Financial Market Homework

Financial Market Homework

Short questions:

1.-Suppose the rate of inflation in Mexico will run about 3 percent higher than the U.S. inflation rate over the next several years. All other things being the same, what will happen to the Mexican peso versus dollar exchange rate? What relationship are you relying on in answering?

2.- 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?

3.- The same television set costs $500 in the United States, €450 in France, £300 in the United Kingdom, and ¥100,000 in Japan. If the law of one price holds, what are the euro-dollar, pound-dollar, and yen-dollar exchange rates? Why might the law of one price fail?

4.- Can purchasing power parity help predict short-term movements in exchange rates?

5.- During the 1990s, the U.S. Secretary of the Treasury often stated, “a strong dollar is in the interest of the United States.”

Is this statement true? Explain your answer.


a.- Suppose the spot exchange rate for the Hungarian forint is HUF 150. The inflation rate in the United States is 2.8 percent per year and is 3.5 percent in Hungary. What do you predict the exchange rate will be in one year? In two years? In five years? What relationship are you using?

b.- You observe that the inflation rate in the United States is 1.8 percent per year and that T-bills currently yield 2.3 percent annually. What do you estimate the inflation rate to be in:

Australia if short-term Australian government securities yield 4 percent per year?

Canada if short-term Canadian government securities yield 6 percent per year?

Taiwan if short-term Taiwanese government securities yield 9 percent per year?

c.- Tomolomo International has operations in Spain. The balance sheet for this division shows assets of 50,000 euros, debt in the amount of 30,000 euros, and equity of 20,000 euros.

1-If the current exchange ratio is 1.20 euros per dollar, what does the balance sheet look like in dollars?

2-Assume that one year from now the balance sheet in Tomolomo is exactly the same as at the beginning of the year. If the exchange rate is 1.30 euros per dollar, what does the balance sheet look like in dollars now?

3-Rework part (2) assuming the exchange rate is 1.12 euros per dollar.

d.- You observe that the inflation rate in the United States is 2 percent per year and that T-bills currently yield 2.4 percent annually. What do you estimate the inflation rate to be in:

Brazil if short-term Brazilian government securities yield 8 percent per year?

Kenia if short-term Canadian government securities yield 10 percent per year?

Andorra if short-term Andorra´s government securities yield 3 percent per year?

Get Online Homework Help from Homework Market 

Calculate your paper price
Pages (550 words)
Approximate price: -

Why Homework Market


Quality Researched Papers

We always make sure that writers follow all your instructions precisely. You can choose your academic level: high school, college/university or professional, and we will assign a writer who has a respective degree.

Homework Market

Qualified Writers

We have hired a team of professional writers experienced in academic and business writing. Most of them are native speakers and PhD holders able to take care of any assignment you need help with.


Unlimited Revision

If you think we missed something, send your order for a free revision. You have 10 days to submit the order for review after you have received the final document. You can do this yourself after logging into your personal account.


Timely Delivery

All papers are always delivered on time. In case we need more time to master your paper, we may contact you regarding the deadline extension. We will always strive to deliver on time.


Original & Confidential

We use several writing tools checks to ensure that all documents you receive are free from plagiarism. Our editors carefully review all quotations in the text.


Customer Support 24/7

Our support agents are available 24 hours a day 7 days a week and committed to providing you with the best customer experience. Get in touch whenever you need any assistance.

Try it now!

Calculate the price of your order

Total price:

How it works?

Follow these simple steps to get your paper done

Homework Market

Place your order

Fill in the order form and provide all details of your assignment.

Homework Market

Proceed with the payment

Choose the payment system that suits you most.

Homework Market

Receive the final file

Once your paper is ready, we will email it to you.

Homework Market Writing Services

No need to work on essay at night. Sleep tight, we will cover your back. We offer all kinds of essay writing services.

HomeworkMarket HomeworkMrket


Essay Writing Services

No matter what kind of academic paper you need and how urgent you need it, you are welcome to choose your academic level and the type of your paper at an affordable price. We take care of all your paper needs and give a 24/7 customer care support system.

HomeworkMarket HomeworkMarket


Admission Essays

An admission essay is an essay or other written statement by a candidate, often a potential student enrolling in a college, university, or graduate school. You can be rest assurred that through our service we will write the best admission essay for you.

HomeworkMarket HomeworkMarket


Essay Editing

Our academic writers and editors make the necessary changes to your paper so that it is polished. We also format your document by correctly quoting the sources and creating reference lists in the formats APA, Harvard, MLA, Chicago / Turabian.

HomeworkMarket HomeworkMarket

Research Paper

Research Paper

If you think your paper could be improved, you can request a review. In this case, your paper will be checked by the writer or assigned to an editor. You can use this option as many times as you see fit. This is free because we want you to be completely satisfied.