a. On September 24, 20xx, you purchased a 3-month British-pound denominated CD by converting $1 million to pounds at a rate of .4964 pounds for U.S. dollars. It is now three months later, i.e. December 24, 20xx, and the exchange rate between U.S. dollars and British pound is .4998 pounds per U.S. dollar. (i) Has the U.S. dollar appreciated or depreciated against the British pound? b. Using the information in part (a), what is you gain or loss on the investment in the CD? Assume that you will be paid interest on the CD, and the CD interest rate is 4 percent annually.
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Under a system of floating exchange rates, which of the following would not tend to cause an increase in the value of a country's currency?
Question 1 options:
An increased demand for the country's goods. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Offering higher interest rates than other countries. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
A downturn in the country's business activity. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
A lower rate of inflation than other countries. 2. Foreign currency is usually referred to as Question 2 options:
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