Spot and Forward Rates Suppose the exchange rate for the Swiss franc is quoted as SF 1.09 in the spot market and SF 1.11 in the 90-day forward market. a. Is the dollar selling at a premium or a discount relative to the franc? b. Does the financial market expect the franc to strengthen relative to the dollar? Explain. c . What do you suspect is true about relative economic conditions in the United States and Switzerland?

Question

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Answer 1

Textbook Question

Chapter 31, Problem 1CQ

Spot and Forward Rates Suppose the exchange rate for the Swiss franc is quoted as SF 1.09 in the spot market and SF 1.11 in the 90-day forward market.

a. Is the dollar selling at a premium or a discount relative to the franc?

b. Does the financial market expect the franc to strengthen relative to the dollar? Explain.

c. What do you suspect is true about relative economic conditions in the United States and Switzerland?

a.

Expert Solution

Summary Introduction

To explain: In relation to franc whether the dollar is selling at premium or discount.

Spot Rate:

Spot rate may be regarded as the value at which a security or commodity is readily sellable. The spot rate is driven by the forces like value which are likely to be paid by the buyers and the sellers depending on the security’s market value and its future market value. The spot transaction is settled within one or two business days from the ‘horizon’ commonly known to be the trade day. Irrespective of any other factors the settlement takes place on the spot date at the agreed spot rate or price.

Explanation of Solution

Given,

The exchange rate for Country S franc is quoted as SF 1.09 in the spot market and SF 1.11 in the 90-day forward market.

Therefore, in the given case the spot rate is SF 1.09 and forward rate is SF 1.11 in 90-day forward market. Hence, the forward rate tends to be more than the spot rate and hence in terms of franc currency the dollar is selling at premium.

Since the exchange rate for Country S franc for dollars is quoted, the forward rate is more than the spot rate of the currency. Hence, the dollar that is the currency to be exchanged is said to be selling at premium.

Conclusion

Hence, in relation to Country S franc the dollar is said to be selling at premium.

b.

Expert Solution

Summary Introduction

To explain: Financial market’s expectation for franc to enhance relative to the dollar.

Forward Rate:

Forward rate can be defined as the interest rate derived from the spot rate which is equal to the total value of the return of a long term investment including the adjustments for the carrying costs to analyze future interest rate. In general, it may be regarded as fixation of interest rates to fulfill a financial obligation arising in near future.

Explanation of Solution

Given,

The exchange rate for Country S franc is quoted as SF 1.09 in the spot market and SF 1.11 in the 90-day forward market.

From the above mentioned statement it is apparent that dollar is selling at premium. Also, in such transactions if one currency decreases or sells at discount the other increases or sells at premium. Hence in the given transaction if dollar is selling at premium, considering its forward rate, the related currency that is Swiss franc is expected to depreciate. In nutshell, it will take more Swiss francs to buy a dollar.

While dealing with spot and forward market we come across different transactions. The transactions involves two different currencies, if one of them depicts the tendency of being sellable at premium, it is implied that the other currency is selling at discount. But the currency at discount is expected to depreciate in terms of its value in relation to the currency in which it is quoted as the spot rate along with the forward rate implies that the currency is depreciating with time and more of franc will be required to buy a unit of dollar.

Conclusion

Hence, Country Sfranc is expected to depreciate in future in terms of its value relative to dollar.

c.

Expert Solution

Summary Introduction

To explain: Relative economic conditions in Country UandCountry S

Explanation of Solution

The afore said currency values depict the relative conditions of the two economies. The currency at discount value implies that the country is facing a phase of inflation with relatively higher rate than the country with currency which is at premium.

Therefore, the economic conditions of the respective countries reveal that Country S is facing higher level of inflation in its economy than Country U.

The inflation rate in the country is inversely proportional to the currency’s performance in the market.
If the currency is at discount in the market then the economy is said to be facing a comparatively higher degree of inflation.

Conclusion

Hence, the economy can be analyzed on the basis of the performance of its currency in the financial market as the decrease in the same shall shoot up the inflation rate of the country and vice-versa.

