Strayer FIN 535 Week 3 Homework Answers (2017) 1. Factors Affecting Exchange Rat

Strayer FIN 535 Week 3 Homework Answers (2017) 1. Factors Affecting Exchange Rate: If the Asian countries experience a decline in economic growth (and experience a decline in inflation and interest rates as a result), how will their currency values (relative to the U.S. dollar) be affected? 2. Economic Impact on Capital Flows. How do you think the weaker U.S. economic conditions could affect capital flows? If capital flows are affected, how would this influence the value of the dollar (holding other factors constant)   3. Speculating With Currency Options: When should a speculator purchase a call option on Australian dollars? When should a speculator purchase a put option on Australian dollars? 4. Estimating Profits from Currency Futures and Options. One year ago, you sold a put option on 100,000 euros with an expiration date of one year. You received a premium on the put option of $.04 per unit. The exercise price was $1.22. Assume that one year ago, the spot rate of the euro was $1.20, the one-year forward rate exhibited a discount of 2%, and the one-year futures price was the same as the one-year forward rate. From one year ago to today, the euro depreciated against the dollar by 4 percent. Today the put option will be exercised (if it is feasible for the buyer to do so).

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