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n the foreign exchange market, how does a change in expected future U.S. exchange rate affect the demand for dollars?

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter4: Exchange Rate Determination

Section: Chapter Questions

Problem 14QA

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Chapter 19

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QUESTION 15 When considering long-term foreign exchange fluctuations which of the following cause- effect relationships is true? options A. As inflation decreases, the real interest rate decreases and the currency weakens. B. When unemployment decreases, the local economy is stronger and the currency strengthens. C.Greater liquidity and smaller spreads lead to stronger local currency. D.Interest rate increases indicate weaker monetary policies which make a country less attractive to foreign investors and result in weaker local currencies. QUESTION 15(B) The inside market at a pure order driven exchange is 40 bid, 40.5 asked for ABC. Brokers then submit a limit buy order at 40.125, and a limit sell order at 40.425. If you then submit a small buy market order, at what price will your order be filled? options A.40 B. 40.625 C. 40.5 D.40.425 E. 40.125
In a floating exchange rate system: Question 15 options: The Balance of payments will always equal the government budget The Balance of Payments should always be in surplus The government intervenes to influence the exchange rate The exchange rate should adjust to equate the supply and demand of the currency
13 what is the difference between the exchange rate in close economy and open economy
International Finance (chapter 21) 7 7.What are the main arguments presented against flexible exchange rates?
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.
Question 22 Which of the following statements relating to foreign currency translation and remeasurement is correct? If a foreign entity's recording currency is not it's functional currency, but the functional currency is the reporting currency, translation using the current rate method is not required. if a foreign entity's recording currency is not it's functional currency, remeasurement into the functional currency using the temporal method is required If a foreign entity operates in a highly inflationary economcy, the reporting currency of the U.S. parent-the U.S. dollar, should be used. All of these statements are correct
Question 4 There are two main functions of foreign exchange market; to convert the currency of one country into the currency of another, and to provide some insurance against foreign exchange risk. a. Define foreign exchange risk and explain the differences between spot exchange rates, forward exchange rates, and currency swap in order to insure against foreign exchange risk.
D3 Suppose the 1-year domestic interest rate is 0.28, keeping in mind that means (100\times×0.28)%. Suppose also that the 1-year expected exchange rate is 59, and the current spot exchange rate is 50, both measured in domestic currency per foreign currency. What is the 1-year foreign interest rate according to uncovered interest parity?