Suppose the MXN (spot) devalued by 15%, the hotel room in Mexico would now sell for __________Mexican Pesos which would equal ___________US dollars. $1=20.1212 MXN (spot) 1/20.1212= > 1 MXN= 0.0497 $
Q: Under conditions of purchasing power parity (PPP), a country with a relatively _______ expected…
A: Purchasing Power Parity is used as a measure to compare the productivity and standard of living…
Q: Are the revenues, salvage value, and working capital are responsive to the general inflation rate?…
A: Yes, revenues, salvage value, and working capital are responsive to general inflation rate in the…
Q: Assume that interest rate parity holds. The U.S. five‑year interest rate is 0.07 annualized, and the…
A: Here, we calculate the given as follow;
Q: Problem #6: Economist As an economist for the Canadian government, you need to ensure that our…
A: The purchasing power of currency is defined as the quantity of goods that can be bought with one…
Q: The oneyear interest rate in New Zealand is 4 percent. The oneyear U.S. interest rate is 10 percent.…
A: Here, we calculate the given as follow;
Q: tion on October 1. He is worried about the increasing forex prices, and wants to lock the forex rate…
A: * SOLUTION :- Given that ,
Q: uppose the annual interest rate is R = 0.10 (10%). If the expected inflation rate is πe= 0.04 (4%)…
A: annual interest rate is R = 0.10 (10%) expected inflation rate is πe= 0.04 (4%)
Q: he inflation rate is expected to be 4.5% per year into the foreseeable future. How many years will…
A: let present value of Peso = 1 Future value = 80 % of 1 = 0.8 inflation rate = 4.5 %
Q: Your U.S. based MNC has a factory in Brazil. You will need to purchase an intermediate part on June…
A: The spot exchange rate is the current and prevailing exchange rate. It is given the value of one…
Q: Suppose that the local real interest rate rises relative to real interest rates in other countries.…
A: There is something else to worldwide trade besides the progression of labor and products across…
Q: 5,000,000 Japanese yen 60 days from now. You decide to hedge your position by selling Japanese yen…
A: *Answer:
Q: May the price in the contract of sale be in dollars? A. Yes. As long as the price can be converted…
A: When the price in the contract of sale is in dollars then it is acceptable to both the parties…
Q: what is the price of the system in US dollar
A: ‘Exchange Rate’ means the price(P) of the currency of one country in terms of foreign currency. It…
Q: Eurobike, based in Germany will need TL2 mn in 2 years to pay for imports. The annual interest rate…
A: The spot rate on an interest rate, a commodity, a securities, or a currency is the price stated for…
Q: D. r$ = 20%
A: The equation that indicates the relationship between the interest rates of nations and their…
Q: Injections include Business savings Consumer savings Taxes Exports Both business and consumer…
A: In an economy, injection and leakage are the concepts used to analyze the National income as…
Q: Suppose you have a 1,200,000 US dollar payable coming due in June and that the spot today is .98…
A: Hedging: It is the function of multinational companies and they use this policy to reduce their…
Q: 15. Assume the Canadian dollar is equal to $0.88 and the Peruvian "sol" is equal to $0.35. The value…
A: The correct answer is given in the second step.
Q: T Khan is a U.S.-based investor. Mr. Khan does not believe that the international Fisher effect…
A: As given in the question: Current interest rate (Country S) = 12% Interest rate (Country U) = 8%…
Q: If Juana contracts to buy U.S. office equipment in U.S. dollars and her domestic currency…
A: Currency depreciation means reduction in the value of currency in compared to other currency in a…
Q: Investors may view the euro area with suspicion because one of its member's public debt increases…
A: The outflow or the inflow of a currency depends upon its relative strength in the international…
Q: Suppose Emma owns an investment portfolio. Last year, she earned a 3.65% portfolio return. During…
A: answer is given below
Q: The bank invests USD $100 million in assets to yield 6.0% and EUR 100 million to yield 8.0%.…
A: We are going to calculate actual position of portfolio by converting USD into EUR. The total capital…
Q: Let's say we expect the inflation rate to be 7 percent in a year, 5 percent in two years and 3…
A: We are going to use fisher identity to answer this question.