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Students have asked these similar questions

The next two questions are based on the following information Consider the following prices in the international money markets: Spot rate: USD1.275/GBP One-year Forward rate: USD1.364/GBP Interest Rate (UK): 2.39% Interest Rate (US): 11.66% Assuming no transaction costs, which of the following statements is true? An arbitrage can be obtained by borrowing in the currency that is expressing the other currency. An arbitrage can be obtained by investing in the currency that is expressing the other currency. An arbitrage can be obtained by borrowing in the currency that is being expressed by the other currency. O d. An arbitrage cannot be obtained by investing in the currency that is being expressed by the other currency. O e. None of the option in this question are correct. O a. O b. O c. What should the forward rate be for the International Fisher Effect to hold? GBP1.4875/USD GBP1.3904/USD USD1.3904/GBP d. USD1.4875/GBP O e. None of the options in this question. a. O b. Oc

Consider the following table. There are two countries and two goods. Assume both countries have the same price table: Time t t+1 P1 $8 $10 P2 $4 $5 a. Assume commodity price parity. What is the foreign currency price of the two goods at the two points in time? What is the domestic inflation rate? What is the foreign inflation rate. b. Suppose PPP is known to hold as is covered interest parity between two countries. What determines any differences between the expected real returns on risk free interest bearing assets in the two countries?

1) The ER between the Swiss franc and the US dollar is one to one in the spot market. The interest rates in Switzerland and the US are .01 and .03 respectively. Swiss franc. What kind of arbitrage will induce a profit for you, if the forward rate is .96 Swiss francs equal $1? Assume you start with $1 million.

Answer 2

Textbook Question

Chapter 31, Problem 1CQ

Spot and Forward Rates Suppose the exchange rate for the Swiss franc is quoted as SF 1.09 in the spot market and SF 1.11 in the 90-day forward market.

a. Is the dollar selling at a premium or a discount relative to the franc?

b. Does the financial market expect the franc to strengthen relative to the dollar? Explain.

c. What do you suspect is true about relative economic conditions in the United States and Switzerland?

a.

Expert Solution

Summary Introduction

To explain: In relation to franc whether the dollar is selling at premium or discount.

Spot Rate:

Spot rate may be regarded as the value at which a security or commodity is readily sellable. The spot rate is driven by the forces like value which are likely to be paid by the buyers and the sellers depending on the security’s market value and its future market value. The spot transaction is settled within one or two business days from the ‘horizon’ commonly known to be the trade day. Irrespective of any other factors the settlement takes place on the spot date at the agreed spot rate or price.

Explanation of Solution

Given,

The exchange rate for Country S franc is quoted as SF 1.09 in the spot market and SF 1.11 in the 90-day forward market.

Therefore, in the given case the spot rate is SF 1.09 and forward rate is SF 1.11 in 90-day forward market. Hence, the forward rate tends to be more than the spot rate and hence in terms of franc currency the dollar is selling at premium.

Since the exchange rate for Country S franc for dollars is quoted, the forward rate is more than the spot rate of the currency. Hence, the dollar that is the currency to be exchanged is said to be selling at premium.

Conclusion

Hence, in relation to Country S franc the dollar is said to be selling at premium.

b.

Expert Solution

Summary Introduction

To explain: Financial market’s expectation for franc to enhance relative to the dollar.

Forward Rate:

Forward rate can be defined as the interest rate derived from the spot rate which is equal to the total value of the return of a long term investment including the adjustments for the carrying costs to analyze future interest rate. In general, it may be regarded as fixation of interest rates to fulfill a financial obligation arising in near future.

Explanation of Solution

Given,

The exchange rate for Country S franc is quoted as SF 1.09 in the spot market and SF 1.11 in the 90-day forward market.

From the above mentioned statement it is apparent that dollar is selling at premium. Also, in such transactions if one currency decreases or sells at discount the other increases or sells at premium. Hence in the given transaction if dollar is selling at premium, considering its forward rate, the related currency that is Swiss franc is expected to depreciate. In nutshell, it will take more Swiss francs to buy a dollar.

While dealing with spot and forward market we come across different transactions. The transactions involves two different currencies, if one of them depicts the tendency of being sellable at premium, it is implied that the other currency is selling at discount. But the currency at discount is expected to depreciate in terms of its value in relation to the currency in which it is quoted as the spot rate along with the forward rate implies that the currency is depreciating with time and more of franc will be required to buy a unit of dollar.

Conclusion

Hence, Country Sfranc is expected to depreciate in future in terms of its value relative to dollar.

c.

Expert Solution

Summary Introduction

To explain: Relative economic conditions in Country UandCountry S

Explanation of Solution

The afore said currency values depict the relative conditions of the two economies. The currency at discount value implies that the country is facing a phase of inflation with relatively higher rate than the country with currency which is at premium.

Therefore, the economic conditions of the respective countries reveal that Country S is facing higher level of inflation in its economy than Country U.

