Question

Answer the following questions:

10.) Indirect exchange rate. If the direct exchange rate of the euro is $ 1.25,what is the euro’s indirect exchange rate? That is what is the value of a dollar in euros?

11.) Cross exchange rate: Assume Poland’s currency(the zloty) is worth $.17 and the Japanese yes is worth $.0008.What is the cross rate of the zloty with respect to yen? That is how many yen equal to zloty?

3.) Interest rate effects on exchange rates:
Assume U.S interest rates fall relative to British interest rates. Other things being equal, how should this affect the (a).U.S demand for British pounds,(b) supply of pounds for sale and (c) equilibrium value of the pound?

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