What are two advantages and two disadvantages of a fixed exchange rate?

Q: Suppose that you observe the following exchange rates: $1.75/£; $.0075/¥; and £.005/¥. Is there…

A: Exchange rates: $1.75/Pound  $0.0075/ Yen Pound 0.005 / Yen

Q: critically discuss main causes of exchange rate volatility in the foreign exchange markets. Please…

A: Exchange rate volatility- It refers to the tendency of a currency of one country  to appreciate or…

Q: According to you what is likely to happen to the exchange rate taking nto account the combined…

A: Real interest rate can be defined as the rate that has been adjusted for the inflation. If exchange…

Q: Discuss how changes in the expected exchange rate affects current exchange rate

A: The rate at which one country currencies is exchanges with the currencies of another country, such…

Q: Give a detailed explanation of whether the following statement is true or false Call-put parity…

A: A portfolio consisting of a long put option and a short call option should be equivalent to a…

Q: Due to ____, market forces should realign the relationship between the interest rate differential of…

A: Arbitrage means buying and selling the asset in order to profit from its price between markets.

Q: The mobility of international capital flows is causing emerging market nations to choose between a…

A: Mobility of, Capital is a common phenomenon post-globalization of world Economy  The exchange rate…

Q: Explain how exchange rate fluctuations affect the return from a foreign market measured in dollar…

A: When doing business outside country of home currency dollars there is risk of change in exchange…

Q: how would market forces be affected? Does arbitrage opportunity destabilize foreign exchange…

A: Arbitrage is nothing but buying in one market with some price and selling the same with other market…

Q: What are two benefits of a single currency like the Euro?

A: In finance, a currency is a medium through which goods and services are exchanged between the buyers…

Q: Who are the major actors in the exchange rate market and what are their roles?

A: The exchange rate market is also known as the Forex, it is a market for the changing home currency…

Q: Assume that interest rate parity holds. When a currency trades at a forward premium,what does that…

A: When trading of currency is at forward premium, A situation where the currency’s forward price is…

Q: Define short exposure and explain the relationship between the variability of the domestic currency…

A: Domestic currency is referred to as the legal tender in an economy as well as issuance through the…

Q: Question Which of the following is a determinant of exchange rates? Answer a. A change in consumer…

A: Exchange rates are rates of foreign currency with respect to domestic currency. For example,  1 $ =…

Q: Would exchange rate changes always increase the risk of foreign investment

A: No, it is not necessary that the exchange rate changes always increse the risk of foriegn…

Q: e the real exchange rate is constant – say, at the level required for net exports (or the current…

A: Nominal exchange rate includes the exchange rate after consideration of inflation and real exchange…

Q: chains of events affected the Foreign Exchange Rates long term and short term

A: Factors affecting foreign exchange rates in short term: Interest rates: depreciation or appreciation…

Q: What is the benefits of floating exchange rates?

A: Floating Exchange Rate  refers to a methodology where price of currency of a nation is determined by…

Q: Does interest rate parity imply that interest rates are the same in all countries?

A: Introduction: When an interest rate on a domestic bond is equivalent to the interest rate on a…

Q: Explain how exchange rate fluctuations affect the return from a foreign market measured in dollar…

A: Introduction: Exchange rate is nothing but the country’s price expressed in terms of another…

Q: What is the difference between a spot rate anda forward exchange rate?

A: There are two types of currency exchange rates available namely forward exchange rate & spot…

Q: What is the effect on a country’s economy of an artificially lowexchange rate? Of an artificially…

A: An exchange rate is the money of one country versus another country's or economic zone's currency.

Q: What is meant by spot rate in case of foreign currency transaction?

A: Spot rate is the rate at which currencies can be exchanged right away. It is the current market…

Q: Assume that there are substantial capital flows among Country A, Country B and Country C. How will a…

A: The exchange rate is the rate that depicts the difference between the currencies of different…

Q: exchange rate regime,

A: The exchange rate refers to the price of the money of a country and relates to the value of…

Q: Discuss the condition under which exchange rate changes may actually reduce the risk of foreign…

A: Exchange rate changes are largely unpredictable. Exchange rates are nonstationary and may deviate…

Q: Explain how changes in interest rates are likely to affect exchange rates.

A: General Introduction: Exchange rates are very important factor in determining country's economic…

Q: age destabilize foreign exchange markets? If yes, which argument do you

A: Foreign exchange market : The foreign exchange market is the market where national currencies are…

Q: What are the advantages or the disadvantages of hedging with currency options as opposed to future…

A: Hedging is used to insulate the investor of the risks of currency fluctuations in an international…

Q: Define each of the following terms: d. Exchange rate risk; convertible currency; pegged exchange…

A: Introduction: The terms exchange rate, fixed exchange rate system, floating exchange rate are…

Q: What are three main stages at which could be considered the effect of exchange rates? Discuss them…

A: There are three main stages in the life of a transaction exposure that could be considered the…

Q: The bid-ask spread on an exchange rate implies _______. A. the transaction cost of foreign exchange…

A: Step 1 The spread of a bid-ask is the difference between the asking and bid prices in the market. A…

Q: What is the difference between spot and forward exchange rates?

A: Commodity market involves different rates for products depending on the trading transactions. The…

Q: llustrate the different factors that determine future foreign exchange rates in the long run

A: The question is based on the concept of determination and determinants of foreign exchange rate  in…

Q: Explain the need for and problems associated with forecasting foreign  exchange rate

A: An exchange rate forecast indicates the expectation about future value of exchange rates at a future…

Currency Market

The currency market, also known as the foreign exchange market, consists of currencies worldwide. This market determines the rate of all currencies based on the buying and selling of forex. It is an over-the-counter market. It is the largest and most liquid market based on trade volume.