Do you think that authority effectively made a profit or not

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Reference no: EM131213882

Each of the following indicates a series of foreign exchange interventions by the monetary authority of a country. For each, do you think that the authority effectively made a profit or not?

a. The local currency is pesos. In January the authority intervenes to sell U.S. dollars at the rate $3.00/peso. In June it intervenes to buy dollars at $3.50/peso. In November it intervenes to sell dollars at $3.10/peso. In June of the next year it intervenes to buy dollars at $3.40/peso.

b. The local currency is the yen. In February the authority intervenes to sell yen at $0.60/yen. In October it intervenes to sell yen at $0.55/yen. The next year it intervenes to sell yen in March at $0.51/yen. In April the exchange rate stabilizes at $0.50/yen, and the authority ceases its intervention.

Reference no: EM131213882

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