Suppose Angola is experiencing an episode of hyperinflation. The currency in Angola is the second kwanza (which is actually the fourth currency called kwanza that has circulated since 1977). The currency code is (AOA).   Select all choices below that are implied by the statement if parity conditions (PPP, IRP, FEP) hold:   Nominal interest rates in Angola will exceed nominal interest rates in countries not experiencing hyperinflation. The value of the AOA is expected to drop to zero. Real interest rates in Angola will fall relative to countries without hyperinflation. The AOA is expected to depreciate against any currencies that are not experiencing hyperinflation.

Sing Tao wants to import goods for 2.54 million Australian dollar (A$) and pay to Australian exporter, WA Co., in one year. Sing Tao also wants to minimise its exchange rate risk for the payment of A$2.54 million by taking the money market hedging strategy. Calculate the Chinese yuan (CNY) costs using the money market hedging strategy based on the information in Table 1. (Enter the whole number without sign and symbol).     ff1

A carry trade is a trading strategy that involves borrowing low-interest currencies and buying high-interest currencies, with results that can be profitable. During much of the 2000s, Japanese yen interest rates were close to zero while Australia’s interest rates were positive. Investors pursued a carry trade strategy, investing billions in Australian dollars and driving that currency’s value up against the yen. According to the interest parity condition, such a strategy should not be systematically profitable: On average, shouldn’t the interest advantage of Australian dollars be wiped out by relative appreciation of the yen? Is the prevalence of the carry trade evidence that interest parity is wrong? What is the risk of investing in such a strategy? Incorporate the Japanese Yen/Australian Dollar exchange rate history in your discussion.

Under a fixed exchange rate regime, the central bank must act to keep: 01) i =E*i*. 2) E= 1. O 3) Y=Y*. 4) P = P. 5) NX = 0. 6) none of the answers is correct