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a) The value of your country's currency has been experiencing a drastic downward decrease in value relative to other major world currencies. In relation

 

a) The value of your country's currency has been experiencing a drastic downward decrease in value relative to other major world currencies. In relation to the above statement, discuss four strategies that could be adopted by the central bank of your country to stabilize the local currency. b) Evaluate four benefits that could accrue to a multinational corporation (MNC) that uses bilateral netting. c) Assume that the following exchange rate information is available between the United States of America (USA) and Britain: Nominal interest rate Expected inflation rate . Spot rate One year forward rate USA 4% 2% Britain 6% 5% $1.13 $1.10 Required: i. The forward rate of the British pound (GBP) assuming interest rate parity exists between the USA and Britain. The expected spot rate of the GBP in one year assuming the purchasing power parity (PPP) holds between the USA and Britain. iii. iv. The expected spot rate of the GBP in one year assuming the international fisher effect (IFE) holds between the USA and Britain. Describe two methods that could be used to determine whether the purchasing power parity (PPP) exists among countries.

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