fin4000 assignment 1 - Daniel Barrecchia Fin4000 Assignment...

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Daniel Barrecchia Fin4000 Assignment 1 Part 1: 1.) A sterilized intervention is the buying or selling of a foreign currency by the  domestic central bank in hopes to change the exchange rate of the domestic  currency, while at the same time trying not to cause inflation. After the foreign  currency is purchased or sold, an open market operation must purchase an equal amount of government securities to offset and “sterilize” the previous  intervention. An unsterilized intervention is this exact process but without the  open market operation to sterilize the first step. 2.) The Bretton Woods system created the International Monetary Fund, the  International Bank for Reconstruction and Development, and the introduction of  an adjustable pegged FX rate system. Currencies became pegged to gold and 
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Unformatted text preview: the IMF was given the authority to intervene when an imbalance of payments arose. The system collapsed because the US experience difficulties in the 60’s. So in the early 70’s, Richard Nixon suspended the dollars convertibility to gold. 3.) a. The dollar will depreciate in comparison to the Japanese Yen. b. The dollar should appreciate and the Yen will depreciate due to a lack of foreign investment. c. The dollar will depreciate due to a lack of foreign investment. Part 2: 1.) The indian rupee depreciated $0.029 2.) a. The dollar value of the Yen in 2002 was $.008333. The dollar value of the Yen in 2006 was $.01 b. The Yen rose .017% over those 4 years. c. The dollar depreciated .017% over those 4 years....
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  • Spring '14
  • ElishaGurfein
  • Aidan Quinn, open market operation, dollar value, Daniel Barrecchia, adjustable pegged FX

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