132 Refer to the World View to answer two questions.WORLD VIEWZimbabwe Raises Key Interest Rate to 70%Harare Zimbabwe's central bank today raised its key interest rate from 50 percentto 70 percent. The governor of the Reserve Bank of Zimbabwe said the higherrate was intended to slow consumer spending, increase foreign buying ofZimbabwean dollars, and slow the rate of inflation, currently running atapproximately 200 percent a year.Source: News reports, September 12-15, 2019.According to the World View, after the key interest rate was raised, what wasInstructions: Enter your responses as a whole number. If you are entering any negative numbers be sure to include a negative sign (-)in front of those numbers.a. the nominal interest rate?percentb. the real interest rate?percent

From the world's view, the world interest rate can be calculated using the following two…

Answered: Refer to the World View to answer two…

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter8: Relationships Among Inflation, Interest Rates, And Exchange Rates

Section: Chapter Questions

Problem 44QA

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Similar questions

Some of the websites show graphs indicating how one currency has done relative to another currency. a. Over the past year, how has the pound performed against the dollar? Does the dollar buy more or less pounds today than it did 1 year ago? b. Over the past year, how has the dollar performed against the yen? Does the dollar buy more or less yen today than it did 1 year ago?
ABC Bank believes the New Zealand dollar will appreciate over the next five days from $.48 to $.50. The following annual interest rates apply: Currency Lending Rate Borrowing Rate Dollars 7.10% 7.50% New Zealand dollar (NZ$) 6.80% 7.25% ABC Bank has the capacity to borrow either NZ$10 million or $5 million. If ABC Bank's forecast is correct, what will its dollar profit be from speculation over the five-day period (assuming it does not use any of its existing consumer deposits to capitalize on its expectations)? Also, find % profit.
Cal Bank believes the US Dollar will appreciate over the next five days from GHS 4.48 to GHS 4.50. The following annual interest rates apply: Currency Lending Rate Borrowing RateDollars 7.10% 7.50%Ghana Cedis 6.80% 7.25% Cal Bank has the capacity to borrow either GHS 10 million or $5 million. If Cal Bank's forecast is correct, what will its dollar profit be from speculation over the five-day period (assuming it does not use any of its existing consumer deposits to capitalize on its expectations)?
Diamond Bank expects that the Singapore dollar will depreciate against the dollar from its spot rate of $.43 to $.42 in 60 days. The following interbank lending and borrowing rates exist: Lending Rate Borrowing Rate U.S. dollar 7.0% 7.2% Singapore dollar 22.0% 24.0% Diamond Bank considers borrowing 10 million Singapore dollars in the interbank market a nd investing the funds in dollars for 60 days. Estimate the profits (or losses) that could be earned from this strategy. Should Diamond Bank pursue this strategy?
A U.S. company can borrow 10,000 pounds in Great Britain for 6% interest, paying back 10,600 pounds in one year. Alternatively, the U.S. company can borrow an equivalent amount of U.S dollars in the United States and pay 13% interest. Assuming capital markets are efficient, estimate the expected inflation rate in the United States if inflation in Great Britain is expected to be zero.
Consider a bank policy to hold reserves equal to 15% of bank deposits. The bank currently has $25 million in deposits and holds $1 million of excess reserves. What is the required reserve on a new deposit of $500,000? Please answer in dollars. If the Fed decides to conduct contractionary monetary policy by selling $250 million in UST bonds, how much will the money supply change by if the required reserve ration is 15%? Please express you answer in millions of dollars.
Bank A expects the New Zealand dollar (NZ$) is going to appreciate in the next five days from $0.48 to $0.50, and the following annual interest rates are: Currency Lending Rate Borrowing Rate Dollars 7.10% 7.50% New Zealand dollar (NZ$) 6.80% 7.25% Bank A has the capacity to borrow either NZ$10 million or $5 million. If the bank's expectation is correct, the dollar profit can be generated over the five-day period is ___________. A. $134,862 B. $491,225 C. $503,320 D. $208,044
(a) Suppose that the current exchange rate between the U.S. dollar ($) and the pound sterling (£) is Se/$=0.75 (i.e. $1 = £0.75). The basket of goods and services consumed by a typical household cost £200 in the UK and $300 in the U.S. A one-year U.S. Treasury bill yields an annual rate of retum of 3%, while a comparable UK Treasury bill yields 5%. The Federal Reserve is expected to keep the U.S. inflation rate at 2% over the coming year, while the Bank of England is expected to keep the UK inflation rate at 3% over the same period. (1) Is the pound overvalued or undervalued relative to the dollar by the standard of absolute purchasing power parity?
In Japan, Honda’s export price per vehicle was 5 million yen when the exchange rate was 125 yen per US dollar ($). The expected inflation rate in the Japanese yen for next year is 1%. The standard inflation rate in the US is 3%. Honda is actively trying to limit the passing exchange rate changes in prices to 60% of annual changes (i.e., if, for example, the US dollar depreciates by 10% against the yen, Honda will consider depreciation of the US dollar by only 6% (=0.60*10%) to calculate the new prices of its vehicles in US dollars). What was the price in $ of a Honda at the beginning of the year? Considering purchasing power parity, what would be the expected exchange rate between the yen and the US dollar at the end of the year Assuming Honda wants to pass 60% of exchange rate changes to the vehicle price, what would be the price of a Honda vehicle at the end of next year in US dollars ($)?
Suppose it takes 1.3037 U.S. dollars today to purchase one British pound in the foreign exchange market, and currency forecasters predict that the U.S. dollar will depreciate by 15% against the pound over the next 30 days. How many dollars will a pound buy in 30 days?
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 30 days. You will be making payment on a shipment of imported goods in 30 days and want to hedge your currency exposure. The U.S. risk-free rate is 5.0 percent, and the U.K. risk-free rate is 4.0 percent. These rates are expected to remain unchanged over the next month. The current spot rate is $1.80. Required: Whether you should use a long or short forward contract to hedge the currency risk. Calculate the no-arbitrage price at which you could enter into a forward contract that expires in 30 days. Move forward 10 days. The spot rate is $1.83. Interest rates are unchanged. Calculate the value of your forward position.
Blue Demon Bank expects that the Mexican peso will depreciate against the dollar from its spot rate of $0.15 to $0.12 in 10 days. The following interbank lending and borrowing rates exist: Assume that Blue Demon Bank has a borrowing capacity of either $10 million or 70 million pesos in the interbank market, depending on which currency it wants to borrow. Assume 360 days in year for your calculations. Do not round intermediate calculations. Round your answers to the nearest dollar. How could Blue Demon Bank attempt to capitalize on its expectations without using deposited funds? Estimate the profits that could be generated from this strategy. Blue Demon Bank can capitalize on its expectations by borrowing (DOLLARS OR PESOS) , converting it to (DOLLARS OR PESOS), lending the (DOLLARS OR PESOS), and repaying to (DOLLARS OR PESOS) loan. The expected profit is $ BLANK? Assume all the preceding information with this exception: Blue Demon Bank expects the peso to appreciate from its present…

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