I need to answer the following questions for homeworkwith original answers.

FIN535 (International Finance)

• Strayer535HomeworkWeek4Spring2016
• 3.DirectIntervention.Howcanacentralbankusedirectinterventiontochangethevalueofacurrency?Explainwhyacentralbankmaydesiretosmoothexchangeratemovementsofitscurrency.
• 5.InterventionEffects.AssumethereisconcernthattheUnitedStatesmayexperiencearecession.HowshouldtheFederalReserveinfluencethedollartopreventarecession?HowmightU.S.exportersreacttothispolicy(favorablyorunfavorably)?WhataboutU.S.importingfirms?
• 10.InterventionEffectsonBondPrices.U.S.bondpricesarenormallyinverselyrelatedtoU.S.inflation.IftheFedplannedtouseinterventiontoweakenthedollar,howmightbondpricesbeaffected?
• 15.IndirectIntervention.DuringtheAsiancrisis(seeAppendix6attheendofthischapter),someAsiancentralbanksraisedtheirinterestratestopreventtheircurrenciesfromweakening.Yet,thecurrenciesweakenedanyway.Offeryouropinionastowhythecentralbankseffortsatindirectinterventiondidnotwork.Chapter7
• 5.CoveredInterestArbitrage.Explaintheconceptofcoveredinterestarbitrageandthescenarionecessaryforittobeplausible.
• 10.InflationEffectsontheForwardRate.Whydoyouthinkcurrenciesofcountrieswithhighinflationratestendtohaveforwarddiscounts?
• 14.ChangesinForwardPremiums.AssumethattheJapaneseyensforwardratecurrentlyexhibitsapremiumof6percentandthatinterestrateparityexists.IfU.S.interestratesdecrease,howmustthispremiumchangetomaintaininterestrateparity?Whymightweexpectthepremiumtochange?
  22.CoveredInterestArbitrageinBothDirections.Thefollowinginformationisavailable:&;&;&;&;&;&;&;&;Youhave$500,000toinvest&;&;&;&;&;&;&;&;ThecurrentspotrateoftheMoroccandirhamis$.110.&;&;&;&;&;&;&;&;The60-dayforwardrateoftheMoroccandirhamis$.108.&;&;&;&;&;&;&;&;The60-dayinterestrateintheU.S.is1percent.&;&;&;&;&;&;&;&;The60-dayinterestrateinMoroccois2percent.a.WhatistheyieldtoaU.S.investorwhoconductscoveredinterestarbitrage?Didcoveredinterestarbitrageworkfortheinvestorinthiscase?b.WouldcoveredinterestarbitragebepossibleforaMoroccaninvestorinthiscase?