A.1) We know that the yen and the Swiss franc have a 120 yen/ sf 1...

A.1) We know that the yen and the Swiss franc have a 120 yen/ sf 1 exchange rate, meaning one swiss franc buys 100 yen in the forward ER market. If the swiss franc has an interest rate of -.06 and the yen rate is -.02, what is the spot exchange rate for IPT (interest parity theory) to be attained ? Show everything in yen terms and franc terms. 2) If there is no equilibrium initially, will there be equilibrium eventually? If so, what will transpire? Be extremely thorough. Your answer should include covered interest arbitrage.

Expert Solution

jeff jeffy answered 2 years ago

Peleh buys a call option on Swiss franc with a strike price of $0.5820/SF at a...

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The Wall Street Journal reported the following spot and forward rates for the Swiss franc ($/SF)....

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Long Call on one unit of Swiss Franc. E=.985 USD/SF P=.5 US cents E= Excise Price P=premium Find the profit and say if it is in the money, at the money or out of the money Spot Rate Payoff Money 0 50 75 87.5 98.5 100 105

Suppose the exchange rate was $1 = 120 yen in 2007 and $1 = 100 yen in 2008.

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what changes have happened between the swiss franc and the US dollar currencies in the last...

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In early 2012, the spot exchange rate between the Swiss Franc and U.S. dollar was 1.0404 ($ per franc). Interest rates in the United States and Switzerland were 0.25% and 0% per annum, respectively, with continuous compounding. The 3-month forward exchange rate was 1.0300 ($ per franc). What arbitrage strategy was possible? How does your answer change if the forward exchange rate is 1.0500 ($ per franc).

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1. We have learned in this class that the steady condition is given as: sf (k)...

1. We have learned in this class that the steady condition is given as: sf (k) = (n + S + g)k . Use this condition for steady state to find the steady state (long run) equilibrium values of capital per effective worker, k* , output per effective worker, y* ; consumption per effective worker, c* ; and investment per effective worker, i* , for this economy. 2. If the United States adopts policies that permanently decrease savings and investment,...

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