...Critical Thinking, (Spot Exchange Rate) The interest rate on South Korean government securities with one-year maturity is 4%, and the expected inflation rate for the coming year is 2 %. The interest rate on U.S. government securities with one-year maturity is 7%, and the expected rate of inflation is 5%.The current spot exchange rate for Korean Won (W) is $1 = W1,200. Forecast the spot exchange rate one year from today (Hall, p. 318). The forecast spot exchange rate one year from now will be W1,166.35. Explain the logic of this answer? The logic for the above answer begins by understanding the meaning and relationship between Spot, Exchange Rate, Interest Rate Parity, and Fisher Effect. 1. Spot Exchange Rates The interaction between supply and demand influences the exchange spot rate. The spot exchange rate is the daily rate which one currency is converted into another. 2. The Fisher Effect In foreign currency transactions between two countries, the spot exchange rate changes in equal amounts as it moves the opposite direction to the difference in nominal interest rates between two countries. According to the Fisher effect, only the interest rate and not the inflation rate are used for calculating the spot interest rate. 3. Interest Rate Parity The differences in currency values pertain to short-term interest rate differences between two countries. The real int. rate in the United States is 2% (7-% maturity – 5% expected inflation). The real interest for...
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...(revised) OFFICE OF INDUSTRIES WORKING PAPER U.S. INTERNATIONAL TRADE COMMISSION How Do Exchange Rates Affect Import Prices? Recent Economic Literature and Data Analysis Cathy L. Jabara Office of Industries U.S. International Trade Commission Revised, October 2009 Cathy Jabara is a Senior Economist with the Office of Industries of the U.S. International Trade Commission. Office of Industries working papers are the result of the ongoing professional research of USITC Staff and are solely meant to represent the opinions and professional research of individual authors. These papers are not meant to represent in any way the views of the U.S. International Trade Commission or any of its individual Commissioners. Working papers are circulated to promote the active exchange of ideas between USITC Staff and recognized experts outside the USITC, and to promote professional development of Office staff by encouraging outside professional critique of staff research. This paper is a revised version of Working Paper No. 21 dated May 2009. The paper has been updated to include 4 lags in the exchange rate estimation, instead of 3, and a new equation for Latin America is included. JEL codes: F10, F12 Key words: Exchange rates, pass-through, U.S. imports Address correspondence to: Office of Industries U.S. International Trade Commission Washington, DC 20436 How Do Exchange Rates Affect Import Prices? Recent Economic Literature and Data Analysis Cathy L. Jabara U.S. International...
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...Heart Rate Experiment: A Study of the Effects of Chronic Smoking on Resting Heart Rate Student Name Grand Canyon University: Bio 202 Lab October 20, 2015 Abstract Heart rate is an important health factor affected by most factors that produce a change in the body physically. Heart rate varies among individuals according to many factors, one including whether or not an individual identifies as a chronic smoker. Smoking is the largest contributing detriment to preventable deaths. Smoking causes many cardiovascular and coronary heart diseases that have been proven through many studies to correlate strongly with heart rate response (“Smoking-Suppressed Heart Rate Recovery in Young Male College Students Who Regularly Exercised”, 2015). This study evaluates a group of individuals and their resting heart rates and how those averages vary between smokers and non-smokers. The hypothesis is that individuals who smoke at least 3-5 times a week have an overall higher resting heart rate than those who do not. This speculation was proven wrong as the results maintained a consistent correlation with a decrease in resting heart rate among those who smoked. This result is due to a number of things, mostly pertaining the decrease in overall cardiac function in those who inhale nicotine on a regular basis. Heart Rate Experiment: A Study of the Effects of Chronic Smoking on Resting Heart Rate Introduction Heart rate is another name for the pulse of the heart, described as the speed...
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...9/20/12 HSC420 Lab Report 1-3 I. Introduction In lab 1, the heart rate and blood pressure were established. The principles that govern each of them are those of the heart. The heart rate (HR) is each full beat, or each pump, the heart does; this is recorded in beats per minute (bpm). The blood pressure (BP) is the amount of resistance the heart works against the arterial walls during each pump. My hypothesis for this lab was that my subject would have the same HR and BP for each of the locations and different methods used. I stated this because, at rest, the heart should be working at the same level no matter the position; although one position might slight lessen the heart’s workload. This is important in terms of my subject’s health and fitness because it means he has a normal, young strong heart. Per minute, it is important for the numbers to be lower because it means his heart is not working too hard but can supply his body with a sufficient amount of blood. In lab 2, the establishment of HR and BP were taken to another level and recorded during different exercises. The principles of this are that my subject’s HR and BP would gradually increase throughout exercise. Physiologically, this is because of the increased demand of oxygen in the working muscles. An increase of HR and BP is the heart’s response to these demands; a faster HR means that the heart is supplying the body with blood at a quicker rate; the higher BP is the high pressure the heart is working against because...
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...Volatility of exchange rate The main objective of this research is to present a rationalized concept of the theory and composition of exchange rate that are compulsory to solve the important economic problems facing the economy in the country, like volatile exchange rate, unbalanced financial circumstances and frustration of government to have control over domestic money market. “Exchange rate” shows that how much unit of onenation’s currency can be purchased with one unit of domestic currency. More precisely, exchange rate is a conversion factor that determines rate of change of currencies. While exchange rates volatility shows that exchange rate is settled on demand and supply of one nation’s currency, it may turn out fastest moving price of currency and bring all the foreign capital in the economy. Exchange rate volatility can influence the decisions of policy makers and affect the volume of exports and imports. It can also affect the allocation of manufacturing of goods, reserve money, exports, imports and balance of payments. Exchange rate volatility provides chances to domestic investors to invest in foreign currency to obtain higher profits and thus domestic currency undervalue and foreign currency gain values. Moreover, this volatility of exchange rate directly influences the prices of exports, imports, reserve money, manufacturing productions and their growth rates. Traders and investors always support the system where the discrepancy of the difference between actual...
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...LECTURE: TRAN LINH DANG STUDENTS OF TC201DE01-0100 1. Phan Nguyễn Ngọc Xuân Mỹ 101537 2. Vũ Thị Hường 101574 3. Trương Linh Trang 101579 4. Nguyễn Đỗ Thiên Trang 093304 Note for faculty: Date: ___/___/___ For the writer: (Signature & full name) 2012 – 2013 CONTENTS CONTENTS i INTRODUCTION ii I. Exchange rates 1 I 1. Exchange rates 1 I 2. Exchange rate regimes 2 I 3. Roles of exchange rates 3 II. Compare and contrast between the value of VND and the others of ASEAN 5 II 1. The exchange rates in Vietnam from 2008 to 2010 6 II 2. The exchange rates in Vietnam in 2011 8 III. Impacts on exchange rates 10 III 1. Balance of Trade 10 III 2. Balance of Payments 11 III 3. Monetary Policy 12 III 4. Differentials in Inflation 12 III 5. Differentials in Interest Rates 12 III 6. Public Debt 12 III 7. Speculation 13 III 8. Employment Outlook 13 III 9. Political Stability and Economic Performance 13 IV. Adjusted policies of Vietnamese government on exchange rates 14 Recommendation a REFERENCES e INTRODUCTION Since Vietnam began to implement the open door policies and integrate into the world economy, Vietnamese trade has jumped by a so large amount, especially after...
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...the people could easily repay loans with interest using these goods. Throughout history, the practice of having interest charged on loans developed over the years. Today, people pay interest using various foreign currencies. It has been legal and regulated by different states, but it also has been restricted in different countries because of religious reasons. In the past, some cultures have regarded charging any interest for loans as sinful. Charging interest was known as ursury and Christians, Muslims and even Buddhists condemned those who practiced it. Although some disapproved of charging interest, there is no doubt that it has played a large role in moving the markets and impacting our society today. In the U.S., changes in interest rates can have both a positive and negative effect on the economy, inflation and recessions, and the stock and bond markets. Many may ask why people use interest in their everyday lives and how it makes a direct impact on the economy. When an individual takes out a loan from a bank or another party, there is a possibility that the borrower will not repay the money. The purpose of interest is to compensate lenders for the risk of letting others borrow. Interest comes into play to decrease the risk of the borrower that defaults on their loan. According to Stephen G. Kellison, “Interest may be defined as the compensation that a borrower of capital pays to a lender of capital for its use” (1). It is the amount of money that lenders earn when they...
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...Explain how foreign exchange rates are determined. How do changes in interest rates, inflation, productivity, and income affect exchange rates? What are the advantages and disadvantages of a weak versus a strong dollar for imports, exports, international and domestic markets? Explain how foreign exchange rates are determined? Foreign exchange rates exist because banks buy and sell foreign currencies from other countries in large quantities. Exchange rates exist in the U.S. dollar, Europe euros, Japanese yen, British pounds, Canadian dollars, Australian dollars, and much more. There are currently two main systems that are used to determine a currencies exchange rate. The floating currency sort of works like the supply demand method. This system is normally used for countries that are in a stable economy. These exchanges are considered more efficient because the market will correct the rate to reflect inflation and other economic forces automatically. The downfall of this system is that it can discourage investment. The other system is a pegged or also known as a fixed system. This is the system that is used when an exchange rate is set and artificially maintained by the government. The rate will be pegged to other countries dollar and does not fluctuate from day to day. How do changes in interest rates, inflation, productivity, and income affect exchange rates? Exchange rates affect different areas in the economy such as interest rates, inflation, productivity, and...
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...What is exchange rate? In finance, exchange rate is the value of one country currency in terms of another country currency. In other words, it is the rate that will be exchanged by one country currency in order to obtain another country currency. For example: When Vivian ,a Malaysian wants to travel to America, she will need to change Malaysia ringgit into US Dollar in order to consume any kind of facility or shelter provided in America. Exchange rate is needed because one nation’s currency is not always accepted in another. Besides that, exchange rates changes every day and when exchange rate changes, it affect different stakeholders in different ways depending on the direction of change. Exchange rates are determined in the foreign exchange market and are open to a wide range of different type of buyers and sellers across different country. Currency trading is continuous from 20:15GMT Sunday to 22:00 GMT Friday. Furthermore, when others say a statement such as an interbank exchange rate of 80 Japanese yen(¥80) to the United Stated dollar (US $) give the meaning of US$ 1 will be exchanged for each ¥80 or ¥80 will be exchange for each US$1. In other words, an individual must give up US$1 to get ¥80. However, if the exchange rate in one country is higher than another, this means that the value of money of that country is worth more than a country with a lower exchange rate. Also, exchange rates are market clearing price that equilibrate supplies and demand in the foreign exchange...
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...With HACK's bank recent cut on interest rate 12 months earlier, loan base has grown, however profit has not, this is due to the fact that lowering interest rate does not necessary mean a rise in profit as consumers may refuse to hold the bank's money and present it to a rival bank, thus does not return to the Hack bank, subsequently causing a fall in security investments and deposits as well as a loss in an interest earning asset. In other words, the non banking public does not want to hold funds with HACK bank possibly due to competitive interest rates for deposits or stability. Although it would seem logical for the bank to lower credit standards or reduce interest rate in order to advance credit and increase profit. It is not necessarily the right thing to do, as the non banking public seek to hold the bank's deposits in a hostile free bank, with minimal risk. Consequently the non banking public will turn away from institution who offer a lower credit standard or lower interest rate due the possibility of non repayment thus consequently could impact the non banking publics asset, this is one of the many reasons why the non banking public refuse to hold funds with a bank that lowers their standards. Instead of lowering rates, HACK bank should be paying competitive rates, to indicate to the market that they can keep up and is stable enough to hold funds. Although HACK bank's loan base has increased, its cut on interest rate, has not benefited in the liquidity side of things...
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...Manoa Brown Friday, May 3, 13 Principles of Macroeconomics Exchange Rates People, firms and nation exchange products for money and use the money to buy other products to pay for the use of resources. Within an economy, prices are stated in the domestic currency, such as US dollars to European euros. Buyers use their currency to purchase goods. International markets are different. Producers in other countries who export goods want to be paid in their own currencies so they can carry out transactions. As a result, a foreign exchange market develops where national currencies can be exchanged. Such markets serve the need of all international buyers and sellers. The equilibrium prices in these markets are called exchange rates. An exchange rate is the rate at which the currency of one nation is exchanged for the currency of another. The foreign exchange market is the financial relationship between countries that makes it possible for international trade to be accomplished more efficiently than barter. Because each nation uses its own monetary unit, people in one country who want to purchase something in another country must exchange their own currency for the other to accommodate the transaction. Many travelers will research foreign exchange rates before purchasing cheap airline tickets or other means of travel to other countries. Depending on the destination, some travelers can benefit greatly from exchanging currencies .The foreign exchange market is where one nation's currency...
