Question

1. Consider a foreign exchange market between the euro (labeled E) and the Swiss franc (labeled F):

a) Illustrate the market equilibrium. Make up a specific
equilibrium exchange rate. Be sure to label the graph carefully and
completely. **Be sure to put quantity of Swiss Francs on the
horizontal axis. (10 points)**

b) **On a new graph**, label a situation where the
Swiss franc is an **undervalued** currency. Is
Switzerland running a balance of payments surplus or deficit? Can
you say anything about the Swiss current account in this situation?
Explain. (10 points)

c) How would the Swiss central bank maintain the exchange rate you picked in part b)? Be specific about whether they need to buy or sell official reserves. (5 points). You do not need to explain.

Answer #1

Foreign Exchange Markets
Example with francs and dollars :
1. Suppose the exchange rate between the Swiss franc and the
dollar is $0.50 per franc. What would be the exchange rate if it is
quoted as francs per dollar?
2. If you are contemplating buying a fancy Swiss watch that
costs 1000 francs, how much will it cost you in dollars?
3. If a Swiss is contemplating buying an American pocket
calculator that costs $100, how much will it cost...

Japanese Yen to Canadian Dollar 78.87 JPY/CAD
United States Dollar to Euro 1.16 USD/EUR
Swiss Franc to Canadian Dollar 0.69 CHF/CAD
Swiss Franc to Euro 1.08 CHF/EUR.
Determine the implied USD/JPY cross rate. (2 POINTS)
Suppose that the JPY to USD exchange rate is 111 JPY/1 USD. Is
there any arbitrage opportunity? Explain in words why you think
that is the case. (2 POINTS)
Assume you have 520 JPY. What is your profit in JPY, (show your
calculations)? (2 POINTS)

Finance
1. What is the exchange rate between the Swiss Franc (CHF) and
the dollar?
2. How many South African Rands (ZAR) can you buy with $500?
3. If you purchase New Zealand Dollar (NZD) 50,000 of supplies
from New Zealandhow much will this cost in US$ today?
4. In the above problem what can you do if you do not have to
pay for 30 days and you wanted to hedge your position? =
______________________________
What will it cost...

Think of Asset Approach and consider we have an equilibrium in
Foreign Exchange Rate Market (or Forex). Then consider the
following situation: Home Interest Rate (Policy Rate) decreases.
How does (spot) exchange rate change? Show your work on a graph and
explain the intuition step by step.

Use the foreign exchange and money market diagrams to
answer the following questions about the relationship between the
Indian rupee (INR) and the Euro (EUR). Let the exchange rate be
defined as rupees per yuan EINR/Eur. Suppose there is a fall in the
Indian nominal money supply. Make the usual assumptions: UIP holds,
PPP holds in the long run, prices are sticky in the short run,
(20p)
-- Now assume instead that the fall in money supply is
permanent. Illustrate...

1.Suppose that you are a
foreign exchange trader for a bank based in New York. You are faced
with the following market rates:
Spot exchange rate: SFr
0.9845/$.
6 month dollar interest rate =
1.0% per annum
6 month Swiss franc interest
rate = 0.25% per annum
6 month forward exchange rate:
= SFr 0.9785/$
a) Is there a Covered Interest
Arbitrage (CIA) opportunity here? Explain why or why
not.
b) Given the data in part (a), spell out the...

Problem 1: Economic Surplus Consider the monthly exchange in the
market for chocolate chip cookies, as described by the following
demand and supply equations. Note that the prices are in dollars
per box of cookies and the quantities are in hundreds of boxes.
Assume that the market for cookies is perfectly competitive.
Demand: P = 12 − 0.5QD and Supply P = 3 + Qs
A. Calculate the equilibrium quantity of exchange and the market
clearing price. (Show all your...

Question 1: Draw and
carefully describe a graph that utilizes the
Aggregate Demand/Aggregate Supply model that would illustrate the
current state of the aggregate economy in the
United States as of October 2020. The Aggregate Demand/Aggregate
Supply Model is first introduced in Chapter 11 (Links to an
external site.) of your text and is further explicated in Chapters
12 and 13. Make sure that you explain your graph in your own
words.
You should draw your own AD/AS graph which...

1. Draw the market for electric vehicles in initial equilibrium.
Be sure to label the axes and the curves/lines. Clearly demonstrate
the initial equilibrium price and quantity.
2. Suppose the cost of lithium-ion batteries, an input into the
production of electric vehicles, has dropped more steeply than
expected. Use the 4-step process to demonstrate the effect of this
change in the market for electric vehicles. Explain why you have
drawn the change you have.
3. Has there been a change...

1. In a closed economy, suppose GDP equals $21 trillion,
consumption equals $13 trillion, the government spends $7 trillion
and has a budget deficit of $800 billion.
Find government saving, taxes, private saving, national saving,
and investment.
Please show clearly how you calculated your final answers, and
box/circle your final answers (in trillions of dollars) with proper
labels
No credit will be given to an answer in incorrect units, in
notations that differ from what’s used in the lectures, without...

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