Which of the following conditions may lead to a

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37. Which of the following conditions may lead to a decline in the value of a country'scurrency?
38. The large U.S. current account deficit implies that
39. A current account deficit implies that
40. Which of the following are likely to lead to an appreciation of the U.S. dollar (ceterisparibus)?
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Chapter 09 - Foreign Exchange Markets41. You can buy or sell the £ spot at $1.98 to the pound. You can buy or sell the pound one-year forward at $2.01 to the pound. If U.S. annual interest rates are 5%, what must be theapproximate one-year British interest rate if interest rate parity holds?
42. You can buy or sell the yen spot at ¥102 to the dollar. You can buy or sell the yen one-yearforward at ¥104 to the dollar. If U.S. annual interest rates are 4%, what must be theapproximate one-year Japanese interest rate if interest rate parity holds?
43. A U.S. bank has £120 million in loans to corporate customers and has £70 million indeposits it owes to customers with the same maturity. The bank has also sold £20 millionpounds forward. The bank's net exposure is
44. The ________________ measures the net flows of imports and exports of goods, services,income payments, and unilateral transfers.
45. The concept underlying purchasing power parity is the
46. What are the major purposes of the foreign exchange markets?
47. A U.S. FI has U.S. $200 million worth of one-year loans earning an average rate of return of 6%. The FIalso has one-year single payment Canadian dollar loans of C$110 million earning 8%. The FI's fundingsource is $300 million in U.S.$ one-year CDs, on which they are paying 4%. Initially the exchange rate isC$1.10 per $1 U.S. The one-year forward rate is C$1.14 per $1 U.S. What is the bank's dollar % spread ifthey hedge fully using forwards?

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