need help with this problem set. thank you. I. Foreign Exchange Market 1. Why mi
ID: 2803430 • Letter: N
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need help with this problem set. thank you.
I. Foreign Exchange Market 1. Why might we not expect covered interest parity to hold between the U.S. and Vietnam: (a) their forward exchange market is very illiquid; (b) their currency is not freely convertible; (c) there are restrictions on capital flows; (d) all of the above. Suppose that California rice costs $100 a bushel, and Japanese rice costs 20,000 Yen 2. What exchange rate would make the rice equally priced in the local currency; (a) 1S/JY; (b) 0.01S/JY; (c) 0.00508/JY; (d) 100JY/S; 3. If the rice rose to 40,000 Yen, what nominal exchange rate e would restore the real exchange rate R to the value in the previous question: (a) 0.00258/JY; (b) 50JY/S; (c) 0.018/JY; (d) 1S/JY; The Korean Won has fallen nearly 20% over the past year relative to the US$. If the uncovered interest parity theory were correct, what should Korean interest rates have been one year ago if rates in the U.S. were 10%: (a) 10%; (b) 20%; (c) 30%; (d) 0; 5. If the USD/GBP exchange rate was 1.6595, the 60 day forward rate was 1.6545, and the 2-month S. Treasury bill rate was 4.58%·What is the 2-month yield of British T-bills if covered interest parity holds: (a) 6.39; (b) 4.55; (c) 3.33; (d) 4.58; 6. If the USD/GBP exchange rate was 1.6667, the 90 day forward rate was 1.6938, and the 3-month yield of British T-bills is 3.72%. What is the yield on 3-month U.S. Treasury bills if covered interest parity holds: (a) 6.39; (b) 10.28; (c) 7.33; (d) 6.38;Explanation / Answer
20% = Korean interest rate - us interest rate
Korean interest rate = 20% -10% =10%. Ans a.
First cour questions answered as per chegg policy, post rest separately
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