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erma4kov [3.2K]
3 years ago
7

Suppose that the spot price of the euro is currently $1.30. The 1-year futures price is $1.35. Is the interest rate higher in th

e United States or the euro zone?
Business
1 answer:
valkas [14]3 years ago
3 0

Answer:

The interest rate is higher in the US.

Explanation:

The forward price is calculated using the following formula,

F= S ( 1+Rd / 1+Rf)^t

where,

  • F = Forward rate
  • S = Spot rate
  • Rd = Nominal interest rate in domestic market
  • Rf = Nominal interest rate in foreign market
  • t = time in years

We consider that the domestic market is the US and the domestic currency is the USD. Thus, it is a direct quote where 1 EUR = 1.3 USD

The forward price ER is more than the Sport ER only when the interest rate in domestic market is more than the interest rate in foreign market and as a result, the value of domestic currency against a foreign currency in the forward market depreciates.

We can see this by the following example,

Say Spot rate is $1.3 per 1 EUR and the interest rate in US is 10% while that in Euro zone is 5%. When we calculate the forward ER we will see that 1 EUR will buy us more USD in forward (more than 1.3 USD)

F= 1.3 * (1.1 / 1.05)^1   => $1.362 PER 1EUR

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Short Corporation acquired Hathaway, Inc., for $33,520,000. The fair value of all Hathaway's identifiable tangible and intangibl
sp2606 [1]

Answer:

$0

Explanation:

The computation of the annual amortization for goodwill is shown below:

As we know in the case of goodwill, the impairment test is to be done on periodic basis and if there is any fall in the value so the same is to be reported as the impairment loss

So for goodwill, no amortization is to be done

hence, the annual amortization is zero

4 0
2 years ago
When Honda, a Japanese auto maker, built a factory in Ohio,
Evgesh-ka [11]

Answer:

A) it was engaged in foreign direct investment.

Explanation:

Foreign Direct Investment is a term used in business-related operations that describes a kind of investment made by an investor in a country other than the actual or original country of the investor. It can be either business operations or business assets in a different firm in another country.

Hence, in this case, when a Japanese automaker, built a factory in Ohio, it was engaged in foreign direct investment. Therefore, the correct answer is option A.

4 0
3 years ago
Other things the same, if prices fell when firms and workers were expecting them to rise, then a. employment and production woul
Trava [24]

Answer:

d. employment and production would fall.

Explanation:

Economic agents have expectations about the parameters of an economy, such as price, inflation, unemployment rate, etc. If the price falls while economic agents expect the opposite, in the short run production and employment tend to increase. This is because investment decisions had already been made. However, in the medium and long term, economic agents realize that price expectations have not been confirmed and market parameters adjust. Thus, in the face of falling prices, there will be less demand. With lower demand, there will be a decrease in production and thus the employment rate decreases.

4 0
3 years ago
If the elasticity for computers at the current price is at 6.4, what would happen to total revenues if a computer manufacturer d
MA_775_DIABLO [31]
They would go down drastically fast.
5 0
3 years ago
Read 2 more answers
Which of the following is not correct? Select one: a. Taxes levied on sellers and taxes levied on buyers are not equivalent. b.
liq [111]

Answer:

The correct answer is option a.

Explanation:

Taxes levied on either buyers or sellers are equivalent. In both cases, the tax creates a wedge. This wedge is the difference between the price that the buyers have to pay and the price that the sellers receive.  

The price that the buyers have to pay increases while the price that the sellers receive decreases. But this tax wedge does not depend on whom the tax is levied, it depends on the elasticity of demand and supply. So whether the tax is levied on buyers or sellers, the tax wedge will remain the same.

The tax burden will be shared between both buyers and sellers. So it is incorrect to say that the taxes levied on sellers and taxes levied on buyers are not equivalent.

8 0
3 years ago
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