Assume that the current spot exchange rate is $1.98/£, that the three-month forward exchange rate is $2.00/£, and that a speculator believes that the spot rate in three months will be $2.05/£. How can this person speculate in the forward market? Also assume that the speculator is willing to take a position of about $20 million or £10 million. How much will the speculator earn if he or she is correct?
What will be an ideal response?
POSSIBLE RESPONSE: Assuming the position amount is $20 million, the speculator will buy £10 million at the 90-day forward rate $2.00/£. On the contract date, he or she will receive the pounds at the forward contract rate of $2.00/£. Then, the person will instruct his or her bank immediately to sell £10 million in the spot market for $2.05/£, making a net profit of $500,000.
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A. the three coordination decisions among different sets of planners. B. the parts of a complex task among different workers. C. the production of consumption goods and capital goods among different workers. D. political leaders into radical and conservative camps each year.
The marginal productivity theory of income distribution states that
A) income distribution is determined by the marginal productivity of the factors of production that individuals own. B) as more and more units of labor are added to a fixed quantity of capital, eventually labor's contribution to a firm's income will decrease. C) factors of production in short supply command higher prices than those available in abundant quantities. D) capital owners receive the bulk of a nation's income because capital-intensive production generates productivity gains.
Which one of the following is TRUE?
A. Negative net investment occurs when exports are less than imports. B. Negative net investment occurs when imports are less than exports. C. Our productive capacity declines when net investment is less than zero. D. Net investment is negative when gross investment is greater than depreciation.
Differentiate between government purchases of goods and services and government transfer payments
What will be an ideal response?