Eco202 M4 Assignment 2: Exchange Rates

In: Business and Management

Submitted By arnitaetsitty
Words 258
Pages 2
ECO202 M4 Assignment 2: Exchange Rates Click Link Below To Buy: http://hwaid.com/shop/eco202-m4-assignment-2-exchange-rates/ You own and operate a chain of electronic stores in Texas and you are considering expanding your inventory to include tablet work stations for small businesses. There is only one supplier of the brand of tablets you would like to stock in your store, and that firm is located in Mexico. You have researched the current spot and forward rates between the U.S. and Mexico, as indicated in Table-1:
TABLE-1 Spot Rate 30-Day Forward 90-Day Forward 180-Day Forward
U.S. Dollar/Peso 1.7851 1.7052 1.8051 1.7555 Peso/U.S. Dollar ? ? ? ?
Questions:
1. Complete the Peso/ U.S. Dollar row in Table-1 and explain your methodology.
2. If you agree to pay 2-million pesos for 100,000 tablets at today’s spot rate, how much would you pay in U.S. dollars?
3. If you agree to pay 2-million pesos but wait 180 days and end up paying the 180-Day forward rate, how much would you be paying for the 100,000 tablets, in U.S. Dollars?
4. Your competitors sell the tablet for $41.20 and you must mark you product up from cost by at least 20% to earn a minimal profit, should you buy the tablets today? Explain your answer.
5. Should you wait to buy the tablets in 30 days at the current 30-day forward rate? Explain your…...

Similar Documents

Exchange Rate

... 1. Phan Nguyễn Ngọc Xuân Mỹ 101537 2. Vũ Thị Hường 101574 3. Trương Linh Trang 101579 4. Nguyễn Đỗ Thiên Trang 093304 2012 – 2013 -------------(((((------------- SUBJECT INTRODUCTION TO BANKING AND FINANCIAL Value of VND compared with ASEAN member currencies? Facts LECTURE: TRAN LINH DANG STUDENTS OF TC201DE01-0100 1. Phan Nguyễn Ngọc Xuân Mỹ 101537 2. Vũ Thị Hường 101574 3. Trương Linh Trang 101579 4. Nguyễn Đỗ Thiên Trang 093304 Note for faculty: Date: ___/___/___ For the writer: (Signature & full name) 2012 – 2013 CONTENTS CONTENTS i INTRODUCTION ii I. Exchange rates 1 I 1. Exchange rates 1 I 2. Exchange rate regimes 2 I 3. Roles of exchange rates 3 II. Compare and contrast between the value of VND and the others of ASEAN 5 II 1. The exchange rates in Vietnam from 2008 to 2010 6 II 2. The exchange rates in Vietnam in 2011 8 III. Impacts on exchange rates 10 III 1. Balance of Trade 10 III 2. Balance of Payments 11 III 3. Monetary Policy 12 III 4. Differentials in Inflation 12 III 5. Differentials in Interest Rates 12 III 6. Public Debt 12 III 7. Speculation 13 III 8. Employment Outlook 13 III 9. Political Stability and Economic Performance 13 IV. Adjusted policies of Vietnamese government on exchange......

Words: 6250 - Pages: 25

Exchange Rates

...negative, the economy is experiencing a capital inflow: investment exceeds saving, and the economy is financing this extra investment by borrowing from abroad FISCAL POLICY UNDER FIXED RATE REGIME LM1 R1 LM2 R=r* IS2 IS1 Y1 Y2 Y3 A fiscal expansion pushes out IS. Investors demand Home currency to purchase high yielding Home assets. CB accommodates currency demand at target exchange rate. This boosts the money supply and shifts out the LM curve. This continues until interest rate at world level. Fiscal policy is now super‐expansionary. MONETARY POLICY UNDER FIXED RATE REGIME A monetary expansion pushes out LM. Investors short Home currency to purchase high yielding foreign assets. CB purchases extra currency supplied at target exchange rate. This cuts the money supply and returns LM to initial position. This Continues until interest rate at world level interest rate LM1 r=r* LM2 r IS1 Y0 output MONETARY POLICY UNDER A FLEXIBLE EXCHANGE RATE interest rate LM1 r LM2 r=r* IS2 IS1 Y1 ......

