Question
In: Finance
1. Please examine the following information for New Zealand, the United States, and The USD/NZD exchange...
1. Please examine the following information for New Zealand, the United States, and The USD/NZD exchange rates:
New Zealand United States 3-month Eurodollar deposit rates 2.33% 2.7375%
Expected Inflation rates (annual) 1.90% 1.95%
USD/NZD spot rate .6907
USD/NZD 3-month forward rate .6917
a. According to Interest rate parity are the spot and forward rates in alignment? If not, use covered interest rate arbitrage to show a profitable trade
b. One year from now, according Relative Purchasing Power Parity (PPP), what is your expected USD/NZD spot rate?
Solutions
Expert Solution
SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE
jeff jeffy answered 1 year agoRelated Solutions
Foreign Exchange USD/NOK (Norway) 10.30 USD/HKD (Hong Kong) 7.75 NZD/USD (New Zealand) 0.62 USD/KRW (Korea) 1210...
Foreign Exchange
USD/NOK (Norway) 10.30
USD/HKD (Hong Kong) 7.75
NZD/USD (New Zealand) 0.62
USD/KRW (Korea) 1210
Use the above currency exchange rates for problems 1-3
below.
1. If you convert 100 Norwegian Krona (NOK) into New Zealand
Dollars (NZD), how many NZD would you have? (3)
2. How many Norwegian Krona (NOK) does it take to buy 100 Hong
Kong Dollars? (3)
3. One ounce of gold costs $1700 US. One ounce of gold also
costs 2,000,000 Korean Won (KRW)....
1) At Bank X, the bid rate of a NZD is USD 0.630 and the ask...
1) At Bank X, the bid rate of a NZD is USD 0.630 and the ask
rate is USD 0.635. However, at Bank Y, the bid rate of the NZD is
USD 0.628 and the ask rate is USD 0.631. What would be your profit
if you use USD 1,000,000 and try to execute locational
arbitrage?
A) + USD 11,146.50 B) + USD 1,587.30 C) - USD 1,584.79 D) - USD
11,023.62
2) At Bank X, the bid rate of...
Smith Co. operates business in the United States and New Zealand. In attempting to assess its...
Smith Co. operates business in the United States and New
Zealand. In attempting to assess its economic exposure, it compiled
the following information.
i. Smith’s
U.S. sales are slightly influenced by the New Zealand dollar (NZ$)
value, due to confronts rivalry from New Zealand exporters. It
estimates the U.S. sales based on the following three exchange rate
scenarios:
Revenue
from U.S. Business
Exchange
Rate of
NZ$ (in
millions)
NZ$
=
$.48 $100
NZ$
= .50 105
NZ$
= .54 110
ii. Revenues
for Smith Co. in New Zealand...
Smith Co. operates business in the United States and New Zealand. In attempting to assess its...
Smith Co. operates business in the United States and New
Zealand. In attempting to assess its economic exposure, it compiled
the following information.
i. Smith’s
U.S. sales are slightly influenced by the New Zealand dollar (NZ$)
value, due to confronts rivalry from New Zealand exporters. It
estimates the U.S. sales based on the following three exchange rate
scenarios:
Revenue
from U.S. Business
Exchange
Rate of
NZ$ (in
millions)
NZ$
=
$.48 $100
NZ$
= .50 105
NZ$
= .54 110
ii. Revenues
for Smith Co. in New Zealand...
St. Paul Co. does business in the United States and New Zealand. In attempting to assess...
St. Paul Co. does business in
the United States and New Zealand. In attempting to assess its
economic exposure, it compiled the following
information.
a. St. Paul’s
U.S. sales are somewhat affected by the value of the New Zealand
dollar (NZ$), because it faces competition from New Zealand
exporters. It forecasts the U.S. sales based on the following three
exchange rate scenarios:
Revenue from U.S. Business
Exchange Rate of
NZ$
(in millions)
NZ$ =
$.48
$100...
USD/NZD 1.51 in nominal currency exchange rate terms. The same "The North Face" parka costs $230.00...
USD/NZD 1.51 in nominal currency exchange rate terms. The same
"The North Face" parka costs $230.00 in the U.S. and 320.00 New
Zealand dollars in New Zealand. The U.S. Federal Reserve Bank
decides to raise interest rates.
Based on the above scenario, please select the best answer
choice below.
I.
If the U.S. Federal Reserve Bank raises interest rates, this
will make it that much less attractive for New Zealanders to
purchase the same parka from the U.S. If the...
How do National Parks in the United States, Australia and New Zealand differ from eachother in...
How do National Parks in the United States, Australia and New
Zealand differ from eachother in the 19th century?
Please explain the financial system and management of foreign exchange in the United States. (Please do...
Please explain the financial system and management of
foreign exchange in the United States.
(Please do not just copy and paste an answer from the internet,
as I can easily do that myself. Looking more for a to-the-point
easy to understand overall explanation)
Assume the following information for the United States and Mexico. The United States can produce a...
Assume the following
information for the United States and Mexico. The United States can
produce a maximum of 600 bushels of barley or a maximum of 600
bushels of corn. Mexico can produce a maximum of 200 bushels of
barley or 400 bushels of corn. Which country has a comparative
advantage in the production of barley? Which country has a
comparative advantage in the production of Corn? Show your work for
the calculation of opportunity cost. (4 Points)
The current exchange rate is one Australian dollar (AUD) equal to 1.349 USD. In the United...
The current exchange rate is one Australian dollar (AUD) equal
to 1.349 USD. In the United States, the 6 months T-bill
rate is 2.84%. The 6-month forward rate for AUD is .75 USD/AUD.
Assuming that interest rate parity exists, what is the implied
interest rate for Australia?
A.
5.19%
B.
-2.35%
C.
2.35%
D.
.49%
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