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# Exchange Rates

### Hypothetical Production Costs

--- Refer to attached graph. 1. Assuming that Toyota obtains all inputs from Japanese suppliers and that the yen/dollar exchange rate is 200 yen per dollar. What is the dollar-equivalent cost of a Toyota automobile? Show your work. 2. Assume that Toyota Inc. obtains all of its automobile inputs from Japanese suppliers

### Floating exchange rate effects

Assume that economic growth is slower in the United States than in its trading partners. Given a system of floating exchange rates, will the impact of this growth differential be for the United States with respect to exports and the value of the dollar? Explain.

### Marginal Rate of Substitution

I am a graduate student surviving on a limited income and my money income is \$300 per month, the price of good X is \$4, and the price of good Y is also \$4. Given these prices and income, I buy 50 units of X and 25 units of Y. The combination of X and Y bundle J. At bundle J my marginal rate of substitution (MRS) is 2. At bund

### How the firm prices its revenues and costs

Need road map to start. Select a U.S. multinational company. In terms of currency denomination, how the firm prices its revenues and costs. For MNE's with multiple foreign operations, consider any one of those operations and the contribution it is making to the parent firm's profits. Show all applicable work. Using this informat

### International Finance

Exchange Rate Relationships. Define each of the following theories in a sentence or simple equation. a. Interest rate parity theory. b. Expectations theory of forward rates. c. Law of one price. d. International Fisher effect Heading Exchange Rate Risk. An importer in

### Macroeconomics help

Taking into account the following: C= Ca = 0.75 (Y-T) Ca = 1000- 20r Ip = 600 - 20r T = 400 + 0.15Y M = 500 + 100 e + 0.0375Y G = 1,000 X = 400 - 100e + 0.01Yf (M/P)d = 0.4Y - 40r Ms/P = 2,000 E = 2 Yf = 100,000 X = exports M = imports Please show all your work and answer the following: a

### Exchange rates and investment decision

Suppose the CFO of a German corporation with surplus cash flow has 1 million Euros to invest. Suppose that interest rates on 1-year CD deposits in US banks are 2%, while rates on 1-year CD deposits denominated in Euros in German banks are currently 4.5%. Suppose further that the CFO expects that the (Euro/\$) exchange rate will i

### International Interest Rates

The issue of differences in international interest rates is quite relevant and interesting as it determines a large part of capital flows. Why would we expect the difference in the 1-year interest rate on the dollar vs the 1-year interest rate on, the Euro or any other freely convertible currency, to match exactly the anticip

### Trade Deficit with Japan

Do we know why there was a trade deficit in June 2005 between the USA and Japan? Was there a particular reason for this?

### Monetary Policy

I understand that monetary policy is an important tool of the federal reserve to regulate the interest rates and money supply which impacts the currency movement. It is also my understanding that the economy can adjust itself. Is it the fact that the economic adjustment takes too long? There must be a reason why the US does not

### Example economics discussion questions

1. List three ways in which individual debt differs from government debt. 2. If all of the government's debt were internal, would financing that debt make the nation poorer? 3. How can a government that isn't running a deficit still get itself into financial trouble? 4. Why is debt service an important mea

### Effect of Monetary Policy on the Exchange-Rate of the Dollar

Let us consider the effect of monetary policy on the exchange-rate value of the dollar. Determine the effect of expansionary monetary policy (an increase in the money supply) on each of the following. Then determine what effect the change in the variable listed will have on the demand or supply of the dollar in exchange-rate m

### Basic Macroeconomics question

Consider a group of open economies; assume perfect capital mobility; (a) Assume there is a Leader country. All other countries (referred to as the Follower countries) fix their exchange rates vis-à -vis the Leader country. Discuss the effectiveness of monetary policy in the Follower countries. (b) If the Leader country r

### International Monetary Economics PPP

Suppose that on January 1, 1999 the spot exchange rate was Yen/£=198. Over the year, the British inflation rate was 4%, and the Japanese inflation rate was 6%. i. What is the value of the spot rate (Yen/£) on December 31, 1999 implied by the relative PPP condition? ii. If the spot rate was Yen/£= 206 on December 31, 1

### Foreign Exchange Rates and portfolio adjustments

This question regards international finance specifically the asset market model and exchange rates. Assume the spot exchange rate between dollars and yen is e=\$1/100yen. The interest rate on a 180 day dollar denominated assets is i(\$)=1% and the interest rate on comparable 180 day yen denominated assets is also i(yen)= 1%. T

### Multinational companies foreign operations and pricing

IBM in terms of currency denomination, how does the firm prices its revenues and costs. Also, I am not clear on this, for MNE's with multiple foreign operations, consider any one of those operations and the contribution it is making to the parent firm's profits. What do you think would be the effect of increases/decreases in the