Q: If in a given situation, Px = 150, Pm = 180 Zx = 160 and Zm = 120 what will be the value of double…
A: Double factorial terms of trade was given by Jacob Viner. The double factorial terms of trade imply…
Q: As an economist for the Canadian government, you need to ensure that our dollar is strong enough to…
A: This question is related to inflation. Inflation is defined as a sustained increase in the general…
Q: If euros can be obtained at € 0.9/$, and pounds can be obtained at £ 0.7/€, the cross rate between…
A: In the foreign exchange market, the value of a currency may differ with respect to different…
Q: You observe that the inflation rate in the United States is 3.6 percent per year and that T- bills…
A: Inflation occurs when the price level of all goods and services in the economy experiences a…
Q: if you expect the inflation rate to be 15 percent next year and a one-year bond has a yied to…
A: Inflation rate = 15 Yield to maturity = 7 %
Q: Suncor Energy is an oil company that extracts oil in Alberta and sells its oil for U.S. dollars.…
A: The exchange rate basically refers to the rate at which one currency trades against another.If the…
Q: Suppose you purchase a $1,500 TIPS on January 1, 2020. The bond carries a fixed coupon rate of 5.5…
A: Given information: Purchase price = $1500 Fixed coupon rate = 5.5%
Q: Diego buys a one-year Argentinean government bond for 100 pesos. If the nominal interest rate on the…
A: Given, Government bond = 100 pesos Nominal interest rate = 33% Expected inflation = 33%
Q: Hong Kong, which has been pegging its currency, the Hong Kong Dollar, to the U.S. dollar, finds that…
A: It is an example of currency peg in which the government sets a certain fixed exchange rate for the…
Q: Suppose you have a 1,200,000 US dollar payable coming due in June and that the spot today is .98…
A: Foreign exchange: It is the level of exchanging of currency of one's economy in relation to another.…
Q: Suppose you take out a loan at your local bank. The bank expects to earn an annual real interest…
A: The nominal interest rate is the interest rate, arrived without adjusting for inflation, at which an…
Q: If you wanted to obtain an endorsement that automatically updates the level of property coverage…
A: Financial economics include all the various components that are used for finance and in the…
Q: Suppose a country has a money demand function (M/P)d= kY, where k is a constant parameter. The money…
A: The money demand function reflects the relationship between the nominal money supply (M), price…
Q: How do you record the following transactions into the US. Balance of Payments (BOP) in 2020? A…
A: The Balance of Payment is defined as the record of all global financial transactions made by the…
Q: Currently, interest rate on euro is near zero while the (Fed Funds) interest rate on dollar is about…
A: The forward conversion scale is the pace of trade, settled upon now, for an unfamiliar trade market…
Q: What is the formula to find the present-worth equivalent of the constant-dollar?
A: The current value of future cash flow provided a specified rate of return is known as the present…
Q: The current political and economic crisis deepened in Malaysia in 2021. Many currency forecasters…
A: Answer - Given in the question- The current political and economic crisis deepened in Malaysia in…
Q: A French citizen bought a house in London and rents out the house to local Londoners. O The…
A: The capital account in the balance of payments (BOP) is an account that records all transactions…
Q: The $TT appreciated by 0.07 percent against the Euro (EUR) over the period August 2021 and October…
A: Appreciation of a currency implies that its value has risen in terms of other currencies. For…
Q: Suppose a country has a money demand function (M/P)d=kY, where k is a constant parameter. The money…
A: Inflation: It refers to the increase in the economy's prices and services. The more inflation in the…
Q: Zoro agreed to make a loan to Kenneth based on an interest rate charge of 8% per annum. Which of the…
A: INTRODUCTION: INFLATION RATE: In economics, inflation is a general growth in the costs of products…
Q: Suppose that a U.S. company wishes to purchase goods from a German producer. The U.S. firm agrees to…
A: Given 3 month exchange rate EUR/USD = 0.95 dollars Total payment = 1 million Euros Payment made…
Q: rms to
A: Reverse innovation is an innovation being used first in the developing world before spreading it to…
Q: Constant dollars are dollars Select one: O a.corrected for general price level changes. Ob. issued…
A: Actual Dollars: The term actual dollars refers to the actual money that a person holds in his…
Q: Cherryland, an imaginary country somewhere in the world invests heavily in government and corporate…
A: * ANSWER :- As per given data , Cherryland is an imaginary country.Americans invest heavily in…
Suppose the MXN (spot) devalued by 15%, the hotel room in Mexico would now sell for __________Mexican Pesos which would equal ___________US dollars.
