International Financial Management
14th Edition
ISBN: 9780357130698
Author: Madura
Publisher: Cengage
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What is a eurodollar? If a French citizen deposits $10,000 in Chase Manhattan Bank in NewYork have eurodollars been created? What if the deposit is made in Barclay’s Bank in London?In Chase Manhattan’s Paris branch? Does the existence of the eurodollar market make theFederal Reserve’s job of controlling U.S. interest rates easier or more difficult? Explain.
If a French citizen deposits $10,000 in Chase Bank inNew York, have Eurodollars been created? What if the deposit is made inBarclays Bank in London? Chase’s Paris branch? Does the existence of theEurodollar market make the Federal Reserve’s job of controlling U.S. interest rates easier or more difficult? Explain.
To force the value of the British pound to depreciate against the dollar, the Federal Reserve should:
A. sell pounds for dollars in the foreign exchange market and the Bank of England should sell pounds for dollars in the foreign exchange market.
B. sell dollars for pounds in the foreign exchange market and the Bank of England should sell pounds for dollars in the foreign exchange market.
C. sell dollars for pounds in the foreign exchange market and the Bank of England should sell dollars for pounds in the foreign exchange market.
D. sell pounds for dollars in the foreign exchange market and the Bank of England should sell dollars for pounds in the foreign exchange market.
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- Consider the strategies used by your government, in the country your currently reside and currentmanagement of the exchange rate.Now record, in your journal, your response to the following questions, in 700 words or less: How is the exchange rate policy in your own jurisdiction managed by government? What, in your opinion, are the strengths and weaknesses of your government’s policies? Identify one MNC that may, or may not, benefit from the operation of your nationalexchange rate policy and justify your position.arrow_forwardImagine an American MNC. Why it might decide to borrow in a country such as Brazil, where interest rates are high, rather than a country like Germany, where interest rates are low? Discuss why this may be the best strategy for the firm, given your understanding of the relationship between inflation, interest rates, and exchange rate.arrow_forwardWhy might a foreign government’s policies be closely monitored by investors in other countries, even if the investors plan no investments in that country? Explain how monetary policy in one country can affect interest rates in other countries.arrow_forward
- If US dollars gets 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?arrow_forwardA bank is quoting the following exchange rates against the dollar for the Swiss franc and the Australian dollar: SFr/$ = 1.5960 − 70 A$/$ = 1.7225 − 35 An Australian firm asks the bank for an A$/SFr quote. What cross-rate would the bank quote?arrow_forwardWhich of the following is an example of economic exposure but not an example of transaction exposure? A. A decrease in the Swiss franc's value decreases the dollar value of interest payments on a Swiss deposit sent to a U.S. firm by a Swiss bank. B. An increase in the pound's value increases the U.S. firm's cost of British pound payables. C. A decrease in the peso's value decreases a U.S. firm's dollar value of peso receivables. D. An increase in the dollar's value hurts a U.S. firm's domestic sales because foreign competitors are able to increase their sales to U.S. customers.arrow_forward
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