# Dollars to invest in the us the new equilibrium will

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dollars to invest in the U.S.). The new equilibrium will be at the point (B) where D 2 intersects S 2 . The exchange rate of euros for dollars is lower, so the dollar has weakened or depreciated. The U.S. dollar will depreciate in value versus the euro when interest rates in the E.U. fall.
0 / 1 point Suppose the exchange rate for U.S. dollars and euros is approximately \$1.00 = €0.80, as shown in the market for U.S. dollars below. Suppose the interest rate is expected to rise in the European Union (relative to the interest rate in the U.S.). As a currency speculator, how should you respond before the interest rate change in order to profit?
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appreciation. 0 / 1 point Assume it is June 1, 2016 and the exchange rate for U.S. dollars and British pounds is approximately \$1.00 = £0.70. You are a currency speculator. Somehow you know that on June 23, 2016, the British will vote to approve Brexit, removing the U.K. from the European Union. Suppose you also know that about week after the vote, on July 1, 2016, the exchange rate for U.S. dollars and British pounds will have increased to approximately \$1.00 = £0.84. In your portfolio (on June 1), you have \$1,000,000 in dollars and £1,000,000 in pounds with which to speculate. Your intent is to profit from currency speculation. Using the money in your portfolio to make currency trades on June 1 and on July 1, calculate how much profit you could make in dollars. Provide your answer in U.S. dollars rounded to one decimal place. Use a negative sign "-" for negative values. Do not include any symbols, such as "\$," "=," "%," or "," in your answer.
Hide Feedback The British pound depreciated in value because a dollar can buy more pounds (and a pound buys fewer dollars) after Brexit. Since the British pound is going to depreciate in value, you want to hold dollars before the Brexit vote. So, on June 1, 2016, trade your pounds for dollars. If the exchange rate is \$1.00 = £0.70, then £1.00 = 1.428. (Leave your dollars on June 1 in dollars.) Then, the British vote to Brexit. The exchange rate changes, and now you convert the dollars back into British pounds. Subtract the amount of your original currency in British pounds to obtain profit in pounds. Lastly, convert the profit in pounds to profit in dollars.