QUESTION 9 A situation in the market exhibits Uncovered Interest Rate Parity when... all traders share the same expectations, and traders split in groups with different trading strategies. As a consequence, the Forward Rate and the expectations Et+1 might not equalize all traders share the same expectations, and the volatility of exchange rates is limited all traders share the same expectations, and the volatility of exchange rates is high all traders share the same expectations, and traders act as homogeneous group, and consequently then Forward Rate and the expectations Et+1 will tend to equalize QUESTION 10 Suppose that the Uncovered Interest Rate Parity holds, and 1) i-iF=5% 2) exp(Et+1)=1 Eis... (Report only a number; no currency signs; 2 decimal points - for example, report 134.56948649 as 134.57) QUESTION 11 Suppose that P=$1.5 and pt=BP 1.6 for a Big Mac. If law of one price holds, then the exchange rate between $ and BP should be... (Report only a number; no currency signs; 2 decimal points - for example, report 134.56948649 as 134.57) QUESTION 12 Suppose that a Big Mac costs $5.79 in the US, and CHF 6.5 in Switzerland. You are told that the exchange rate between $ and CHF IS CHF=$0.5 From what you know about PPP theory and Law of One Price, the swiss franc is... overvalued! It should be about 6.50/5.79 overvalued! It should be about 5.79/6.50 undervalued! It should be about 6.50/5.79 undervalued! It should be about 5.79/6.50 QUESTION 13 Suppose that a Big Mac costs $5.79 in the US, and Yuan 20 in China. You are told that the exchange rate between $ and Yuan is Yuan=$2 From what you know about PPP theory and Law of One Price, the Yuan is... undervalued! It should be priced at 5.79/20 overvalued! It should be priced at 20/5.79 undervalued! It should be priced at 20/5.79 overvalued! It should be priced at 5.79/20 QUESTION 9 A situation in the market exhibits Uncovered Interest Rate Parity when... all traders share the same expectations, and traders split in groups with different trading strategies. As a consequence, the Forward Rate and the expectations Et+1 might not equalize all traders share the same expectations, and the volatility of exchange rates is limited all traders share the same expectations, and the volatility of exchange rates is high all traders share the same expectations, and traders act as homogeneous group, and consequently then Forward Rate and the expectations Et+1 will tend to equalize QUESTION 10 Suppose that the Uncovered Interest Rate Parity holds, and 1) i-iF=5% 2) exp(Et+1)=1 Eis... (Report only a number; no currency signs; 2 decimal points - for example, report 134.56948649 as 134.57) QUESTION 11 Suppose that P=$1.5 and pt=BP 1.6 for a Big Mac. If law of one price holds, then the exchange rate between $ and BP should be... (Report only a number; no currency signs; 2 decimal points - for example, report 134.56948649 as 134.57) QUESTION 12 Suppose that a Big Mac costs $5.79 in the US, and CHF 6.5 in Switzerland. You are told that the exchange rate between $ and CHF IS CHF=$0.5 From what you know about PPP theory and Law of One Price, the swiss franc is... overvalued! It should be about 6.50/5.79 overvalued! It should be about 5.79/6.50 undervalued! It should be about 6.50/5.79 undervalued! It should be about 5.79/6.50 QUESTION 13 Suppose that a Big Mac costs $5.79 in the US, and Yuan 20 in China. You are told that the exchange rate between $ and Yuan is Yuan=$2 From what you know about PPP theory and Law of One Price, the Yuan is... undervalued! It should be priced at 5.79/20 overvalued! It should be priced at 20/5.79 undervalued! It should be priced at 20/5.79 overvalued! It should be priced at 5.79/20
