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(Solved) I need to answer the following questions for homework with



  I need to answer the following questions for homework   with original answers.          

FIN535  (International Finance)

  • Strayer 535 Homework Week 4 Spring 2016
  • 3.   Direct  Intervention. How can a central bank use  direct intervention to change the value of a currency? Explain why a central  bank may desire to smooth exchange rate movements of its  currency.
  • 5.   Intervention  Effects. Assume  there is concern that the United States may experience a recession.  How should  the Federal Reserve influence the dollar to prevent a recession?  How might U.S.  exporters react to this policy (favorably or unfavorably)?  What about U.S.  importing firms? 
  • 10. Intervention Effects on Bond  Prices.  U.S.  bond prices are normally inversely related to U.S. inflation. If the Fed planned  to use intervention to weaken the dollar, how might bond prices be affected? 
  • 15. Indirect Intervention. During the Asian crisis (see Appendix 6 at the end of  this chapter), some Asian central banks raised their interest rates to prevent  their currencies from weakening.  Yet, the currencies weakened anyway.  Offer  your opinion as to why the central banks? efforts at indirect intervention did  not work. Chapter 7 
  • 5.   Covered Interest  Arbitrage. Explain the concept of covered  interest arbitrage and the scenario necessary for it to be  plausible.
  • 10. Inflation Effects on the  Forward Rate. Why do you think currencies of  countries with high inflation rates tend to have forward  discounts? 
  • 14. Changes in Forward Premiums. Assume that the Japanese yen?s forward rate currently  exhibits a premium of 6 percent and that interest rate parity exists.  If U.S.  interest rates decrease, how must this premium change to maintain interest rate  parity?  Why might we expect the premium to change?

     

    22. Covered  Interest Arbitrage in Both Directions. The following information is  available: ?&????;&????;&????;&????;&????;&????;&????;&????;  You have $500,000 to  invest?&????;&????;&????;&????;&????;&????;&????;&????;  The current spot rate of the Moroccan  dirham is $.110.?&????;&????;&????;&????;&????;&????;&????;&????;  The 60-day forward rate of the Moroccan  dirham is $.108.?&????;&????;&????;&????;&????;&????;&????;&????;  The 60-day interest rate in the U.S. is 1  percent.?&????;&????;&????;&????;&????;&????;&????;&????;  The 60-day interest rate in Morocco is 2  percent. a.   What is the yield to a U.S. investor who conducts covered interest  arbitrage? Did covered interest arbitrage work for the investor in this  case?b.    Would covered interest arbitrage be possible for a Moroccan  investor in this case?


                
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1.

 


 

Direct Intervention. How can a central bank use direct intervention to change the

 

value of a currency? Explain why a central bank may desire to smooth exchange

 

rate movements of its currency....

 


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