$1=20.1212 MXN (spot) |
1/20.1212= > 1 MXN= 0.0497 $ |
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
- In 30 days Radio Shack must pay yen to a Japanese supplier for a shipment of radios arriving then. Radio Shack can sell each radio for $100 and must pay its supplier ¥9,000 per radio; its profit depends on the dollar/ yen exchange rate. The current spot exchange rate, E$/¥ = $0.0105 per yen. Radio Shack will not have the funds to pay the supplier until the radios arrive and are sold. Over the next 30 days, the dollar may depreciate to $0.0115 per yen, and Radio Shack may incur a loss. Describe how Radio Shack can use a forward exchange deal to insure against the possibility that the depreciation of U.S. currency will turn a profitable importing deal into a loss.A US investor sees an arbitrage opportunity in the currency markets. The spot exchange rate between the Swiss Franc and US Dollar is 1.0404 ($ per CHF). Assume the continuously compounded interest rates in the US and Switzerland are 0.25% and 0%, respectively. The 3-month currency forward price is 1.0300 ($ per CHF). What is the theoretically correct forward price. What is the investor’s total profit (in CHF), assuming she begins by borrowing 1,000 CHF? ?Due to the integrated nature of their capital markets, investors in both the U.S. and U.K. require the same real interest rate, 3.2%, on their lending. There is a consensus in capital markets that the annual inflation rate is likely to be 2.1% in the U.S. and 3.6% in the U.K. for the next three years. The GBP/USD rate is currently 1.3081. What is your expected future spot for GBP/USD three years from now? (X.XXXX)
- Today the euro costs $1.35. If the dollar gains strength against the euro at a rate of 3% per year, how much will the euro cost (in dollars) after five years (a) $1.20 (b) $1.41 (c) $1.16 (d) $1.09.The spot rate for the Chilean peso is USD/CLP 812.88. The 1-year interest rate in the U.S. is 5.10% and the 1-year interest rate in Chile is 8.92? What is the 1-year forward rate for the Chilean peso? A. USD/CLP 842.4252 B. USD/CLP 823.3401 C. USD/CLP 798.6490 D. USD/CLP 784.3710HP a US-based corporation exports computer printers to Brazil, whose currency, there is (symbol R$) has been trading at R$3.40/US$. Exports to Brazil are currently 50,000 printers per year at the reais equivalent of $200 each. A strong rumor exists that the reais will be devalued to R$4.00/$ within two weeks by the Brazilian government. Should the devaluation take place, the reais is expected to remain unchanged for another decade. Accepting this forecast as given, HP faces a pricing decision that must be made before any actual devaluation: HP may either (1) maintain the same reais price and in effect sell for fewer dollars, in which case Brazilian volume will not change, or (2) maintain the same dollar price, raise the reais price in Brazil to compensate for the devaluation, and experience a 20% drop in volume. Direct costs in the U.S. are 60% of the U.S. sales price. What would be the short-run (one-year) implication of each pricing strategy? Which do you recommend?
- a) Subsidiary A of a U.S. Corporation has net inflows in Australian dollars of A$1,000,000, while Subsidiary B has net outflows in Australian dollars of A$1,500,000. The expected exchange rate of the Australian dollar is $.55. What is the net inflow or outflow, as measured in U.S. dollars? b) If you are a U.S. importer of Indian goods and you believe that today’s forward rate of the INR is a very accurate estimate of the future spot rate, do you think INR call options would be a more appropriate hedge than a forward hedge? c) Under what conditions would a U.S. parent’s subsidiary consider using a “leading” strategy and a “lagging” strategy to reduce its transaction exposure? ExplainSony is exporting its newest gaming system to the US. The system costs 40,800 yen in Japan. If the dollar is valued as 102 yen, what is the price of the system in US dollars? Show your work.Suppose Australia has an annual 6% inflation rate, while the annual growth rate of the nominalexchange rate, expressed in euros per Australian dollar, is 4%. If purchasing power parity holds,what is the annual inflation rate in the Eurozone?
- Eurobike, based in Germany will need TL2 mn in 2 years to pay for imports. The annual interest rate in the next 2 years is 3% in Europe and 10% in Turkey. Assume interest rate parity holds. Determine the appropriate forward premium or discount on TL? Calculate the €s Eurobike will need in 2-years to make the payment, assuming spot rate of EURTL is 7?Your rich aunt is going to give you an end-of-year gift of $1,000 for each of the next 10 years. The general price inflation is expected to average 6%per year during the next 10 years, and the real interest rate is 4% per year. a. What is the equivalent value of these gifts at the present time? b. What is the current PW of the gift? c. What is the MARR?Your company expects to receive 5,000,000 Japanese yen 60 days from now. You decide to hedge your position by selling Japanese yen forward. The current spot rate of the yen is $.0089, while the forward rate is $.0095. You expect the spot rate in 60 days to be $.0090. How many dollars will you receive for the 5,000,000 yen 60 days from now if you sell yen forward?