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Approximate Annual %
20 % 15 10 5 0 -5 -10 -15 -20 1992 1996 2000
D1 D0 Quantity of
U.S. inflation U.S. demand for British goods, and hence . British desire for U.S. goods, and hence the supply of .
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D0 D1 Quantity of
U.S. interest rates U.S. demand for British bank deposits, and hence . British desire for U.S. bank deposits, and hence the supply of .
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D1 D0 Quantity of
U.S. income level U.S. demand for British goods, and hence . No expected change for the supply of .
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Fed chairman suggests Fed is Strengthened unlikely to cut U.S. interest rates A possible decline in German interest rates Central banks expected to intervene to boost the euro Strengthened Weakened
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U.S. demand for foreign securities, i.e. demand for foreign currency Foreign demand for U.S. securities, i.e. supply of foreign currency
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strengthens $ weakens
U.S. interest rates high U.S. interest rates, a somewhat depressed U.S. economy, & low inflation
1976 1980 1984
relatively high U.S. interest rates, & lower balance of trade deficit
0 1972
1988
1992
1996
2000
Note: The index reflects equal weights of , , French franc, German mark, and Swiss franc. C3 - 18
Borrows at 7.20% for 30 days 1. Borrows $20 million Returns $20,120,000 Profit of $792,320 Exchange at $0.50/NZ$ Lends at 6.48% for 30 days Exchange at $0.52/NZ$ 4. Holds $20,912,320
3. Receives NZ$40,216,000
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Borrows at 6.96% for 30 days 1. Borrows NZ$40 million Returns NZ$40,232,000 Profit of NZ$1,668,000 or $800,640 Lends at 6.72% for 30 days 4. Holds NZ$41,900,000
Exchange at $0.50/NZ$
Exchange at $0.48/NZ$
3. Receives $20,112,000
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Kerjakan
Jika kurs rupiah-dolar awal tahun adalah Rp.2,000/$ dan
pada akhir tahun adalah Rp.4,000/$ berapa apresiasi/depresiasi rupiah terhadap dolar, dan apresiasi/depresiasi dolar terhadap rupiah?
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Kerjakan
Blue Demon Bank expects that French Franc (FF) will depresiate againts
the dolar from its spot rate of $0.15 to $0.14 in 10 days. The following interbank lending and borrowing rate exist:
Lending Rate
US Dolar French Franc 8% 8.5%
Borrowing Rate
8.3% 8.7%
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Borrows at 8.70% for 10 days 1. Borrows FF$70 million Returns FF75,166,666.7FF70,169,166.7 = FF 4,997,500 or $ 699,650 4. Holds FF$75,166,666.7
Exchange at $0.15/FF
Exchange at $0.14/FF$
3. Receives $10,523,333.3
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How could Blue demon bank attempt to capitalize on its expectations without using deposit funds? Estimate the profits that could be generated from this strategy. Assume all the preceding information, with this exception: blue demon bank expect the FF to appreciate from its present spot rate of $0.15 to $0.17 in 10 days. How could it attempt capitalize on its expectations without using deposited funds? Estimate the profits that could be generated from this strategy?
2.
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Thank You
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