### financing a Brazilian business operation

As a seller of information to customers in Brazil, you are an exporter and you periodically purchase advertising space on Brazilian Web sites to advertise your service; therefore are an importer of a service. If you could not afford to pay for the advertising space in advance, you might finance your purchases of Brazilian advert

### Exchange rate problem

Suppose the CFO of an American corporation with surplus cash flow has \$1 million to invest. Suppose that the interest rates on 3-month CD deposits in US banks is 2%, while rates on 3-month CD deposits denominated in euros in German banks are currently 4.2%. Suppose further that the CFO expects that the (euro/\$) exchange rate wil

### A)what would you receive in USD if you sold YEN 300,000,000 spot? b)what would it cost you to purchase YEN 400,000,000 forward 3M with USD? When would you make payment for the forward transaction? c) Using mid rates, calculate the yield on Japanese 6M bills.

A FX dealer in London normally quotes spot, 1M, 3M and 6M forward. When you ask over the phone for current quotes for YEN/USD you hear "111.43 to 51, 52 to 48, 150 to 144, 337 to 205" a)what would you receive in USD if you sold YEN 300,000,000 spot? b)what would it cost you to purchase YEN 400,000,000 forward 3M with USD? Whe

### Interest Rates in US Market

CAD/USD is quoted 1.2237. IF USD interest rate is 3%, CAD interest rate 4%, what is CAD/USD one year forward? And CAD/USD 3M forward?

### Nominal exchange rates, relative PPP , real exchange rate

One year ago Polish zloty was PLN 3.8000/USD. Since then the sloty has fallen 14% against the dollar. Price levels in the US have not changed, but Polish price has gone up 7% -what is the nominal exchange rate today? -what should be the exchange rate today, based on relative PPP and assuming last year was normal? -Did the z

### Current state of the NHL

What is the current state of the NHL? Why is there a lockout? Is it to do with revenues? Salary Caps? High player salaries? Too many unprofitable teams? Low ratings, low attendance? Revenue Sharing? The tv deals? Thanks!

### Currency translation methods

Ajax Manufacturing's German subsidiary has the following balance sheet(in DM): Cash, marketable securities: 250,000 Accounts receivable 1,000,000 Inventory ( at market) 2,700,000 Fixed assets: 5,100,000 Total assets DM 9,050,000 Current liabilities DM 750,000 Long-term debt 3,400,000 Equity 4,900,000 Total liabi

### Summarize currency translation methods

Ajax Manufacturing's German subsidiary has the following balance sheet(in DM): Cash, marketable securities: 250,000 Accounts receivable 1,000,000 Inventory ( at market) 2,700,000 Fixed assets: 5,100,000 Total assets DM 9,050,000 Current liabilities DM 750,000 Long-term debt 3,400,000 Equity 4,900,000 Total liabi

### Currency translation methods: temporal method to calculate Ajax's traslation gain(loss)

Ajax Manufacturing's German subsidiary has the following balance sheet(in DM): Cash, marketable securities: 250,000 Accounts receivable 1,000,000 Inventory ( at market) 2,700,000 Fixed assets: 5,100,000 Total assets DM 9,050,000 Current liabilities DM 750,000 Long-term debt 3,400,000 Equity 4,900,000 Total liabi

### Translation Gain and Loss using Current and Noncurrent Methods

Ajax Manufacturing's German subsidiary has the following balance sheet(in DM): Cash, marketable securities: 250,000 Accounts receivable 1,000,000 Inventory ( at market) 2,700,000 Fixed assets: 5,100,000 Total assets DM 9,050,000 Current liabilities DM 750,000 Long-term debt 3,400,000 Equity 4,900,000 Total liabi

### Currency conversion and Effect of currency depreciation

Problem : One type of toy bears is in China and exported to the US. A toy bear sells for 16 Yen in China. The exchange rate of Chinese yen and US dollars is \$1 = 8 Yen. a. what will be the price of this toy bear in US dollars? b. Suppose the US demand for this toy bear is D = 100- 10*P. P is the price in US dolla

### Macroeconomics-Monetary/policy

1. Assume that a country's real growth is 2 percent per year, while its real deficit is rising 5 percent a year. Can the country continue to afford such deficit indefinitely? What problems might it face in the future? 2.The Fed wants to increase the money supply (which is currently 4000) by 200. The money multiplier is 3.

### Exchange rate for traded good - "Law of One Price"

Suppose that there are only two goods produced in the world: computers, which are traded internationally and ice cream which is not. The following table shows in two countries: Computer Ice cream Price of Price of Produced Per capita Produced Per capita Computers in Local Currency ice cream Country Rich

### Foreign Exchange Rates in Russia

In 1998, the Russian ruble depreciated 54% against the Deutschmark. How much did the Deutschmark appreciate against the Ruble?