Questions from Financial Markets

Q: The Mexican peso is trading at 10 pesos per dollar. If

The Mexican peso is trading at 10 pesos per dollar. If the expected U.S. inflation rate is 2% while the expected Mexican inflation rate is 23% over the next year, what is the expected exchange rate in...

Q: The current exchange rate between the United States and Britain is $

The current exchange rate between the United States and Britain is $1.825 per pound. The six-month forward rate between the British pound and the U.S. dollar is $1.79 per pound. What is the percentage...

Q: The current exchange rate between the Japanese yen and the U.

The current exchange rate between the Japanese yen and the U.S. dollar is 120 yen per dollar. If the dollar is expected to depreciate by 10% relative to the yen, what is the new expected exchange rate...

Q: If the price level recently increased by 20% in England while

If the price level recently increased by 20% in England while falling by 5% in the United States, how much must the exchange rate change if PPP holds? Assume that the current exchange rate is 0.55 pou...

Q: A one-year CD in Europe is currently paying 5%,

A one-year CD in Europe is currently paying 5%, and the exchange rate is currently 0.99 euros per dollar. If you believe the exchange rate will be 1.04 euros per dollar one year from now, what is the...

Q: Short-term interest rates are 2% in Japan and 4

Short-term interest rates are 2% in Japan and 4% in the United States. The current exchange rate is 120 yen per dollar. What is the expected forward exchange rate?

Q: The interest rate in the United States is 4%, and the

The interest rate in the United States is 4%, and the euro is trading at 1 euro per dollar. The euro is expected to depreciate to 1.1 euros per dollar. Calculate the interest rate in Germany.

Q: A German sports car is selling for 70,000 euros.

A German sports car is selling for 70,000 euros. What is the dollar price in the United States for the German car if the exchange rate is 0.90 euros per dollar?

Q: An investor in England purchased a 91-day T-bill

An investor in England purchased a 91-day T-bill for $987.65. At that time, the exchange rate was $1.75 per pound. At maturity, the exchange rate was $1.83 per pound. What was the investor’s holding p...

Q: An investor in Canada purchased 100 shares of IBM on January 1

An investor in Canada purchased 100 shares of IBM on January 1 at $93.00 per share. IBM paid an annual dividend of $0.72 on December 31. The stock was sold that day as well for $100.25. The exchange r...