What will the government force exporter to do

Reference no: EM13897886

1. Toward the end of 1999, the central bank (Reserve Bank) in Zimbabwe stabilized the Zimbabwe dollar, the Zim for short, at Z$38 > USD and privately instructed the banks to maintain that rate. In response, at the end of 1999, an illegal market developed wherein the Zim traded at Z$44 > USD. Are you surprised at rumors that claim corporations in Zimbabwe were "hoarding" USD200 million? Explain.

2. We described how exchange rate risk could be hedged using forward contracts. In pegged or limited-flexibility exchange rate systems, countries imposing capital controls sometimes force their importers and exporters to hedge. First, assuming that forward contracts are to be used, and an exporter has future foreign currency receivables, what will the government force him to do? Second, how does this help the government in defending their exchange rate peg?

Reference no: EM13897886

Questions Cloud

What is the dividend yield and capital gains yield today : What is the dividend yield and capital gains yield today

What are official international reserves of the central bank : What are official international reserves of the central bank? What is likely to happen if a central bank suddenly prints a large amount of new money?

What are the potential benefits of a pegged currency system : What are the potential benefits of a pegged currency system? What is the difference between a target zone and a crawling peg?

Is the robotic surgery investment financially acceptable : Is the robotic surgery investment financially acceptable

What will the government force exporter to do : An exporter has future foreign currency receivables, what will the government force him to do? Second, how does this help the government in defending their exchange rate peg?

Determine the current rate of return on risk-free assets : Determine the current rate of return on risk-free assets

Determine the exchange rate system croatia runs : Find the Web site of Croatia's central bank and determine the exchange rate system Croatia runs. Suppose the kuna weakens substantially relative to the euro.

How much energy must the ice absorb : How much energy must the ice absorb if it is to completely melt? If the ice were mixed with 360 grams of water initially at 30°C and the system is assumed to be closed, would the water be able to lose enough energy to melt all the ice? Show calc..

Explain the concepts of present value and future value : Explain the concepts of present value and future value. If the dollar interest rate is positive, explain why the value of $1,000,000 received every year for 10 years is not $10,000,000 today.

User Account

All Pages