Global Economics – Summarize the below topics.
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- Suppose that the US dollar interest rate and the Swiss Franc interest rate are the same, 5 percent per year, but that there is a risk premium of 1 percent associated with holding Swiss Franc rather than US dollars over the year.
(a) What is the relationship (in percentage terms) between the current equilibrium dollar/franc exchange rate and its expected future level?
(b) If the expected future exchange rate is $1.12 per franc, what is the equilibrium dollar/franc (spot) exchange rate?
Now suppose that the expected future exchange rate, $1.12 US per franc, remains constant as Swiss’s interest rate rises to 10 percent per year.
(c) If the US interest rate also remains constant, what is the new equilibrium dollar/franc exchange rate?
NOTE: Ignore calculations. Write theory, definitions & examples explaining the concepts associated to the above topics. (Include Abstract, 3 paragraphs body, Conclusion and 6 references)
- A sudden increase in interest rates in the European Union would likely lead to both depreciation of the U.S. dollar and upward pressure on U.S. interest rates.” Agree? Disagree? Why? (2 Paragraphs and 3 references)
- Topic: Global Economics & International Trade. Develop a summary relating the topic and how it can be applied to your professional lives (2 Paragraphs and 3 references).
Additional Info: Please explore and critically think about some of the learning objectives and concepts presented in this course. Please effectively communicate how you would lead an organization (or a group of people within the organization) by applying the knowledge you have learned ethically and responsibly.You may frame your discussion around any functional component of business, and in any context; problem-solving, management, leadership, organizational behavior, etc.