Chapter 4 answer

Chapter 4 answer - ANSWERS: CHAPTER 4 QUESTIONS 1....

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
ANSWERS: CHAPTER 4 QUESTIONS 1. ($1.66-$1.73)/($1.73) = -4.05% Expected depreciation = 4.05%. 2. Demand for Canadian dollars should increase, supply of Canadian dollars for sale should decrease, and the Canadian dollar’s value should increase. 3. Demand for pounds should increase, supply of pounds for sale should decrease, and the pound’s value should increase. 4. The higher the real interest rate of a country relative to another country, the stronger will be its home currency, other things equal. 5. The trade deficit announcement may provide a reasonable forecast of future trade deficits and, therefore, has implications about supply and demand conditions in the foreign exchange market. For example, if the trade deficit was larger than anticipated, and is expected to continue, this implies that the U.S. demand for foreign currencies may be larger than initially anticipated. Thus, the dollar would be expected to weaken. Some speculators may take a position in foreign currencies immediately and could cause an immediate decline in the
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 09/01/2008 for the course FIN 370 taught by Professor Storey during the Spring '08 term at CSU Fullerton.

Page1 / 2

Chapter 4 answer - ANSWERS: CHAPTER 4 QUESTIONS 1....

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online