Question

The spot exchange rate between the dollar and the Swiss franc is a floating, or flexible,...

The spot exchange rate between the dollar and the Swiss franc is a floating, or flexible, What are the effects of each of the following on this exchange rate? a.There is a large increase in Swiss demand for US exports as US culture becomes more popular in Switzerland. b.There is a large increase in Swiss demand for US investments in US dollar‐denominated financial assets due to a belief that the US economy are imporoving markedly. c. Political uncertainties in Europe lead US investors to shift their financial investments out of Switzerland, back to the US. d. US demand for products imported from Switzerland falls significantly as bad press reports lead Americans to question the quality of Swiss products.

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

(a) Increase in Swiss demand for US exports will increase Swiss demand for dollar, which will shift the dollar demand curve rightward, appreciating the dollar and increasing exchange rate.

(b) Increase in Swiss demand for US dollar-denominated assets will increase Swiss demand for dollar, which will shift the dollar demand curve rightward, appreciating the dollar and increasing exchange rate.

(c) US investors shifting their investment from Swiss assets back to US will increase US demand for dollar, which will shift the dollar demand curve rightward, appreciating the dollar and increasing exchange rate.

(d) Lower US demand for Swiss products will decrease the demand for Swiss franc/euro and decrease the supply of US dollar, which will shift the dollar supply curve leftward, appreciating the dollar and increasing exchange rate.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
The spot exchange rate between the dollar and Swiss franc is a floating, or flexible, exchange...
The spot exchange rate between the dollar and Swiss franc is a floating, or flexible, exchange rate. What are the effects of each of the following 2 distinct scenarios on this exchange rate for dollar? Hint: Franc/Dollar is the exchange rate in interest. 1-There is a large increase in Swiss demand for US exports as US culture becomes more popular in Switzerland. A-Dollar depreciates B-Dollar appreciates C-Indeterminate D-Stay the same 2-There is a large increase in Swiss demand for investments...
In early 2012, the spot exchange rate between the Swiss Franc and U.S. dollar was 1.0404...
In early 2012, the spot exchange rate between the Swiss Franc and U.S. dollar was 1.0404 ($ per franc). Interest rates in the U.S. and Switzerland were 1.35% and 1.10% per annum, respectively, with continuous compounding. The three-month forward exchange rate was 1.0300 ($ per franc). What arbitrage strategy was possible? How does your answer change if the exchange rate is 1.0500 ($ per franc).
One year ago, the spot exchange rate between Japanese yen and Swiss franc was S_1Y/SFR =...
One year ago, the spot exchange rate between Japanese yen and Swiss franc was S_1Y/SFR = ¥160/SFr/ Today, the spot rate is S_0 ^¥/Sfr = ¥155/SFr. Inflation during the year was p^¥ = 2 percent and p^SFr= 3 percent in Japan and Switzerland, respectively. a.) What was the percentage change in the nominal value of the Swiss franc? b.) One year ago, what nominal exchange rate would you have predicted for today based on the difference in inflation rates? c.)...
Finance 1. What is the exchange rate between the Swiss Franc (CHF) and the dollar? 2....
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...
A US investor sees an arbitrage opportunity in the currency markets. The spot exchange rate between...
A US investor sees an arbitrage opportunity in the currency markets. The spot exchange rate between the Swiss Franc and US Dollar is 1.0404 ($ per CHF). Assume the continuously compounded interest rates in the US and Switzerland are 0.25% and 0%, respectively. The 3-month currency forward price is 1.0300 ($ per CHF).\ a) What is the theoretically correct forward price? b) What is the investor’s total profit (in CHF), assuming she begins by borrowing 1,000 CHF?
Consider the Euro-dollar exchange rate (nominal exchange rate = Euros/$US). For each of these examples, use...
Consider the Euro-dollar exchange rate (nominal exchange rate = Euros/$US). For each of these examples, use a supply/demand diagram for the foreign exchange market to show the impact on the exchange rate. In each case, does the exchange rate appreciate or depreciate? a. A debt crisis in Europe causes investors holding Euro denominated securities to move to dollar denominated securities. b. The European Central Banks raises interest rates, attracting inflows from U.S. financial investors into European markets. c. The European...
No excel.Use the following information to answer the next two questions:5) The dollar/franc spot exchange rate...
No excel.Use the following information to answer the next two questions:5) The dollar/franc spot exchange rate is $1.055/CHF on 3/1, but you believe the franc will appreciate relative to the dollar over the next few days. On 3/1, you decide to open a position consisting of four Swiss franc futures contracts to trade based on your belief. Each futures contract consists of 100,000 francs. The futures price 3/1 is $1.045/CHF. Your broker requires an initial margin of $1000 per contract...
1. In the long run, the most important determinant of the exchange rate between the US...
1. In the long run, the most important determinant of the exchange rate between the US dollar and the Euro is a. the prices of goods in the US and in Europe. b. economic growth in the United States. c. the flow of financial capital. d. the precautionary motive. e. speculation. 2. An increase in the U.S. demand for the Euro causes a. an increase in the U.S. dollar price of a Euro. b. the Euro to appreciate. c. the...
Using the model proposed by Lafley and Charan, analyze how Apigee was able to drive innovation....
Using the model proposed by Lafley and Charan, analyze how Apigee was able to drive innovation. case:    W17400 APIGEE: PEOPLE MANAGEMENT PRACTICES AND THE CHALLENGE OF GROWTH Ranjeet Nambudiri, S. Ramnarayan, and Catherine Xavier wrote this case solely to provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality. This publication may not be...
Delta airlines case study Global strategy. Describe the current global strategy and provide evidence about how...
Delta airlines case study Global strategy. Describe the current global strategy and provide evidence about how the firms resources incompetencies support the given pressures regarding costs and local responsiveness. Describe entry modes have they usually used, and whether they are appropriate for the given strategy. Any key issues in their global strategy? casestudy: Atlanta, June 17, 2014. Sea of Delta employees and their families swarmed between food trucks, amusement park booths, and entertainment venues that were scattered throughout what would...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT