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tatuchka [14]
3 years ago
8

A European investor can earn a 4.75 percent annual interest rate in Europe or 2.75 percent per year in the United States. If the

spot exchange rate is $1.58 per euro, at what one-year forward rate would an investor be indifferent between the U.S. and European investments?
Business
1 answer:
cestrela7 [59]3 years ago
6 0

Answer:

To obtain the same returns, the interest rate in the United States should be 7.5%.

Explanation:

Since $ 1.58 dollars is equal to $ 1 euro, the difference between both currencies arises from the following calculation:

1 = 100

1.58 = X

((1.58 x 100) / 1) = X

158/1 = X

158 = X

Therefore, a euro is worth 58% more than a dollar is worth.

Thus, if the investment in Europe has an interest rate of 4.75%, to obtain the same return in dollars, an interest rate of 58% must be obtained, that is:

4.75 x 1.58 = X

7.5 = X

Thus, to obtain the same returns, the interest rate in dollars should be 7.5%.

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This is how micromarketing is defined, a practice that tends to become general to reach a more specific type of audience. Under this strategy, the target audience is considered as a sum of micro-segments, of unique but large market niches. With more precise promotions and actions. Other criteria could be specific interests, age, sex, common activities or geolocation.

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when the price rises from p1 to p2, consumer surplus a. increases by an amount equal to a. b. decrease by an amount equal to c.
aleksandrvk [35]

When the price rises from P1 to P2, consumer surplus decreases by an amount equal to B + C.

Consumer surplus, also known as buyers' surplus, refers to an economic measurement of consumer advantages that arises from market competition. It occurs when the actual price for a product or service that consumers are paying is less than the price, they are willing to pay. The changes in price affect the consumer surplus, as consumer surplus always increases as the price of a good or service decreases, and decreases as the price of a good or service increase. Visually, it is illustrated by economists as the area under the demand curve between the market price and what consumers would be willing to pay. In this case, that is represented by sum of B and C.

Note: The question is incomplete. It does not contain the figure (which is attached).

Learn more about Consumer surplus:

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​________ occurs when economic benefits are distributed fairly. A. Equity B. Allocative efficiency C. Equality D. Productive eff
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3 years ago
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