Solution-Making foreign goods cheaper in country

Making foreign goods cheaper in country

Reference no: EM133056269

Consider the following:

AUD/EUR spot rate	0.63
One-year AUD interest rate	2.50% p.a.
One-year EUR interest rate	1.00% p.a.

(a) Is the following statement true or false? (Please just state "True" or "False" without providing explanations.) "Policymakers may not want to see their country's currency appreciate because this would hurt domestic businesses by making foreign goods cheaper in their country."

(b) An exporter is to receive one million Euro one year from now. What AUD value can the exporter lock in using forward contracts?

Reference no: EM133056269

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Making foreign goods cheaper in country

Reference no: EM133056269

Reference no: EM133056269

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