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alexgriva [62]
3 years ago
12

In Japan, suppose Honda’s export price per vehicle is ¥4,000,000 and that the exchange rate is ¥125/$. The one-year Japanese yen

interest rate is 1.0%; the one-year U.S. interest rate is 3.0%. Assume that International Fisher holds. Assuming a 60% pass-through of exchange rate changes, what would the price of a Honda be at the end of the coming year in U.S. dollars?
Business
1 answer:
NemiM [27]3 years ago
5 0

Answer:$31,379

Explanation:Applying the

Fishers international effect

1+Ic/1+Ib=S1/S0

Where Ib represents the interest rate in base country which is Japan in this case

Ic represents the interest rate in counter country in this case,US

S0 is the base spot rate or exchange rate at the moment while S1 is the spot rate at the end of the coming year

Ic =3%=0.03

Ib=1%=0.01

So=145

Substituting in the formula

1.03/1.01=S1/125

Cross multiplying

S1=125(1.03)/1.01=127.475

So price in US at spot 127.475 will be ¥4,000,000/127.475=$31,379

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Answer:

The financial securities would decline by $106.7

Explanation:

Given

Financial securities at a geometric rate= $128

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Decreased value of the underlying asset = $6

When there's a reduction of $6 in the underlying asset price, this means the securities value will also get a reduction by a ratio of 6.

Because of this, we'll only consider the financial securities because it increases at a geometric progression unlike underlying assets that increases by arithmetic progression.

First, the value of financial securities needs to be calculated using the following formula;.

Value of Financial Securities = Financial securities at a geometric rate ÷

Decreased value of the underlying asset

Value of Financial Securities = $128 ÷ 6

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Hence, the financial securities would decline by $106.7

6 0
3 years ago
A good economic model is more likely to address a:
mars1129 [50]

Answer:

Option D is correct one.

<u>Positive statement because a good model can be tested with evidence.</u>

Explanation:

Positive statement:

It is essentially goal and reality based. Also, positive explanations are have to demonstrate or invalidated however can't right them. Positive financial aspects manages the realities and circumstances and logical results connections which incorporates portrayals, hypothesis advancement and hypothesis testing.  

Normative Statement:  

Normative explanations are abstract and the substance are esteem based. The announcements are fundamentally assessment based so they can't be tried. Regulating explanation incorporates the worth decisions with respect to that whether the economy must resemble or the suggestion of specific approach to get an ideal objective.  

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8 0
2 years ago
Consider a U.S. importer desiring to purchase merchandise from a Dutch exporter invoiced in euros, at a cost of €512,100. The U.
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The importer accepts this price, so his bank will <u>debit</u> the importer's account in the amount of <u>$500000</u>

Explanation:

Debiting an account removes money from the account. Crediting an account adds money to the account.

The bank will  therefore <em>debit</em> his account because the money will be taken out and paid to the exporter.

The amount that the importer pays in dollars can easily be calculate as:

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3 years ago
Due to the presence of diminishing returns to capital, doubling the amount of physical capital available for one worker to use w
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Answer:

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    Cr Additional paid in capital 4,300

8 0
2 years ago
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