The inflation rate in the country is inversely proportional to the currency’s performance in the market.
If the currency is at discount in the market then the economy is said to be facing a comparatively higher degree of inflation.

Conclusion

Hence, the economy can be analyzed on the basis of the performance of its currency in the financial market as the decrease in the same shall shoot up the inflation rate of the country and vice-versa.

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Answer 3

Textbook Question

Chapter 31, Problem 1CQ

Spot and Forward Rates Suppose the exchange rate for the Swiss franc is quoted as SF 1.09 in the spot market and SF 1.11 in the 90-day forward market.

a. Is the dollar selling at a premium or a discount relative to the franc?

b. Does the financial market expect the franc to strengthen relative to the dollar? Explain.

c. What do you suspect is true about relative economic conditions in the United States and Switzerland?

a.

Expert Solution

Summary Introduction

To explain: In relation to franc whether the dollar is selling at premium or discount.

Spot Rate:

Spot rate may be regarded as the value at which a security or commodity is readily sellable. The spot rate is driven by the forces like value which are likely to be paid by the buyers and the sellers depending on the security’s market value and its future market value. The spot transaction is settled within one or two business days from the ‘horizon’ commonly known to be the trade day. Irrespective of any other factors the settlement takes place on the spot date at the agreed spot rate or price.

Explanation of Solution

Given,

The exchange rate for Country S franc is quoted as SF 1.09 in the spot market and SF 1.11 in the 90-day forward market.

Therefore, in the given case the spot rate is SF 1.09 and forward rate is SF 1.11 in 90-day forward market. Hence, the forward rate tends to be more than the spot rate and hence in terms of franc currency the dollar is selling at premium.

Since the exchange rate for Country S franc for dollars is quoted, the forward rate is more than the spot rate of the currency. Hence, the dollar that is the currency to be exchanged is said to be selling at premium.

Conclusion

Hence, in relation to Country S franc the dollar is said to be selling at premium.

b.

Expert Solution

Summary Introduction

To explain: Financial market’s expectation for franc to enhance relative to the dollar.

Forward Rate:

Forward rate can be defined as the interest rate derived from the spot rate which is equal to the total value of the return of a long term investment including the adjustments for the carrying costs to analyze future interest rate. In general, it may be regarded as fixation of interest rates to fulfill a financial obligation arising in near future.

Explanation of Solution

Given,

The exchange rate for Country S franc is quoted as SF 1.09 in the spot market and SF 1.11 in the 90-day forward market.

From the above mentioned statement it is apparent that dollar is selling at premium. Also, in such transactions if one currency decreases or sells at discount the other increases or sells at premium. Hence in the given transaction if dollar is selling at premium, considering its forward rate, the related currency that is Swiss franc is expected to depreciate. In nutshell, it will take more Swiss francs to buy a dollar.

While dealing with spot and forward market we come across different transactions. The transactions involves two different currencies, if one of them depicts the tendency of being sellable at premium, it is implied that the other currency is selling at discount. But the currency at discount is expected to depreciate in terms of its value in relation to the currency in which it is quoted as the spot rate along with the forward rate implies that the currency is depreciating with time and more of franc will be required to buy a unit of dollar.

Conclusion

Hence, Country Sfranc is expected to depreciate in future in terms of its value relative to dollar.

c.

Expert Solution

Summary Introduction

To explain: Relative economic conditions in Country UandCountry S

Explanation of Solution

The afore said currency values depict the relative conditions of the two economies. The currency at discount value implies that the country is facing a phase of inflation with relatively higher rate than the country with currency which is at premium.

Therefore, the economic conditions of the respective countries reveal that Country S is facing higher level of inflation in its economy than Country U.

The inflation rate in the country is inversely proportional to the currency’s performance in the market.
If the currency is at discount in the market then the economy is said to be facing a comparatively higher degree of inflation.

Conclusion

Hence, the economy can be analyzed on the basis of the performance of its currency in the financial market as the decrease in the same shall shoot up the inflation rate of the country and vice-versa.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Textbook Question

Chapter 31, Problem 1CQ

Spot and Forward Rates Suppose the exchange rate for the Swiss franc is quoted as SF 1.09 in the spot market and SF 1.11 in the 90-day forward market.

a. Is the dollar selling at a premium or a discount relative to the franc?

b. Does the financial market expect the franc to strengthen relative to the dollar? Explain.

c. What do you suspect is true about relative economic conditions in the United States and Switzerland?

a.

