Blog

Given a home country and a foreign country, the international Fisher effect (IFE) suggests that:

The form of proof that deals with rational appeals based on facts, statistics, examples,  expert testimony  and reasoning is called

A ____ is not normally used for hedging long-term transaction exposure.

Forward contracts are usually liquidated by offsetting transactions, while futures contracts are usually liquidated by delivery of the currency.

A U.S. corporation has purchased currency call options to hedge a 70,000 pound payable. The premium is $.02 and the exercise price of the option is $.65. If the spot rate at the time of maturity is $.50, what is the total amount paid by the corporation if it acts rationally?

Realignment in the exchange rates of banks will eliminate locational arbitrage. More specifically, market forces will increase the ask rate of the bank from which the currency was bought to conduct locational arbitrage and will decrease the bid rate of the bank to which the currency was sold to conduct locational arbitrage.

Assume Countries A, B, and C produce goods that are substitutes of each other and that these countries engage in trade with each other. Assume that Country A’s currency floats against Country B’s currency, and that Country C’s currency is pegged to B’s. If A’s currency depreciates against B, then A’s exports to C should ____, and A’s imports from C should ____.

The ____ the existing strike price relative to the spot price, the ____ valuable the put options will be.

Discuss the case against the single European currency.  In other words, what are the advantages of a multi-currency system that are obviously not realized with a single European currency?  (Hint: Under a multi-currency exchange rate system a change in the demand for a country’s output and investments results in an exchange rate change.  In contrast, how does a relative change in the demand for a country’s output and investments occur under the single European currency?)

Identify the following type of stylistic device: “Walking into my grandparents home when I was a child was like being wrapped in a giant security blanket.”