Category: Uncategorized

If the European Central Bank (ECB) decides to weaken the euro by decreasing interest rates through an expansion of the money supply, it should be aware that although this action will stimulate the lower growth economies of southern Europe, it may result in inflation and asset valuation bubbles in the stronger northern European economies (i.e., Germany).

To capitalize on high foreign interest rates using covered interest arbitrage, a U.S. investor would convert dollars to the foreign currency, invest in the foreign country, and simultaneously sell the foreign currency forward.

Because there are a variety of factors in addition to inflation that affect exchange rates, this will:

Assume that the U.S. one-year interest rate is 3% and the one-year interest rate on Australian dollars is 6%. The U.S. expected annual inflation is 5%, while the Australian inflation is expected to be 7%. You have $100,000 to invest for one year and you believe that PPP holds. The spot exchange rate of an Australian dollar is $0.689. What will be the expected yield on your investment if you invest in the Australian market? 

When using ____, funds are not tied up for any length of time. (Select all that apply.)

The current account balance includes: (Select all that apply.)

Information about the location, size, and kind of windows and doors to be installed in the building are found on the ____.

As the real value of the dollar rises, the current account balance is likely to ________ and the capital/financial account balance will ________.

Assume that the one-year interest rate in the U.S. is 7% and in the U.K. is 5%. According to the international Fisher effect, British pound’s spot exchange rate should ____ by about ____ over the year.

What kind of protagonist is Faustus?