What would be the effect in the exchange rate

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Reference no: EM133168200

Questions -

1- If you are an exporter who must make payments in foreign currency three months after receiving each shipment and you predict that the domestic currency will appreciate over this period, is there any value in hedging your currency exposure?

2- The same computer costs $1000 in the United States, €900 in Spain, £700 in the United Kingdom. If the law of one price holds, what are the euro-dollar, pound-dollar? Why might the law of one price fail?

3- Can purchasing power parity help predict long-term movements in exchange rates?

4- It has been mentioned that "After the creation of the eurozone, countries are not allowed to adjust their currency rates to gain competitiveness in their trading".

Could you explain why adjusting the exchange rates some countries try to improve their trading balance?

5- Are exchange rate changes necessarily good or bad for a particular country? Explain.

6- If the stock exchange in China grows and becomes bigger than wall street, what would be the effect in the exchange rate between USD and Yuan?

Reference no: EM133168200

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