1A Homework Problems.doc

# Assume that all transactions are financed by checks

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entries for the following transactions. Assume that all transactions are financed by checks written on U.S. banks. (a) A US dentist buys a \$600 10-year Japanese bond. (b) Microsoft pays dividend of \$200 to Japanese stock owner (c) Fed buys \$250 worth of yen in foreign exchange markets by selling \$ (d) English investor buys \$300 worth of Ford stock from Virginian (e) China buys \$500 worth of wheat from Washington state farmers 1.7. If the current account is in deficit by 30, the ORTB (“BOP”) is in surplus by 20, and long term capital and financial account (KFA LP ) is in deficit by 15, then: (a) What is the basic balance? (b) What is the KFA? (c) What is the KFA SP ? 1.8. If the basic balance is \$30 in surplus, the capital and financial account is \$80 in deficit, and the Official Reserves Transactions Balance (ORTB or “BOP”) is \$40 in surplus: (a) What is the value of the current account? (b) What is the value of the short term private capital and financial account? (c ) If the country’s international investment position was +\$200 before this activity, what was it after? 1.9. If account: CA G was in deficit by \$55 CA S was in surplus by \$20 CA FS was in deficit by \$15 KFA LP was in surplus by \$40 KFA SP was in balance Then what was the: (a) current account balance (b) capital and financial account (c) basic balance (d) official reserve transactions balance (e) trade balance (f) would you guess the International Investment Position is positive or negative? State your reasoning. (10 words MAX)

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