Explain the foreign exchange market

Assignment Help Business Economics
Reference no: EM133132657

You are the treasurer of a U.S. firm that has a €1 million commitment due to a German firm in 90 days. The current spot rate is $1.00 per euro. Ms. A forecasts that the spot rate in 90 days will be $1.01 per euro. Ms. B forecasts that the spot rate will be $1.12 per euro. The 90-day forward rate is $1.11 per euro and the actual spot rate in 90 days turns out to be $1.10 per euro.

1. Who's forecast is more accurate? Ms. A or Ms. B ?

2. If you follows Ms. A's forecast, what will you do today on the foreign exchange market? Howmuch will your firm's €1 million commitment turn out to be in dollars. Explain.

3. If you follows Ms. B's forecast, what will you do today on the foreign exchange market? Howmuch will your firm's €1 million commitment turn out to be in dollars. Explain.

4. Based on your answers for (2) and (3), who's forecast is actually better for your firm? Explain

Reference no: EM133132657

Questions Cloud

Described as courageous risk-takers : Social justice counselors have been described as "courageous risk-takers." What are some of problems in your community, such as needs or gaps and how could you
How much market power does the government have : How much market power does the government have in purchasing health services? Words to consider: monopsony purchasers v competitive markets v monopoly suppliers
What is budget : Case Study #1-Read the scenario and use only the information below to answer the questions.It's your last year of high school and you have been asked to organiz
Types of social groups : How can the results of a social problem aid all types of social groups?
Explain the foreign exchange market : You are the treasurer of a U.S. firm that has a €1 million commitment due to a German firm in 90 days. The current spot rate is $1.00 per euro.
Behaviors need to have clear specification : In The Supervisors Guidebook, the authors point out that work behaviors need to have clear specification.
What makes you better for a high-top quality position : Describe what makes you better for a high-top quality position.
Evaluate the time warner offer : TiVo sells cable boxes and a digital video recording service. Typically, TiVo customers pay a fee for the box (as little as $30) and a monthly fee ($17 to $20)
Concerning the spiritual in art by kandinsky : Why is color so intimately tied to "spirituality", for Kandinsky? What does Kandinsky say about that himself in the book?

Reviews

Write a Review

Business Economics Questions & Answers

  Determine how much money would be in a savings account

Determine how much money would be in a savings account that started with a deposit of $2000 in year 1 with each succeeding amount increasing by 10%/yr. Assume a 7 year period and an interest rate of 15%.

  Elucidate reason for both wage and cost rigidities

Elucidate reason for both wage and cost rigidities including policy implications for se rigidities. Would you conclude on se reasons suggested by New Keynesian economists as relevant to unemployment situation in South Africa.

  Amount of the imputed interest you must declare

If you do not sell your bond in the secondary market during 2017, what is the amount of the imputed interest you must declare for tax purposes for 2017, if any?

  Relationship between actual and real dollars and inflation

Inflation impacts the before- and after-tax analysis. In performing analysis, it is important to understand how inflation impacts the world economies. When inflation occurs, we are able not able to buy as much and our future dollars hold less value t..

  Institutions influence economic life

Demonstrate by example about production which exhibits constant returns to scale.

  What is transparency of pricing in healthcare

What is transparency of pricing in healthcare and how can pricing be made more understandable for the average healthcare consumer?

  Relationship in economic growth rate and unemployment rate

What factors might contribute to low or high growth rates in a country? How can sustainable long-run economic growth rate be realized? What are the roles of the government in achieving sustainable long-run economic growth? What is the relationship be..

  Calculate price elasticity of demand

Calculate price elasticity of demand (using the point elasticity formula) at the following amounts of CLO along this demand curve: QD=4000, QD =2500, QD =1000.

  What level of output should you produce in the short run

You are a manager in a perfectly competitive market. The price in your market is $45. Your total cost curve is C(Q) = 10 + 2Q + .5Q2 and MC = 2 + Q.

  Claims for unemployment

Suppose that only data on in action were published but not on claims for unemployment. What would be a reaction of the USD/EUR in that case.

  Q1 manipulate demand of price elasticity suppose that 50

q1. manipulate demand of price elasticity. suppose that 50 units of a good demanded at a cost of 1 unit. a reduction

  Earn an annual return

How much do you have to save each month if you can earn an annual return of 10.7 percent?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd