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Consider a Dutch investor with 1,000 euros to place in a bank deposit in either the Netherlands or Great Britain. The (one-year) interest rate on bank deposits is 2% in Britain and 4.04% in the Netherlands. The (one-year) forward euro-pound exchange rate is 1.575 euros per pound and the spot rate is 1.5 euros per pound. Answer the following questions, using the exact equations for UIP and CIP as necessary.
a.) Illustrate what is the euro-denominated return on Dutch deposits for this investor?
b.) What is the (riskless) euro-denominated return on British deposits for this investor using forward cover?
c.) Is there an arbitrage opportunity here? Explain why or why not. Is this an equilibrium in the forward exchange rate market?
Under oligopoly, if one firm in an industry significantly increases advertising expenditures in order to capture a greater market share, it is most likely that other firms in that industry.
suppose that the economy is currently in a recession. If policy-makers take no action, explain how will the economy evolve over time. Explain in words and using an aggregate-demand/ aggregate-supply diagram.
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a disgruntled college graduate sues her school on grounds that her tuition payments did not land her the good job she was expecting when she started there. Courts invariably throw out cases like hers.
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Illustrate what factors might explain why the $A went so low when the Global financial crisis hit the world economy in late 2008?
Receive full credit for this question in previous attempt. Illustrate what level of excess reserves does the bank
This production function does not satisfy the definition of rising returns to scale, constant returns to scale, or decreasing returns to scale. How can this be.
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