End-of-Chapter 4 Problems

End-of-Chapter 4 Problems - Moore School of Business...

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1 Moore School of Business Spring 2012 University of South Carolina IBUS 401 – INTERNATIONAL FINANCIAL MANAGEMENT Answers to selected end-of-chapters problems Chapter 4 Exchange Rate Determination Problems assigned: 1, 2, 3, 4, 5, 9, 11, 20 1. Percentage Depreciation. ($1.66 – $1.73)/$1.73 = –4.05% Expected depreciation of 4.05% percent 2. Inflation Effects on Exchange Rates. Demand for Canadian dollars should increase, supply of Canadian dollars for sale should decrease, and the Canadian dollar’s value should increase. 3. Interest Rate Effects on Exchange Rates. Demand for pounds should increase, supply of pounds for sale should decrease, and the pound’s value should increase. 4. Income Effects on Exchange Rates. Assuming no effect on U.S. interest rates, demand for dollars should increase, supply of dollars for sale may not be affected, and the dollar’s value should increase. 5.
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End-of-Chapter 4 Problems - Moore School of Business...

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