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...CAcT HomePage Rate and Order of Reactions Skills to develop Derive the integrated rate laws from differential rate laws. Describe the variation of concentration vs. time for 1st order reactions. Describe the variation of concentration vs. time for 2nd order reactions. Figure out order of reaction from concentration vs. time plots. Rate and Order of Reactions The rate of a chemical reaction is the amount of substance reacted or produced per unit time. The rate law is an expression indicating how the rate depends on the concentrations of the reactants and catalysts. The power of the concentration in the rate law expression is called the order with respect to the reactant or catalyst. This page deals specifically with first- and second-order reaction kinetics, but you should know that other orders such as zeroth-order and 3rd order may also be involved in chemical kinetics. Reaction Rates and Stoichiometry In acidic solutions, hydrogen peroxide and iodide ion react according to the equation: H2O2 + 2H+ + 3I- = 2 H2O + I3-. In this reaction, the reaction Rate can be expressed as decreasing Rate of H2O2, - d[H2O2]/dt decreasing Rate of H+, - d[H+]/dt decreasing Rate of I-, - d[I-]/dt increasing Rate of H2O, + d[H2O] /dt increasing Rate of I3-, d[I3-]/dt However, from the stoichiometry, you can easily see the following relationship: d[H2O2] 1 d[H+] 1 d[I-] 1 d[H2O] d[I3-] - ------- = - - ------ = - - ------- = - ------ = -------- ...
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...Rate of Reaction The rate of a reaction is the speed at which a chemical reaction happens. If a reaction has a low rate, that means the molecules combine at a slower speed than a reaction with a high rate. Some reactions take hundreds, maybe even thousands, of years while others can happen in less than one second. If you want to think of a very slow reaction, think about how long it takes plants and ancient fish to become fossils (carbonization). The rate of reaction also depends on the type of molecules that are combining. If there are low concentrations of an essential element or compound, the reaction will be slower. There is another big idea for rates of reaction called collision theory. The collision theory says that as more collisions in a system occur, there will be more combinations of molecules bouncing into each other. If you have more possible combinations there is a higher chance that the molecules will complete the reaction. The reaction will happen faster which means the rate of that reaction will increase. Think about how slowly molecules move in honey when compared to your soda even though they are both liquids. There are a lower number of collisions in the honey because of stronger intermolecular forces (forces between molecules). The greater forces mean that honey has a higher viscosity than the soda water. Factors That Affect Rate Reactions happen - no matter what. Chemicals are always combining or breaking down. The reactions happen over and...
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...Rate of Return In some situations, you know the cost of an investment opportunity and the expected cash flows from it, but you do not know the rate of return. The rate of return on the investment opportunity is the rate at which the present value of the benefits exactly offsets the cost. For example, suppose you have an investment opportunity that requires a $1000 investment today and will have a $2000 payoff in six years. This would appear on a time- line as: 0126 ... Given: Solve for: N I/Y PV 10 7 0 60,000 PMT 4343 FV $1000 $2000 One way to analyze this investment is to ask the question: What interest rate, r, would you need so that the present value of what you get is exactly equal to the present value of what you give up? 2000 1000 = 11 + r26 Rearranging this calculation gives the following: 1000*11+r26 =2000 That is, r is the interest rate you would need to earn on your $1000 to have a future value of $2000 in six years. We can solve for r as follows: 1 1 + r = a2000b6 = 1.1225 1000 Or, r = 0.1225. This rate is the rate of return of this investment opportunity. Making this investment is like earning 12.25% per year on your money for six years. When there are just two cash flows, as in the preceding example, it is straightforward to compute the rate of return. Consider the general case in which you invest an amount P today, and receive FV in N years: P * 11 + r2N = FV 1 + r = 1FV/P21/N That is, we take the total return of the investment...
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...Assignment #3 Intrest rates are considered to be the price of holding money and the opportunity cost of any investment. After analysing intrests rates in our course do you think that interest rate in Egypt reflect the real opportunity cost of holding money? why or why not? Please support your answer with all the references you have searched. The opportunity cost of holding money is the cost that could be realized if money were invested instead of held. In other words, it is the interest rate that money is earning in a chosen investment. Typically, it is the interest rate that is set on a bond, particularly a government bond. Given the other investment choices that could be made, this cost could be very different from one person or entity to another. To determine the true opportunity cost of holding money, it is necessary to first determine what the investment vehicle would have been. After that, the next step is to research what the interest rate would be on that investment strategy. If the annual percentage rate is a single percent, then one percent annually would be the opportunity cost of holding onto the money. Assigning a definite value would require first knowing how much money was being held, and how long it would be held for. In economics, investing and holding money are known as mutually exclusive choices. This means that both cannot be done at the same time with the same money. If the money is being invested, it cannot be held. It may be possible for an individual...
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