You are given the following questions; 1) Suppose the following exchange rates are observed in among British pounds (E),

[answerhappygod]

You Are Given The Following Questions 1 Suppose The Following Exchange Rates Are Observed In Among British Pounds E 1 (126.13 KiB) Viewed 47 times

You are given the following questions; 1) Suppose the following exchange rates are observed in among British pounds (E), US dollars ($) and Euro (€): 1€ = $1.88; €1 =$1.30. i) What rate will eliminate arbitrage opportunities? ii) State the static portfolio problem and derive the fundamental valuation relationship. ii) Suppose an investor buys 100 shares in an energy corporation at $50 a share and the purchase was financed partially by a loan of $2000. Show how the investors account would look like when presented in a balance sheet and calculate its margin. iv) Assume that the required reserve ratio on checkable deposits is 10% banks hold 8% excess reserves and the public's holdings of currency does not change. Supposing that the fed buys 1 million of bonds from the first national bank and all other banks use the resulting increase in reserves to purchase securities only and not make loans. What will happen to checkable deposits? If a bank client withdraws $1000 of currency deposits from an account what happens to current and deposits? V) Given the central bank loss function (CB) objective function =Bie_(Uz+i) where U=A[yt – yn)-(TC.)? and assuming the private sector behaves as follows: n = {TE π< αλ, lar (=n"), if πε-1 = πF-1 if Te-1 n81 Aggregate supply (AS) is given by the Lucas supply curve, y = yn+a (1 – 72) +e. Assume that the CB controls inflations directly so that at time t, it causes an inflation surprise TT+=E>ī find the following: a. Derive the optimal level of cheating. b. Assuming two periods, derive the loss function from cheating.