Ministey of ™ Yemen Scie 8h Valentin LIE Resear ‘wt w ol , Subjer Name; elects TEM Anternatlonal University of y of Technolgy 1 ray Twhntech Central b ree re w ly nies anks comm explain on at Ki ronly manage exchange rates for th ‘eagons, what are they? 1 And brief Question 2 (6 marks) ritish pound call option with @ strike price of $130 ent date. Nabil pays # premium of $.01 Per ‘mit for the call option. A efore the expiration date, the spot rate of the British and then immediately sells the cises the call option fit or loss, first compute his reve? Nabil is 4 speculator who buys 4 Bi December settlem' there are no prokerage fees. Just be Nabil exe! reaches $1.60. At at the spot rate to ermine Nabil’s pro’ from this amo ion. The selling the currency: Then, subtrac shase price of the opto this time, a bank. To det tract the pure’ also sub! specifies 100,000 units. exercisin follow- As’Stestens omar j pein Yemen hrs ‘supplied; Entry on Yer country. US tenporier pay Wemens comma & Debit or- ron Yemeni balance of payment v7 fon ents, @. ‘001665 S/YR 3. Assume the spot rate of the British pound is 59 US. Te expected spot tate OnE: fos noel Spot ed to be 1.90 £18. What percentage sappresation OF See sanon SO a. 21% depreciated b. 21% appreciated cc. 0.21 depreciated 4, Both aand care correct 4, The US. Treasury sends a0 jnterest payment 0 a German insurance company that purchased US. "Teeagury bonds 1 Year ABN, SO TE Trensacgons ont) S. cas How POSTON and entry on U.S. palance- of-payments ‘ACCOUMN Be ‘a. USS. cash outflow and debit b. USS. cash outflow and credit c. US. cash inflow and credit 4. US. cash jnflow and debit 5, Assume that the United States and she United Kingdom tate eqhenstvdy With 2d thet. Now assume that the United States experiences ad percent anlaonrate, vets United Kingdom experiences a5 percent inflation tate “Vnder these costars, PRE. theory suggests that the British: pound should. a. Appreciate by approximately 3 percent b. Deppreciate by approx ately 3 percent c. Appreciate by approximately 5 percent 4, Appreciate by approximately § percentee in the is 8 percent raat feng 0 be ae " United sta a an in each coun Perce WI ile the ; indi. ed to oe * Percent in Jap, rea ‘delpasse isp a