Expert Solution

Summary Introduction

To explain: In relation to franc whether the dollar is selling at premium or discount.

Spot Rate:

Spot rate may be regarded as the value at which a security or commodity is readily sellable. The spot rate is driven by the forces like value which are likely to be paid by the buyers and the sellers depending on the security’s market value and its future market value. The spot transaction is settled within one or two business days from the ‘horizon’ commonly known to be the trade day. Irrespective of any other factors the settlement takes place on the spot date at the agreed spot rate or price.

Explanation of Solution

Given,

The exchange rate for Country S franc is quoted as SF 1.09 in the spot market and SF 1.11 in the 90-day forward market.

Therefore, in the given case the spot rate is SF 1.09 and forward rate is SF 1.11 in 90-day forward market. Hence, the forward rate tends to be more than the spot rate and hence in terms of franc currency the dollar is selling at premium.

Since the exchange rate for Country S franc for dollars is quoted, the forward rate is more than the spot rate of the currency. Hence, the dollar that is the currency to be exchanged is said to be selling at premium.

Conclusion

Hence, in relation to Country S franc the dollar is said to be selling at premium.

b.

Expert Solution

Summary Introduction

To explain: Financial market’s expectation for franc to enhance relative to the dollar.

Forward Rate:

Forward rate can be defined as the interest rate derived from the spot rate which is equal to the total value of the return of a long term investment including the adjustments for the carrying costs to analyze future interest rate. In general, it may be regarded as fixation of interest rates to fulfill a financial obligation arising in near future.

Explanation of Solution

Given,

The exchange rate for Country S franc is quoted as SF 1.09 in the spot market and SF 1.11 in the 90-day forward market.

From the above mentioned statement it is apparent that dollar is selling at premium. Also, in such transactions if one currency decreases or sells at discount the other increases or sells at premium. Hence in the given transaction if dollar is selling at premium, considering its forward rate, the related currency that is Swiss franc is expected to depreciate. In nutshell, it will take more Swiss francs to buy a dollar.

While dealing with spot and forward market we come across different transactions. The transactions involves two different currencies, if one of them depicts the tendency of being sellable at premium, it is implied that the other currency is selling at discount. But the currency at discount is expected to depreciate in terms of its value in relation to the currency in which it is quoted as the spot rate along with the forward rate implies that the currency is depreciating with time and more of franc will be required to buy a unit of dollar.

Conclusion

Hence, Country Sfranc is expected to depreciate in future in terms of its value relative to dollar.

c.

Expert Solution

Summary Introduction

To explain: Relative economic conditions in Country UandCountry S

Explanation of Solution

The afore said currency values depict the relative conditions of the two economies. The currency at discount value implies that the country is facing a phase of inflation with relatively higher rate than the country with currency which is at premium.

Therefore, the economic conditions of the respective countries reveal that Country S is facing higher level of inflation in its economy than Country U.

The inflation rate in the country is inversely proportional to the currency’s performance in the market.
If the currency is at discount in the market then the economy is said to be facing a comparatively higher degree of inflation.

Conclusion

Hence, the economy can be analyzed on the basis of the performance of its currency in the financial market as the decrease in the same shall shoot up the inflation rate of the country and vice-versa.

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Answer 5

Textbook Question

Answer 6

Textbook Question

Answer 7

a.

Expert Solution

Summary Introduction

To explain: In relation to franc whether the dollar is selling at premium or discount.

Spot Rate:

Spot rate may be regarded as the value at which a security or commodity is readily sellable. The spot rate is driven by the forces like value which are likely to be paid by the buyers and the sellers depending on the security’s market value and its future market value. The spot transaction is settled within one or two business days from the ‘horizon’ commonly known to be the trade day. Irrespective of any other factors the settlement takes place on the spot date at the agreed spot rate or price.

Explanation of Solution

Given,

The exchange rate for Country S franc is quoted as SF 1.09 in the spot market and SF 1.11 in the 90-day forward market.

Therefore, in the given case the spot rate is SF 1.09 and forward rate is SF 1.11 in 90-day forward market. Hence, the forward rate tends to be more than the spot rate and hence in terms of franc currency the dollar is selling at premium.

Since the exchange rate for Country S franc for dollars is quoted, the forward rate is more than the spot rate of the currency. Hence, the dollar that is the currency to be exchanged is said to be selling at premium.

Conclusion

Hence, in relation to Country S franc the dollar is said to be selling at premium.

b.

