Chapter 21, Problem 17QA

True or false A recent terrorist attack caused the US dollar to rise to unexpectedly high levels relative to all major currencies. To a Japanese investor, this excess return is most likely an example of systematic risks.

Effect of 9/11 on Forward Rate Forecasts The September 11, 2001, terrorist attack on the United States was quickly followed by lower interest rates in the United States. How would this affect a fundamental forecast of foreign currencies? How would this affect the forward rate forecast of foreign currencies?

29.World Central Banks Act as EU Growth Stalls The European Central Bank(ECB), along with its U.S., Japanese, Swiss, and British counterparts, announced they would inject extra U.S. dollar liquidity into banks facing a shortage of the U.S. dollars. European bank shares have plunged over the past weeks as their usual sources of U.S  dollars. have dried up on concerns they might be hit by a Greek debt default, and the announcement sparked a strong  bank and general stocks rally. Source: AFP, September 15,2011 How can group of central banks "inject extra U.S. dollar liquidity"? What will such an action do to the quantity of U. S dollars in Europe? 30.Banks in New Transylvania have a desired reserve ratio  of 10 percent and no excess reserves. The currency drain ratio is 50 percent. Then the central bank increases the monetary base by $1,200 billion. a. How much do the banks lend in the first round of the money creation process? b. How much of the initial amount…