Question
Can you please help me answer this question? Question 1 A) Fixed versus Flexible. What are the advantages and disadvantages of fixed exchange rates? B)
Can you please help me answer this question?
Question 1
A) Fixed versus Flexible. What are the advantages and disadvantages of fixed exchange rates? B) The Impossible Trinity. Explain what is meant by the term impossible trinity and why it is in fact impossible. C) Exchange Rate Effects on Borrowing. Explain how the appreciation of the Japanese yen against the U.S. dollar would affect the return to a U.S. firm that borrowed Japanese yen and used the proceeds for a U.S. project. D) Bid/ask Spread. Utah Banks bid price for Canadian dollars is USD0.7938 and its ask price is USD0.81. What is the bid/ask percentage spread? E) Indirect Exchange Rate. If the direct exchange rate of the euro is worth USD1.25, what is the indirect rate of the euro? That is, what is the value of a dollar in euros? F) Cross Exchange Rate. Assume Polands currency (the zloty) is worth USD0.17 and the Japanese yen is worth USD0.008. What is the cross rate of the zloty with respect to yen? That is, how many yen equal a zloty? G) International Diversification. Explain how the Asian crisis would have affected the returns to a U.S. firm investing in the Asian stock markets as a means of international diversification. H) Foreign Exchange. You just came back from Canada, where the Canadian dollar was worth USD0.70. You still have CAD200 from your trip and could exchange them for dollars at the airport, but the airport foreign exchange desk will only buy them for USD0.60. Next week, you will be going to Mexico and will need pesos. The airport foreign exchange desk will sell you pesos for USD0.10 per peso. You met a tourist at the airport who is from Mexico and is on his way to Canada. He is willing to buy your CAD200 for MXN1,300 pesos. Should you accept the offer or cash the Canadian dollars in at the airport? Explain.
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