Economics Q8 Suppose, on a certain day in February, a speculator observes the following prices in the foreign exchange and currency futures markets: GBP/USD spot: 1.6465 March futures: 1.6425 September futures: 1.6250 December futures: 1.6130 The speculator thinks that the markets are overestimating the weakness of sterling (GBP) against the dollar. How can she act on this view to make a profit? Under what circumstances do her actions lead to a loss?

Economics Q8 Suppose, on a certain day in February, a speculator observes the following prices in the foreign exchange and currency futures markets: GBP/USD spot: 1.6465 March futures: 1.6425 September futures: 1.6250 December futures: 1.6130 The speculator thinks that the markets are overestimating the weakness of sterling (GBP) against the dollar. How can she act on this view to make a profit? Under what circumstances do her actions lead to a loss?

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter13: Monetary Policy

Section: Chapter Questions

Problem 10E

See similar textbooks

Similar questions

Explain the relationship between a forward contract and a swap.
No1 ) Rob works as a loan officer for a major U.S. commercial bank, specializing in international loans. When considering loans to governments and businesses in other nations, Rob Multiple Choice must be aware of federal limits on the total amount of U.S. funds his bank can lend to foreign borrowers. can only make loans if his bank has funds in excess of those sought by American firms. is likely to approve loans to foreign borrowers if the return is high enough to justify the risk. must increase the dollar volume of loans they make to customers. must pay more to borrow from the Fed. have fewer funds available for lending. will find their balance sheets temporarily out of balance. must be careful to get approval from the International Monetary Fund. No. 2) When the Fed increases the reserve requirement, banks Multiple Choice must increase the dollar volume of loans they make to customers. must pay more to borrow from the Fed.…
The following table indicates the unit prices (in Rands) and quantities of three goods held in the national warehouse of a DIY (“do it yourself”) store for the years 2020 and 2021. Item 2020 2021 Unit Price (p0) Quantity (q0)) Unit Price (p1) Quantity (q1) Mineral spirits R23.70 30 R27.70 45 10mm spanner R49.00 60 R65.00 50 25mm brush R58.00 30 R63.00 40 Q.8.1 Using 2020 as the base year, compute the price relatives in 2021 for the 10mm spanner and the 25mm brush. Interpret your answers. (8) Q.8.2 Again, using 2020 as the base year, compute the Paasche price index for all of the items for 2021. Interpret your answer.
Case study— THE IMPACT OF THE OIL CRISIS ON SECURITY AND FOREIGN POLICY IN GCC COUNTRIES Given the fact that there is considerable diversity in the sources of oil as the energy needed by the world, and the fact that the United States, which is one of the largest consumers of energy from hydrocarbon, has become a significant producer of oil with technological development, it is likely that the current low oil price and volatility will continue for a considerable amount of time (Krauss 2016: 1). This volatility and low price are likely to continue to adversely affect GCC countries given their high dependence on oil and gas for government budgets. GCC countries in dealing with their foreign and security policies going forward during the current and future periods of oil price falls and volatility: Economic diversification that reduces overdependence on high oil prices is likely to support a GCC socio-economic and political future by ensuring that the oil price does not have a…
The rand is back as the world’s most volatile major currency, and options pricing suggests it’s not going to lose that status any time soon.A gauge of expected swings over the next six months, based on prices of options to buy and sell the rand, has jumped 175 basis points since the beginning of August to 16.1% on Thursday.Historical volatility climbed 61 basis points to 13.8%, the highest among 16 major developed-nation and emerging-market currencies tracked by Bloomberg.That took the spread of implied over realised volatility to the most in almost a year, as traders hedge against currency fluctuations amid the escalating trade war and concern about South Africa’s fiscal outlook. The premium of options to sell the rand over those to buy it, known as the 25 Delta risk reversal, widened 23 basis points to 338. South Africa’s currency has depreciated 6.5% versus the dollar in August, the worst performance among emerging-market currencies after Argentina’s peso.This week alone, it has…
If inflation rises, why is a bond more likely to be sold at a discount to its face value?Explain, with reference to the bond’s coupon.
Discuss crypto currency and blockchain technology and how they might impact the economy. Discuss some of the ethical considerations associated with AI and Automation and the impact they may have on the economy.
Briefly explain whether each of the following statements is true or false 4. The Tobin speculative demand model predicts that cash holdings decline when there is an increase in uncertainty about returns on other assets.
46. Suppose a financial analyst suggests that investors should now hold cash instead of stocks or bonds. The analyst is probably encouraging an increase in money holdings for which reason? portfolio demand present value demand speculative demand transaction demand precautionary demand
13. If differences occur for FX rates between three or more currencies, FX dealers may perform: A. locational arbitrage B. triangular arbitrage C. cross arbitrage D. speculative arbitrage
_______ is that money Which is accepted as a medium of exchange because of the trust between the payer and the Payee in economics
2-5 Kraft and Cadbury When Kraft recently bid $16.7 billion for Cadbury, Cadbury’s market value rose, but Kraft’s market value fell by more. What does this tell you about the value-creating potential of the deal? for one of the surgeries has increased by about 10% each year since 1995, whereas the other has increased by only 2% per year. Which of the surgeries has the lower inflation rate? Why?