Question: Hello, please help me answer the questions. Please show work so I can understand the process. Thank you so much! Use the following table of
Use the following table of swap quotes for relevant questions in this exercise. Table 1 Interest Rate and Currency Swap Quotes Euro- Swiss franc U. S. dollar Japanese yen Ask Bid Ask Ask 1.47 Years Bid Bid Bid Ask 2.99 3.08 3.24 3.02 3.12 3.28 1.43 1.68 1.93 5.24 5.26 0.23 0.26 7 1.76 2.01 5.43 5.46 0.36 0.56 0.39 0.59 5.59 5.56 4 3.44 3.48 2.15 2.23 5.65 5,68 0.82 0.85 3.63 3.67 2.35 2.43 5.73 5.76 109 1.12 6 3.83 3.87 2.54 2.62 5.80 5.83 1.33 1.36 1.58 1.78 1.93 7 4.01 4.18 4.32 4.05 4.22 2.73 2.91 2.81 2.99 5.86 5.92 5.96 5.89 5.95 5.99 1.55 1.75 8 4.36 3,08 3.16 1.90 10 12 4.42 4,58 3.22 3.45 3.30 3.55 2.04 2.28 2.07 2.32 4.46 6.01 6.04 4.62 6.10 6.13 15 20 4.78 5.00 4.82 5.04 3,71 3.96 3.81 6.20 6.29 6.23 6.32 2.51 2.71 2.56 2.76 4.06 25 5.13 5.17 4.07 4.17 6.29 6.32 2.77 2.82 5.0625 0.1250 0.2188 2.82 2.88 30 4.16 4.26 6.28 6.J LIBOR 3.0313 3.0938 1.3125 14375 4.9375 Note: Typical presentation by the Financial Times. Bid and ask spreads as of close of Lon don business. Al quotes are against LIBOR (News) The Fed will meet next week to decide the interest rate on the U.S. dollar. The current 1. interest rate is 0.5 %. The market's consensus is that the Fed will leave the rate unchanged in the coming meeting. Using the asset pricing approach, discuss how the U.S. dollar will react against other currencies in each of the following scenarios. The Fed lowers interest rate further to 0.25 % a b. The Fed keeps the interest rate at 0.5 % The Fed raises the inte interest rate to 0.75% . c. 2. (Effect of inflation on currency) The U.S. economy is on the track of sustainable growth now. This leads to fears of inflation and likely action by the Federal Reserve to raise interest rates to contain the inflation Based on the PPP theory, discuss whether the U.S. dollar is going to get stronger or weaker a b. Based on the asset pricing approach, discuss whether the U.S. dollar is going to get stronger or weaker
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