国际金融-chapter four.pptVIP

Summary Equilibrium in the foreign exchange market requires interest parity. For given interest rates and a given expectation of the future exchange rate, the interest parity condition tells us the current equilibrium exchange rate. A rise in dollar (euro) interest rates causes the dollar to appreciate (depreciate) against the euro. Today’s exchange rate is altered by changes in its expected future level. Home work 1. Suppose the dollar interest rate and the pound sterling interest rate are the same, 5 percent per year. What is the relation between the current equilibrium$/￡exchange rate and its expected future level? Suppose the expected future$/￡exchange rate, $1.52 per pound,remains constant as Britains interest rate rises to 10 percent per year.If the U.S.interest rate also remains constant,what is the new equilibrium$/￡ exchange rate? 2.Traders in asset markets suddenly learn that the interest rate on dollars will decline in the near future.Use the diagrammatic analysis of the chapter to determine the effect on the current dollar/euro exchange rate,assuming current interest rates on dollar and euro deposits do not change. We noted that we could have developed our diagrammatic analysis of foreign exchange market equilibrium from the perspective of Europe, with the euro/dollar exchange rate E€/$(=l/￡g/€)on the vertical axis,a schedule vertical at/?€to indicate the euro return on euro deposits,and a downward-sloping schedule showing how the euro return on dollar deposits varies with E€/$.Derive this alternative picture of equilibrium and use it to examine the effect of changes in interest rates and the expected future exchange rate.Do your answers agree with those we found earlier? * * * * * 黑板上算dollar price of a euro deposit of * 这到题目中 贬值率如何计算 * * * * * * * * * * * * * * * Chapter four asset approach Key terms Risk liquidity Expected exchange rate Interest parity condition The demand for a foreign currency asset is influenced