Expert Solution

Summary Introduction

To explain: Financial market’s expectation for franc to enhance relative to the dollar.

Forward Rate:

Forward rate can be defined as the interest rate derived from the spot rate which is equal to the total value of the return of a long term investment including the adjustments for the carrying costs to analyze future interest rate. In general, it may be regarded as fixation of interest rates to fulfill a financial obligation arising in near future.

Explanation of Solution

Given,

The exchange rate for Country S franc is quoted as SF 1.09 in the spot market and SF 1.11 in the 90-day forward market.

From the above mentioned statement it is apparent that dollar is selling at premium. Also, in such transactions if one currency decreases or sells at discount the other increases or sells at premium. Hence in the given transaction if dollar is selling at premium, considering its forward rate, the related currency that is Swiss franc is expected to depreciate. In nutshell, it will take more Swiss francs to buy a dollar.

While dealing with spot and forward market we come across different transactions. The transactions involves two different currencies, if one of them depicts the tendency of being sellable at premium, it is implied that the other currency is selling at discount. But the currency at discount is expected to depreciate in terms of its value in relation to the currency in which it is quoted as the spot rate along with the forward rate implies that the currency is depreciating with time and more of franc will be required to buy a unit of dollar.

Conclusion

Hence, Country Sfranc is expected to depreciate in future in terms of its value relative to dollar.

c.

Expert Solution

Summary Introduction

To explain: Relative economic conditions in Country UandCountry S

Explanation of Solution

The afore said currency values depict the relative conditions of the two economies. The currency at discount value implies that the country is facing a phase of inflation with relatively higher rate than the country with currency which is at premium.

Therefore, the economic conditions of the respective countries reveal that Country S is facing higher level of inflation in its economy than Country U.

The inflation rate in the country is inversely proportional to the currency’s performance in the market.
If the currency is at discount in the market then the economy is said to be facing a comparatively higher degree of inflation.

Conclusion

Hence, the economy can be analyzed on the basis of the performance of its currency in the financial market as the decrease in the same shall shoot up the inflation rate of the country and vice-versa.

Answer 8

a.

Expert Solution

Summary Introduction

To explain: In relation to franc whether the dollar is selling at premium or discount.

Spot Rate:

Spot rate may be regarded as the value at which a security or commodity is readily sellable. The spot rate is driven by the forces like value which are likely to be paid by the buyers and the sellers depending on the security’s market value and its future market value. The spot transaction is settled within one or two business days from the ‘horizon’ commonly known to be the trade day. Irrespective of any other factors the settlement takes place on the spot date at the agreed spot rate or price.

Explanation of Solution

Given,

The exchange rate for Country S franc is quoted as SF 1.09 in the spot market and SF 1.11 in the 90-day forward market.

Therefore, in the given case the spot rate is SF 1.09 and forward rate is SF 1.11 in 90-day forward market. Hence, the forward rate tends to be more than the spot rate and hence in terms of franc currency the dollar is selling at premium.

Since the exchange rate for Country S franc for dollars is quoted, the forward rate is more than the spot rate of the currency. Hence, the dollar that is the currency to be exchanged is said to be selling at premium.

Conclusion

Hence, in relation to Country S franc the dollar is said to be selling at premium.

Answer 9

a.

Expert Solution

Answer 10

a.

Expert Solution

Answer 11

Expert Solution

Answer 12

Summary Introduction

To explain: In relation to franc whether the dollar is selling at premium or discount.

Spot Rate:

Spot rate may be regarded as the value at which a security or commodity is readily sellable. The spot rate is driven by the forces like value which are likely to be paid by the buyers and the sellers depending on the security’s market value and its future market value. The spot transaction is settled within one or two business days from the ‘horizon’ commonly known to be the trade day. Irrespective of any other factors the settlement takes place on the spot date at the agreed spot rate or price.

Answer 13

Explanation of Solution

Given,

The exchange rate for Country S franc is quoted as SF 1.09 in the spot market and SF 1.11 in the 90-day forward market.

Therefore, in the given case the spot rate is SF 1.09 and forward rate is SF 1.11 in 90-day forward market. Hence, the forward rate tends to be more than the spot rate and hence in terms of franc currency the dollar is selling at premium.

Since the exchange rate for Country S franc for dollars is quoted, the forward rate is more than the spot rate of the currency. Hence, the dollar that is the currency to be exchanged is said to be selling at premium.

Answer 14

Conclusion

Hence, in relation to Country S franc the dollar is said to be selling at premium.

