Ask Question, Ask an Expert


Ask Microeconomics Expert

Suppose you (or you have friends or relatives) work in a financial institution, how you would advise your clients with regard to the following:

(a) A U.S. resident can earn 6% interest on a one-year bank deposit of US$100,000 at home. Alternatively, she can convert the US$100,000 into Euro and earn 4% on a one-year bank deposit in Germany. Suppose the initial exchange rate is 1.5 Euro/US$.

Suppose that she wishes to withdraw her money at the end of the year and the exchange rates changes to 1.45Euro/US$ at the end of the year. Identify and discuss which deposit will give her a higher return, and by how much (measured in U.S. dollars).

(b) At the end of the year, the U.S. investor referred to in (a) wishes to travel to Germany to visit relatives. She sees that the £ /US$ exchange rate is 0.91£/US$, and the £/Euro exchange rate is 0.65£/Euro, and the Euro/US$ conversion is 1.45Euro/US$. Should she convert the US$10,000 she wishes to take to Germany directly from US$ to Euro, or should she first convert to £, and then to Euro? Discuss how much (in Euro) does she make/lose by converting to £ first.

(c) Suppose you have a corporate client IXM which sells computers in Japan and receives revenues in yen. However, IXM's expenses are in US dollars. describe how you would advise your client to hedge against currency risks.

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M941123

Have any Question? 

Related Questions in Microeconomics

Discussion forumtopicsanother reason to hate the yankeesand

DISCUSSION FORUM Topics: Another reason to hate the Yankees...and the Red Sox, the Dodgers, the Cardinals, even the Pirates Yankee Stadium and the Power of Sports Monopolies ...

Applications and best practicesi always like to hear the

Applications and Best Practices I always like to hear the feedback from students about what are some of the challenges they face in the economic concepts. This makes the class advance in the future. From your perspective ...

Question 1nbspgiven the following chart answer the

Question 1  Given the following chart answer the questions below, assuming that all resources and technology are fixed for this farm. Corn(bu) Soybeans(bu) 20,000 0 16,000 5000 12,000 9000 8,000 12,000 4,000 14,000 0 15, ...

Assignmentthere are many terms used to describe the

Assignment There are many terms used to describe the importance of people to an organization's success. Some of those terms are human resources, human capital, intellectual assets, and talent management. This implies tha ...

To begin you initial post research one of the health

To begin you initial post, research one of the health profession licensing agencies in your state. Analyze and comment on the role this professional licensing group plays in the creation of policy within the profession a ...

Research topicthis assignment is the first step towards

Research Topic This assignment is the first step towards completing your research paper. For this submission, you will need to find a topic of interest related to race and ethnicity, social change, or both. You may come ...

Topic 1 price elasticity of demand and government

Topic 1: Price Elasticity of Demand and Government Revenue Based on the assessments of price elasticity of demand, some goods are demand-elastic whereas others are demand inelastic. Our consumption pattern also depends o ...

Fight against obesityno unread repliesno

Fight against Obesity No unread replies.No replies. Directions: The impact of obesity is overwhelming and the numbers are staggering in relation to both co-morbidity and cost. Advance practice nurses are in an optimal po ...

Crowd funding assignmentthe purpose of this assignment is

Crowd Funding Assignment The purpose of this assignment is to have you become familiar with the concept of crowdfunding. As such you should do the following: 1. Google crowd funding, visit crowd funding web sites, and le ...

Discussion questionconduct research on ucc 2-209 and the

Discussion Question Conduct research on UCC 2-209 and the case Cloud Corp v. Hasbro, Inc., 314 F,3d 289 (7th Cir. 2002). Briefly summarize the Cloud Corp case. Discuss whether an employee's email communication form a wai ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

A cola-dispensing machine is set to dispense 9 ounces of

A cola-dispensing machine is set to dispense 9 ounces of cola per cup, with a standard deviation of 1.0 ounce. The manuf

What is marketingbullwhat is marketing think back to your

What is Marketing? • "What is marketing"? Think back to your impressions before you started this class versus how you

Question -your client david smith runs a small it

QUESTION - Your client, David Smith runs a small IT consulting business specialising in computer software and techno

Inspection of a random sample of 22 aircraft showed that 15

Inspection of a random sample of 22 aircraft showed that 15 needed repairs to fix a wiring problem that might compromise

Effective hrmquestionhow can an effective hrm system help

Effective HRM Question How can an effective HRM system help facilitate the achievement of an organization's strate