Hw4a - Economics 442 Homework 4 Due in class on Tuesday...

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Economics 442 Homework 4 Due: in class on Tuesday, April 1 st (Note new due date) 1. FOREX market efficiency and technical trading: Examine the daily closing price data on the DM/$ rate in the data file posted on Ctools: (1) Suppose that you are using the 1 percent filter rule to trade the DM and US$. a. On what day would the 1 percent filter rule have issued its first signal? Was this a buy or a sell signal? At what price did the trade occur? b. On what day would the 1 percent filter rule have issued its second signal? Was this a buy or sell signal? At what price did the second trade occur? c. Calculate the profit from the first trade by assuming that transaction costs are 0.02 percent and that interest rates were constant over the period with i DM = 3.0% and i $ = 5.5% . (2) Suppose that you are using the 2 percent filter rule to rade the DM and US$. Repeat question a-c. (3) Suppose that you are using a 1/200 moving average rule to trade the DM and US$. a.
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This homework help was uploaded on 04/12/2008 for the course ECON 442 taught by Professor Chari during the Winter '08 term at University of Michigan.

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Hw4a - Economics 442 Homework 4 Due in class on Tuesday...

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