Macroeconomics
21st Edition
ISBN: 9781259915673
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Question
Chapter 21.A, Problem 1ADQ
To determine
Comparison of Bretton woods system with the gold standard.
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2. What has to be true of the capital account between two countries(in below question) if the current account is negative?
1. Assume the theory of absolute convergence is literally true. The current GDP per capita of Iran is $5000 and the current GDP per capita of Switzerland is $30000. What will happen to the difference between these two countries in the "long run"?
3. Assume you are thinking about buying a three year bond with a face of $1000 and coupon rate of 5% (paid every year including at maturity, so you receive three coupon payments). What is your valuation of this asset if your discount rate is 10%? 5%?
*Please answer question 1 & 3.
Table 18-3
Country
Units of Foreign Currency per U.S. Dollar
U.S. Dollars per Unit of Foreign Currency
Danish krone
5.00
EU euro
0.70
Refer to Table 18-3. Given the following exchange rates in the above table, what are the exchange rates stated as U.S. dollars per Danish krone and U.S. dollars per EU euro respectively?
Group of answer choices
0.02 dollars per krone and 0.70 dollars per euro
2.00 dollars per krone and 7.14 dollars per euro
0.05 dollars per krone and 1.30 dollars per euro
0.20 dollars per krone and 1.43 dollars per euro
Assume that the U.S. interest rate is 12 percent, while the British interest rate is 15 percent. If interest rate parity exists, then: O a.U.S. investors will earn 12 percent whether they use covered interest arbitrage or invest in the United States. O b. U.S. investors will earn a higher rate of return when using covered interest arbitrage than what they would earn in the United States. O c. British investors who invest in the United Kingdom will achieve the same return as U.S. investors who invest in the United States. O d. U.S. investors will earn 15 percent whether they use covered interest arbitrage or invest in the United States.
Chapter 21 Solutions
Macroeconomics
Ch. 21.1 - Prob. 1QQCh. 21.1 - Prob. 2QQCh. 21.1 - Prob. 3QQCh. 21.1 - Prob. 4QQCh. 21.A - Prob. 1ADQCh. 21.A - Prob. 1ARQCh. 21.A - Prob. 1APCh. 21 - Prob. 1DQCh. 21 - Prob. 2DQCh. 21 - Prob. 3DQ
Ch. 21 - Prob. 4DQCh. 21 - Prob. 5DQCh. 21 - Prob. 6DQCh. 21 - Prob. 7DQCh. 21 - Prob. 8DQCh. 21 - Prob. 9DQCh. 21 - Prob. 10DQCh. 21 - Prob. 11DQCh. 21 - Prob. 1RQCh. 21 - Prob. 2RQCh. 21 - Prob. 3RQCh. 21 - Prob. 4RQCh. 21 - Prob. 5RQCh. 21 - Prob. 6RQCh. 21 - Prob. 7RQCh. 21 - Prob. 8RQCh. 21 - Prob. 9RQCh. 21 - Prob. 10RQCh. 21 - Prob. 1PCh. 21 - Prob. 2PCh. 21 - Prob. 3PCh. 21 - Prob. 4PCh. 21 - Prob. 5P
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