Words: 661 - Pages: 3

Exchange Rate

...|Exchange rate |Monetary Policy Framework | |arrangement (Number | | |of countries) | | | |Exchange rate anchor |Monetary aggregate|Inflation targeting framework |Other1 | | | |target | | | | |U.S. dollar (66) |Euro (27) |Composite (15) |Other(7) |(22) |(44) |(11) | |Exchange arrangement |Ecuador |Palau |Montenegro |  |Kiribati |  |  |  |  | |with no separate |El Salvador |Panama |San Marino | | | | | | | |legal tender (10) |Marshall Islands |Timor-Leste ...

Words: 454 - Pages: 2

Exchange Rate

...MP A R Munich Personal RePEc Archive Optimal choice of an exchange rate regime: a critical literature review Mariam Ouchen Cadi Ayyad University, Faculty of Economics Marrakesh Morocco, University of Basel 17. January 2013 Online at http://mpra.ub.uni-muenchen.de/43907/ MPRA Paper No. 43907, posted 21. January 2013 12:56 UTC Optimal Choice of an Exchange Rate Regime: A Critical Literature Review 1 Mariam OUCHEN Laboratory of innovation, responsibility and sustainable development Cadi Ayyad University, Faculty of Economics Marrakesh Morocco Center of Macroeconomics and economic theory University of Basel Abstract :This paper set out to review the main theories and empirical methods employed in selecting an appropriate exchange rate regime.In order to achieve this, the paper is organized as follows : Section 2 introduces the distinct classifications of exchange regimes(de jure exchange rate regimes versus the facto exchange rate regimes), and the different theoretical approaches which illustrate how an optimal exchange rate regime is determined . Despite their initial popularity, the theoretical considerations have not escaped criticism.Section 3 reviews the criticism of these theories.A conclusion is provided in Section 4. Keywords :  Exchange rate regime, the structural approach, credibility, flexibility, the bipolar view. 1 - Introduction The literature on the selection of exchange rate regimes can be divided into three main groups : the structural approach, the......

Words: 10108 - Pages: 41

Exchange Rate..

...EXCHANGE RATES & SURCHARGES YR. 2013 IN PHP FUEL SURCHARGE TNT IATA EXCHANGE RATE JANUARY 20% Dec 30, 2012 - Jan 05, 2013 Jan 06-12 Jan 13-19 Jan 20-26 Jan 27 - Feb 02 FEBRUARY 19.50% Feb 03-09 (Feb 3 - Mar 2) Feb 10-16 Feb 17-23 Feb 24 Mar 02 MARCH 20% Mar 03-09 Mar 10-16 Mar 17-23 Mar 24-30 APRIL 20.50% Mar 31 - Apr 06 April 07-13 April 14-20 April 21-27 April 28 - May 04 MAY 19.50% May 05-11 May 12-18 May 19-25 May 26 - June 01 JUNE 19.50% June 02-08 June 09-15 June 16-22 June 23-29 JULY 19% June 30 - July 06 July 07-13 July 14-20 July 21-27 July 28 - Aug 03 AUGUST 19% Aug 04-10 Aug 11-17 Aug 18-24 Aug 25 -31 SEPTEMBER 19.50% Sept 01-07 Sept 09-14 Sept 16-21 Sept 22-28 20% Sept 29 - Oct 05 OCTOBER Oct 06-12 Oct 13-19 Oct 20-26 Oct 27 - Nov 02 NOVEMBER 20% Nov 03-09 Nov 10-16 Nov 17-23 Nov 24-30 DECEMBER Dec 01-07 Dec 08-14 Dec 15-21 Dec 22-28 Dec 29, 2013 - Jan 04, 2014 VLI EXCHANGE RATE Dec 30, 2012 - Jan 05, 2013 Jan 06-12 Jan 13-19 Jan 20-26 Jan 27 - Feb 02 Feb 03-09 Feb 10-16 Feb 17-23 Feb 24 Mar 02 Mar 03-09 Mar 10-16 Mar 17-23 Mar 24-30 Mar 31 - Apr 06 April 07-13 April 14-20 April 21-27 April 28 - May 04 May 05-11 May 12-18 May 19-25 May 26 - June 01 June 02-08 June 09-15 June 16-22 June 23-29 June 30 - July 06 July 07-13 July 14-20 July 21-27 July 28 - Aug 03 Aug 04-10 Aug 11-17 Aug 18-24 Aug 25 -31 Sept 01-07 Sept 09-14 Sept 16-21 Sept 22-28 Sept 29 - Oct 05 Oct 06-12 Oct 13-19 Oct 20-26 Oct 27 - Nov 02 Nov 03-09 Nov 10-16 Nov 17-23 Nov 24-30 Dec 01-07 Dec 08-14......

