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Mexico and Argentina are trade partners. Which of the following is the most likely impact of the Mexican peso depreciating compared to the Argentinian peso?
- Mexico and Argentina are trade partners. Which of the following is the most likely impact of the Mexican peso depreciating compared to the Argentinian peso?
- Argentina will import fewer Mexican goods, hurting Mexican exports
- Argentina will import more Mexican goods, helping Mexican exports
- Mexico will import more Argentinian goods, helping Argentinian exports
- There will be no impact as foreign currency exchange rates dont impact trade
- Suppose U.S. interest rates are 10%, European interest rates are 7%, and the current spot rate is 1 Euro = 1.19 US Dollars. According to interest rate parity, what is the equilibrium forward rate (in other words, based on the forward rate, how many US dollars will 1 Euro be worth in the future)? Give your answer to four decimal places (for example if 1 Euro will be worth 1.5555 US Dollars, write your answer as 1.5555).
- You are trying to estimate the price risk faced by a bank that owns a 30 year fixed rate mortgage that has an 8% annual rate with monthly payments of $1,100.65. The loan is for $150,000 (i.e. value of the loan originally is $150,000). You consider the change in the price (present value) of this asset if rates fall by 1%. What is the percent change in the price from rates falling 1% (suppose the change happens immediately when there are still 30 years of monthly payments remaining)? Give your answer to the closest 0.01% and enter your answer as a percentage.
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