(Solved) 2. Suppose a basket of goods costs 210,000 Mexican pesos in

July 21, 2017UncategorizedBy classhelp24@gmail.com [email if you need fresh paper done]

2. Suppose a basket of goods costs 210,000 Mexican pesos in Mexico, while the same basket costs $16,800in Australia. The nominal exchange rate is currently at E$/Peso = 0.10. Assume that the prices in twocountries do not change at all over time (the inflation rates in two countries are always zero). Assumethat the uncovered interest parity (UIP) holds.

(A) Calculate the real exchange rate, q$/Peso.Hint: Use the real exchange rate definition. [5 marks]

(B) Under the purchasing power parity (PPP), what will be the nominal exchange rate in the long run?Hint: Use the real exchange rate definition and apply the PPP. [5 marks]

(C) Is the Australian dollar under or overvalued against Mexican pesos at the moment?Hint: Check the definition of the under/over valuation of a currency. [5 marks]

(D) The nominal exchange rate in 1 year is expected to become Ee$/Peso = 0.097. Using the definition ofthe real exchange rate with zero inflation rates in two countries, calculate the expected realexchange rate in 1 year, qe$/Peso.Hint: Check the definition of the real exchange rate in growth rates and apply the inflation ratesgiven. [10 marks]

(E) The exchange rate in 1 year is expected to be 0.097, Ee$/Peso = 0.097 as in (D), the current 1- year interest rate in Australia is 2%, and the 1-year forward rate is F$/Peso = 0.10. If you can borrow $1million from a bank in Australia or 10 million pesos from a bank in Mexico, explain how you canmake money without any exchange rate risks. The answer should have the specific amount ofprofits in Australian dollars in 1 year.Hint: Check the UIP equation and find the interest rate in Mexico. Then, apply the way to makemoney when the CIP does not hold.

Request A Fresh Paper Done For You!You are guaranteed plagiarism free paper within 3-8 hrs

About the author

classhelp24@gmail.com [email if you need fresh paper done]

When I made the decision to seek help from you guys, I didn’t know I was making a choice that would positively change my life forever. I am so much more confident with my ability to go to work and still be able to finish my research paper on time. The research you guys did for me was great and I was highly awarded for it. I mean, all along I was having difficulty managing my time. It was so hard to decide what I ought to give priority, work or research? Thanks to you guys I can now go to work without worrying too much about how great my research should be. I am still the same person, just to be sure, but with lot of skills and ability, courtesy of feather essay. I wish you guys were around 30 years ago when I started doing research while still in school. Great research paper, thanks feather essays.

Scott Williams, Chicago
Feather essays is awesome, really. I can’t just say enough about how well their services are custom-made to meet students’ needs. I mean have been using other services from different websites with erratic degree of satisfaction, but this is way too perfect. I’m thankful their team understand all about essays requirement. I had an essay assignment due in two days so I had to seek for their help, at first I thought they wouldn’t be able to do it perfectly since it was the first time I was using their service. Well, I guess I was wrong. Another thing I also liked about feather essays is how they communicate with clients, so simple, they made me feel at ease even though I was under pressure. From my standpoint, their platform is very intuitive, and it’s pretty much dummy-proof. Thanks to you guys I passed, it’s really hard to recommend anything but feather essays for quality service.

Joseph Levoh, Phoenix University
I mostly do silly mistakes in term papers and essays, and while going through the instructions I used to get stuck after a few steps. I must say I always get annoyed whenever this happened and I had started doubting if I will make it through college. I had lost confidence in myself, I felt uncomfortable and unmotivated in doing assignments. One day I was just going through the internet looking for help with my essay, I found out about feather essay. I was not really sure if they could help me, but considering my situation I decided to give it a try. To say the least, I’ve never regretted making the decision. They are amazing, they offer instant help on assignment and term papers, and whenever I come across any assignment with doubts, all I do is talk to them. They instantly help me with my essays and explain to me everything about it. Thanks to you guys, you help me save a lot of time and concentrate on other class work.

Eleona Miller, New York City
I’d never sought out for help with my essays before, so I was a bit uncertain how to go about it. All this doubts disappeared as soon as I talked to feather essays. You guys took your time to comprehend what my short term and long term needs were, and perfectly lined up different options for me. Considering the fact that I needed a quick response and solution, the options you guys offered were so organized. I thought the steps involved could take up several weeks or days, but I was surprised when all it took was less than four hours. I guess as soon as the agreement was made, the worked started immediately. The way you delivered that essay showed me how top class service professional you guys are. For quick essays help, I recommend you guys. The best thing is that you understand when a client needs more time to think. Thanks to you guys.

Laurette, Ohio
Quick Essay Help

I’d never sought out for help with my essays before, so I was a bit uncertain how to go about it. All this doubts disappeared as soon as I talked to feather essays. You guys took your time to comprehend what my short term and long term needs were, and perfectly lined up different options for me. Considering the fact that I needed a quick response and solution, the options you guys offered were so organized. I thought the steps involved could take up several weeks or days, but I was surprised when all it took was less than four hours. I guess as soon as the agreement was made, the worked started immediately. The way you delivered that essay showed me how top class service professional you guys are. For quick essays help, I recommend you guys. The best thing is that you understand when a client needs more time to think. Thanks to you guys.

Diana Ross, California
Unique service and quality work!!!Feather essays not only offer wonderful essays but also helped me pass with flying colors!! I could not also believe it. And what makes me love them more is how work is done instantly after ordering!!i will never worry about school essays anymore. Absolutely the best!

Sasha Kelly, Cleveland