Words: 589 - Pages: 3

Exchange Rate

...Impact of Exchange Rate Adjustments and Its Effects on the Balance of Payment The persistency and size of a country’s imbalance payments whether surplus or deficit and the adjustment needed to correct it, depends upon the exchange rate system used. There are two types of exchange rates. 1. Floating or Flexible Exchange Rate, the supply and demand of the currency determines the rate the countries will exchange. No involvement of the Government takes place. Example of floating exchange rate is US Dollar. 2. Fixed or Pegged Exchange Rate, this system is dominated by the Governments of countries managing the rates at which the currency exchanges, and take proper measures to ensure continuation of rates. Example of Fixed or pegged exchange rate is China’s Yuan. (Investopedia, 2013) Depreciation of currency, that is the decrease in currency exchange rate, affects a country’s balance of trade through changes in the imports and export. A trade deficit nation might be able to reverse the imbalance by lowering the relative prices increasing the demand of local goods both domestic and internationally, henceforth increasing exports and decreasing imports. The country can lower the relative prices by allowing its exchange rates to depreciate in the free market or by deliberately devaluing its currency by Government intervention.(R.J. Carabaugh, 2011) For example, China in the past years has shown a surplus in balance of payments, this has majorly been due to the Chinese currency......

Words: 379 - Pages: 2

Spot Rate Exchange Rate

...Critical Thinking, (Spot Exchange Rate) The interest rate on South Korean government securities with one-year maturity is 4%, and the expected inflation rate for the coming year is 2 %. The interest rate on U.S. government securities with one-year maturity is 7%, and the expected rate of inflation is 5%.The current spot exchange rate for Korean Won (W) is $1 = W1,200. Forecast the spot exchange rate one year from today (Hall, p. 318). The forecast spot exchange rate one year from now will be W1,166.35. Explain the logic of this answer? The logic for the above answer begins by understanding the meaning and relationship between Spot, Exchange Rate, Interest Rate Parity, and Fisher Effect. 1. Spot Exchange Rates The interaction between supply and demand influences the exchange spot rate. The spot exchange rate is the daily rate which one currency is converted into another. 2. The Fisher Effect In foreign currency transactions between two countries, the spot exchange rate changes in equal amounts as it moves the opposite direction to the difference in nominal interest rates between two countries. According to the Fisher effect, only the interest rate and not the inflation rate are used for calculating the spot interest rate. 3. Interest Rate Parity The differences in currency values pertain to short-term interest rate differences between two countries. The real int. rate in the United States is 2% (7-% maturity – 5% expected inflation). The real interest......

Words: 486 - Pages: 2

Exchange Rate

...Abstract INTRODUCTION When first looking at an exchange rates, and foreign exchange, there are a few questions which must be considered. What factors affect the demand and supply of Australian dollars in the foreign exchange markets? Distinguish between the possible causes and effects of currency depreciation and a currency appreciation on the Australian economy. What forces have come into play, if any, in the past few years that have affected the value of the Australian dollar? In addition to looking further into those questions, it is helpful to know what the word Exchange Rate means; it is defined as, “The rate at which one unit of domestic currency is exchanged for a given amount of foreign currency.”  A BRIEF HISTORY OF THE AUSTRALIAN DOLLAR Until 1971, the Australian dollar (AUD) was “pegged” to the British pound. This meant that the AUD rose or fell in line with the pound. In 1971, the AUD became pegged to the US dollar instead. These currencies were fixed currencies, which meant that the Australian currency would only change value when a major world currency also changed. This system lasted only until 1974 when the AUD became pegged to a trade-weighted selection of other currencies. This was still a fixed currency. In 1976 this selection of currencies became moveable. Small shifts were able to take place when needed. In 1983 the AUD became a floating currency. This means that the value of the dollar is determined by supply and demand. Initially, the......

