over the next 60 days. You will be making payment on a shipment of imported goods in 60 days and want to hedge your currency exposure. The U.S. risk-free rate is 3.3 percent, and the U.K. risk-free rate is 1.8 percent. These rates are expected to remain unchanged over the next 2 months. The current spot rate is $1.3069. Calculate the no-arbitrage price at which you could enter into a forward contract that expires in 60 days. (X.XXXX)
per USD. Assume that the current exchange rate for Japanese Yen and U.S. Dollar is 140 JPY Considering Interest Rate Parity (IRP), if interest rates are higher in the United States than in Japan, what should we expect what for the forward exchange rate? We would expect the forward exchange rate to move below 140 JPY per USD. OIRP does not apply to this situation. We should expect no change in the forward exchange rate. We would expect the forward exchange rate to move above 140 JPY per USD.