oday, the U.S. and British interest rates as equally attractive to Swiss investors holding Swiss franc. Assume that U.S. interest rate is going to increase while British interest rate stays the same, this implies that _______. A. the Swiss demand for dollars to increase and the dollar will depreciate against the Swiss franc B. the Swiss demand for dollars to increase and the dollar will appreciate against the Swiss franc C. the Swiss demand for dollars to decrease and the dollar will depreciate against the pound D. the Swiss demand for dollars to decrease and the dollar will appreciate again

oday, the U.S. and British interest rates as equally attractive to Swiss investors holding Swiss franc. Assume that U.S. interest rate is going to increase while British interest rate stays the same, this implies that _______. A. the Swiss demand for dollars to increase and the dollar will depreciate against the Swiss franc B. the Swiss demand for dollars to increase and the dollar will appreciate against the Swiss franc C. the Swiss demand for dollars to decrease and the dollar will depreciate against the pound D. the Swiss demand for dollars to decrease and the dollar will appreciate again

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter9: Forecasting Exchange Rates

Section: Chapter Questions

Problem 5ST

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Similar questions

1) The ER between the Swiss franc and the US dollar is one to one in the spot market. The interest rates in Switzerland and the US are .01 and .03 respectively. Swiss franc. What kind of arbitrage will induce a profit for you, if the forward rate is .96 Swiss francs equal $1? Assume you start with $1 million.
Given the interest rates in the U.S. and Canada are similar, if the Canadian dollar is expected to appreciate against the U.S. dollar, banks are most likely speculating on this anticipated exchange rate movement by borrowing ____ and investing in ____. A. dollars; Canadian dollar B. Canadian dollar; dollars C. Canadian dollar; Canadian dollar D. dollars; dollars
Mexican investors are benehting from covered interest arbitrage due to high interest rates on the Swiss francs. Which of the follow result from the act of this covered interest arbitrage? O a downward pressure on the franc's spot rate. Ob upward pressure on Mexico's interest rate. Odownward pressure on Mexico's interest rate Od downward pressure on the franc's forward rate
Assuming that existing U.S. one year interest rate is 8% and the Canadian one-year interest rate is 9%. Also assume that interest rate parity exists. Should the forward rate of the Canadian dollar exhibit a discount or a premium? If U.S. investors attempt covered interest arbitrage, what will be their return? If Canadian investors attempt covered interest arbitrage what will be their return?
If the Swiss franc depreciates against the U.S. dollar, can a dollar buy moreor fewer Swiss francs as a result?
Investors from Japan, Philippines, and China frequently invest in each other based on prevailing interest rates. If China’s interest rates increase, Japanese investors are likely to buy ____ peso denominated securities, and the Chinese yuan is likely to ____ relative to the peso. A. more; depreciate B. more; appreciate C. fewer; depreciate D. fewer; appreciate
What is likely to happen to an MNC in UK if the British pound appreciates: exports denominated in British Pound will probably increase. exports denominated in foreign currencies will probably increase. O All of these statements are correct. O U.S. sales will probably decrease. interest owed on foreign funds borrowed will probably increase.
Given the interest rates of the U.S. and Japan are similar but the Japanese yen is expected to appreciate against the U.S. dollar, you would choose to borrow ____ and investing in ____. A. yen; dollars B. dollars; dollars C. yen; yen D. dollars; yen
If the U.S. interest rate is higher than the U.K. interest rate, will the U.K. investors place short-term funds in the U.S.? Explain. Assume the investment is covered. If the rate of inflation in the European Union (EU) is above the rate of inflation in the U.S., by 4 percentage points and the dollar depreciates against the euro by 5% during the same time period, what is expected to happen to the real exchange rate? The e exchange rate is defined as the dollar price of euro($/€).
If the U.S. dollar appreciates, an MNC's _____. A. U.S. sales will probably decrease B. exports denominated in U.S. dollars will probably increase C. exports denominated in foreign currencies will probably increase D. interest owed on foreign funds borrowed will probably increase
Assume U.S. interest rates are generally above foreign interest rates. What does this suggest about the future strength or weakness of the dollar based on the IFE? Should U.S. investors invest in foreign securities if they believe in the IFE? Should foreign investors invest in U.S. securities if they believe in the IFE?
(B) Suppose that the demand rate of the Euro (€) against the Swiss Franc is 0.86 (1 Euro = 0.86 Swiss Francs), the annual forward rate is 0.87, the annual interest rate in Switzerland is 0.8% and the annual interest rate of the Euro is 0.4%, can a Swiss investor exercise Covered Interest Rate Arbitrage (OEM); Show what this investor needs to do