Words: 3252 - Pages: 14

The Exchange Rate

...The exchange rate An exchange rate is the rate at which one currency is exchanged on another one. This rate differs from country to country and depends on many economical variables, the main of which are the general balance and disbalance of economy, monetary and fiscal policy, the state of the budget, international policy, the condition and development of the country’s economy compared to the world situation and dominating countries, purchasing power of the currency, and other internal and external factors. The history of world exchange rate systems shows us that the world community (in its majority) has in fact shifted from the system of fixed exchange rates to floating exchange rate system. Currently there exist different combinations of floating and fixed exchange rate systems, together with specific economical instruments, created for exchange rate regulating. Since the development of production and a number of divisions of labor there existed such a phenomenon as commodity money. There was no other monetary system until 17th century when there appeared coins having an intrinsic value, not linked with commodity. Usually the value of the coin was associated with the content of gold in the coin. The exchange rate between different coins and different currencies depended on the content of gold in the coin as well, and equaled to the relative content of gold in the coins. In 17th century banks started issuing own banknotes which had the same purchasing power as...

Words: 2755 - Pages: 12

Exchange Rates

...6 Factors That Influence Exchange Rates: Aside from factors such as interest rates and inflation, the exchange rate is one of the most important determinants of a country's relative level of economic health. Exchange rates play a vital role in a country's level of trade, which is critical to most every free market economy in the world. For this reason, exchange rates are among the most watched, analyzed and governmentally manipulated economic measures. But exchange rates matter on a smaller scale as well: they impact the real return of an investor's portfolio. Here we look at some of the major forces behind exchange rate movements. Overview Before we look at these forces, we should sketch out how exchange rate movements affect a nation's trading relationships with other nations. A higher currency makes a country's exports more expensive and imports cheaper in foreign markets; a lower currency makes a country's exports cheaper and its imports more expensive in foreign markets. A higher exchange rate can be expected to lower the country's balance of trade, while a lower exchange rate would increase it. Determinants of Exchange Rates Numerous factors determine exchange rates, and all are related to the trading relationship between two countries. Remember, exchange rates are relative, and are expressed as a comparison of the currencies of two countries. The following are some of the principal determinants of the exchange rate between two countries. Note that these factors......

Words: 1096 - Pages: 5

Bus212 M4 Assignment 2 Unhealthy Lunches

...BUS212 M4 Assignment 2 Unhealthy Lunches Click Link Below To Buy: http://hwaid.com/shop/bus212-m4-assignment-2-unhealthy-lunches/ Drive-In Don’s fast food restaurant sells the most delicious burgers in town at the most affordable price. Elementary and high schools in the vicinity have contracted with the restaurant to serve burgers during lunch hour. However, the county health department’s one-year study shows that children from these schools have the highest cholesterol, are the most obese, and are the least active. George and Mary’s son, Randall, 12, attends one of the schools where Drive-In Don’s foods are served. He suffers from extreme obesity and high cholesterol and runs the risk of diabetes. George and Mary have sued Drive-In Don’s and the school, alleging that Drive-In Don’s is engaging in illegal deceptive advertising of its foods and is not truthful to customers. Further, the lawsuit states that the restaurant purposely fails to provide consumers details of the ingredients of its food products. Research consumer protection laws and regulations, using your textbook, the Argosy University online library resources, and the Internet. Based on the facts of the case and research, write an analytical paper (approximately 4-5 pages). In the paper, respond to the following questions: • Do George and Mary have a case? What are their strongest legal arguments? Explain. • What defense(s), if any, do the school and the restaurant have? Explain. • Can......

Words: 274 - Pages: 2

Sci 115 M4 Assignment 2 Nuclear Medicine

...SCI 115 M4 Assignment 2 Nuclear Medicine Click Link Below To Buy: http://hwaid.com/shop/sci-115-m4-assignment-2-nuclear-medicine/ Nuclear medicine is a specialized branch of modern medicine that exploits the process of radioactivity for imaging, diagnosis, and treatment. Many imaging techniques inject small amounts of radioactive material into the body, which are then tracked by a sensing device specific to the type of radiation emitted from that material. Radiation has also been used to destroy diseased tissue, typically beyond the reach of standard surgical techniques. Using the readings for this module, the Argosy University online library resources, and the Internet, write a paper on nuclear medicine. Address the following: • Explain the scientific and technical concepts related to nuclear medicine. Consider the following questions when you construct your response: o What type of radiation is typically exploited in most nuclear medicine procedures? o How are patients prepared for nuclear medicine procedures? o What are the advantages and limitations of nuclear medicine? o What ailments are typically diagnosed and treated via nuclear medicine procedures? • Evaluate a minimum of three applications of nuclear medicine relating to any of the following topics: o Positron Emission Tomography (PET) scans o Gallium scans o Indium white blood cell scans o Iobenguane scans (MIBG) o Octreotide scans o Hybrid scanning techniques employing X-ray......

