Exchange rates play in attracting foreign investments

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Reference no: EM13208014

1. The EURUSD spot exchange rate is quoted as 1.32250-1.32267. How many EUR are needed to purchase $100,000,000 USD on this market? Explain.

2. Who buys at the bid? Who buys at the ask? Who sells at the bid? Who sells at the ask? Explain.

3. An FX dealer quotes the spot exchange USDJPY spot exchange rate as 85.887-85.905. Two buyside counterparties agree to transact at these quotes: One buys one billion JPY and the other sells one billion JPY. What is the dealers profit from these transactions in JPY terms?

4. What role do exchange rates play in attracting foreign investments? What currency policies do you recommend a policymaker implement in order to remain an attractive destination for foreign investments?

5. You are advising a USD firm that expects to make a EUR 5,000,000 payment in three months. What forward contract can be used to hedge FX risk? Explain with a diagram.

6. If you are bearish regarding EURUSD volatility and bullish regarding EURUSD direction, what type of option position should one obtain? Explain.

7. When will an entity with a long position in a down-and-out barrier call option regret their decision to choose the down-and-out barrier rather than a long position in a vanilla call option? Explain.

8. Is it always good news for a country classified as emerging to be reclassified as developed? Explain.

9. What were the original BRIC predictions? Were they accurate? Explain.

Reference no: EM13208014

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