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5. The exchange rate between the dollar and the euro is E 1.00 = $1.07560. In six months, the rate is expected to be E
5. The exchange rate between the dollar and the euro is E 1.00 = $1.07560. In six months, the rate is expected to be E 1.00 = $1.08445. Is the dollar getting stronger or weaker compared to the euro? If you had $123,456 now, how much dollars would you gain or lose by waiting to convert to euros instead of now? 6. Fine Italian suits are $2,500 in Italy and $3,500 in the US. What is the opportunity to make a profit from this situation? How would this strategy affect exchange rates? The current exchange rate is E 1.00 = $1.07560. Will the exchange rate go to $1.10 or $1.05? What is the effect on the profit? 7. Suppose there is a US BOP current account surplus with Japan. How would the foreign exchange market and the international trade market react to this situation? What would be the result? 8. You are advising a US company that is considering building a manufacturing plant in China. The budget is expected to be over $4.5 billion. The company is concerned that the NPV will be low and the IRR will be below the cost of capital. How would you advise the company to reduce expenses? What would be the effect on NPV and IRR
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