Words: 271 - Pages: 2

Bus 212 M4 Assignment 2 Unhealthy Lunches

...BUS 212 M4 Assignment 2 Unhealthy Lunches http://homeworklance.com/downloads/bus-212-m4-assignment-2-unhealthy-lunches/ Drive-In Don’s fast food restaurant sells the most delicious burgers in town at the most affordable price. Elementary and high schools in the vicinity have contracted with the restaurant to serve burgers during lunch hour. However, the county health department’s one-year study shows that children from these schools have the highest cholesterol, are the most obese, and are the least active. George and Mary’s son, Randall, 12, attends one of the schools where Drive-In Don’s foods are served. He suffers from extreme obesity and high cholesterol and runs the risk of diabetes. George and Mary have sued Drive-In Don’s and the school, alleging that Drive-In Don’s is engaging in illegal deceptive advertising of its foods and is not truthful to customers. Further, the lawsuit states that the restaurant purposely fails to provide consumers details of the ingredients of its food products. Research consumer protection laws and regulations, using your textbook, the Argosy University online library resources, and the Internet. Based on the facts of the case and research, write an analytical paper (approximately 4-5 pages). In the paper, respond to the following questions: • Do George and Mary have a case? What are their strongest legal arguments? Explain. • What defense(s), if any, do the school and the restaurant have? Explain. • Can the government agencies,......

Words: 271 - Pages: 2

Eco 202 M4 Assignment 2 Exchange Rates

...ECO 202 M4 Assignment 2 Exchange Rates http://homeworklance.com/downloads/eco-202-m4-assignment-2-exchange-rates/ You own and operate a chain of electronic stores in Texas and you are considering expanding your inventory to include tablet work stations for small businesses. There is only one supplier of the brand of tablets you would like to stock in your store, and that firm is located in Mexico. You have researched the current spot and forward rates between the U.S. and Mexico, as indicated in Table-1: TABLE-1 Spot Rate 30-Day Forward 90-Day Forward 180-Day Forward U.S. Dollar/Peso 1.7851 1.7052 1.8051 1.7555 Peso/U.S. Dollar ? ? ? ? Questions: 1. Complete the Peso/ U.S. Dollar row in Table-1 and explain your methodology. 2. If you agree to pay 2-million pesos for 100,000 tablets at today’s spot rate, how much would you pay in U.S. dollars? 3. If you agree to pay 2-million pesos but wait 180 days and end up paying the 180-Day forward rate, how much would you be paying for the 100,000 tablets, in U.S. Dollars? 4. Your competitors sell the tablet for $41.20 and you must mark you product up from cost by at least 20% to earn a minimal profit, should you buy the tablets today? Explain your answer. 5. Should you wait to buy the tablets in 30 days at the current 30-day forward rate? Explain your answers....

Words: 255 - Pages: 2

Exchange Rate

...-21 (revised) OFFICE OF INDUSTRIES WORKING PAPER U.S. INTERNATIONAL TRADE COMMISSION How Do Exchange Rates Affect Import Prices? Recent Economic Literature and Data Analysis Cathy L. Jabara Office of Industries U.S. International Trade Commission Revised, October 2009 Cathy Jabara is a Senior Economist with the Office of Industries of the U.S. International Trade Commission. Office of Industries working papers are the result of the ongoing professional research of USITC Staff and are solely meant to represent the opinions and professional research of individual authors. These papers are not meant to represent in any way the views of the U.S. International Trade Commission or any of its individual Commissioners. Working papers are circulated to promote the active exchange of ideas between USITC Staff and recognized experts outside the USITC, and to promote professional development of Office staff by encouraging outside professional critique of staff research. This paper is a revised version of Working Paper No. 21 dated May 2009. The paper has been updated to include 4 lags in the exchange rate estimation, instead of 3, and a new equation for Latin America is included. JEL codes: F10, F12 Key words: Exchange rates, pass-through, U.S. imports Address correspondence to: Office of Industries U.S. International Trade Commission Washington, DC 20436 How Do Exchange Rates Affect Import Prices? Recent Economic Literature and Data Analysis Cathy L. Jabara U.S.......

Words: 6701 - Pages: 27