Answer 15

b.

Expert Solution

Summary Introduction

To explain: Financial market’s expectation for franc to enhance relative to the dollar.

Forward Rate:

Forward rate can be defined as the interest rate derived from the spot rate which is equal to the total value of the return of a long term investment including the adjustments for the carrying costs to analyze future interest rate. In general, it may be regarded as fixation of interest rates to fulfill a financial obligation arising in near future.

Explanation of Solution

Given,

The exchange rate for Country S franc is quoted as SF 1.09 in the spot market and SF 1.11 in the 90-day forward market.

From the above mentioned statement it is apparent that dollar is selling at premium. Also, in such transactions if one currency decreases or sells at discount the other increases or sells at premium. Hence in the given transaction if dollar is selling at premium, considering its forward rate, the related currency that is Swiss franc is expected to depreciate. In nutshell, it will take more Swiss francs to buy a dollar.

While dealing with spot and forward market we come across different transactions. The transactions involves two different currencies, if one of them depicts the tendency of being sellable at premium, it is implied that the other currency is selling at discount. But the currency at discount is expected to depreciate in terms of its value in relation to the currency in which it is quoted as the spot rate along with the forward rate implies that the currency is depreciating with time and more of franc will be required to buy a unit of dollar.

Conclusion

Hence, Country Sfranc is expected to depreciate in future in terms of its value relative to dollar.

Answer 16

b.

Expert Solution

Answer 17

b.

Expert Solution

Answer 18

Expert Solution

Answer 19

Summary Introduction

To explain: Financial market’s expectation for franc to enhance relative to the dollar.

Forward Rate:

Forward rate can be defined as the interest rate derived from the spot rate which is equal to the total value of the return of a long term investment including the adjustments for the carrying costs to analyze future interest rate. In general, it may be regarded as fixation of interest rates to fulfill a financial obligation arising in near future.

Answer 20

Explanation of Solution

Given,

The exchange rate for Country S franc is quoted as SF 1.09 in the spot market and SF 1.11 in the 90-day forward market.

From the above mentioned statement it is apparent that dollar is selling at premium. Also, in such transactions if one currency decreases or sells at discount the other increases or sells at premium. Hence in the given transaction if dollar is selling at premium, considering its forward rate, the related currency that is Swiss franc is expected to depreciate. In nutshell, it will take more Swiss francs to buy a dollar.

While dealing with spot and forward market we come across different transactions. The transactions involves two different currencies, if one of them depicts the tendency of being sellable at premium, it is implied that the other currency is selling at discount. But the currency at discount is expected to depreciate in terms of its value in relation to the currency in which it is quoted as the spot rate along with the forward rate implies that the currency is depreciating with time and more of franc will be required to buy a unit of dollar.

Answer 21

Conclusion

Hence, Country Sfranc is expected to depreciate in future in terms of its value relative to dollar.

Answer 22

c.

Expert Solution

Summary Introduction

To explain: Relative economic conditions in Country UandCountry S

Explanation of Solution

The afore said currency values depict the relative conditions of the two economies. The currency at discount value implies that the country is facing a phase of inflation with relatively higher rate than the country with currency which is at premium.

Therefore, the economic conditions of the respective countries reveal that Country S is facing higher level of inflation in its economy than Country U.

The inflation rate in the country is inversely proportional to the currency’s performance in the market.
If the currency is at discount in the market then the economy is said to be facing a comparatively higher degree of inflation.

Conclusion

Hence, the economy can be analyzed on the basis of the performance of its currency in the financial market as the decrease in the same shall shoot up the inflation rate of the country and vice-versa.

Answer 23

c.

Expert Solution

Answer 24

c.

Expert Solution

Answer 25

Expert Solution

Answer 26

Summary Introduction

To explain: Relative economic conditions in Country UandCountry S

Answer 27

Explanation of Solution

The afore said currency values depict the relative conditions of the two economies. The currency at discount value implies that the country is facing a phase of inflation with relatively higher rate than the country with currency which is at premium.

Therefore, the economic conditions of the respective countries reveal that Country S is facing higher level of inflation in its economy than Country U.

The inflation rate in the country is inversely proportional to the currency’s performance in the market.
If the currency is at discount in the market then the economy is said to be facing a comparatively higher degree of inflation.

Answer 28

Conclusion

Hence, the economy can be analyzed on the basis of the performance of its currency in the financial market as the decrease in the same shall shoot up the inflation rate of the country and vice-versa.

Answer 29

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