Question: I know this is long question, but i really need it. Thank you xx 1.) Why do people demand for foreign currency? Explain in details.

I know this is long question, but i really need it. Thank you xx

1.) Why do people demand for foreign currency? Explain in details.

a) Explain Interest Rate Parity IPR Model which is also known as Asset Approach.

b) Using the Asset Approach/IRP model, analyze the increase in the US interest rate on value of the spot exchange rate on a graph. Make sure to name all the axes, lines and show the equilibrium points. Please explain the reason the shifts on the graph. Note that Foreign country is United Kingdom and its money is Pound.

c) Using the Asset Approach/IRP model, analyze the increase in the UK interest rate on value of the spot exchange rate on a graph. Make sure to name all the axes, lines and show the equilibrium points. Please explain the reason the shifts on the graph. Note that Foreign country is United Kingdom and its money is Pound.

d) Using the Asset Approach/IRP model, analyze the increase in the expected exchange rate on the spot exchange rate on a graph. Make sure to name all the axes, lines and show the equilibrium points. Please explain the reason the shifts on the graph. Note that Foreign country is United Kingdom and its money is Pound.

e) Using the Rate of Return diagram, analyze the increase in the US interest rate on value of the spot exchange rate on a graph. Make sure to name all the axes, lines and show the equilibrium points. Please explain the reason the shifts on the graph. Note that Foreign country is United Kingdom and its money is Pound.

f) Using the Rate of Return diagram, analyze the increase in the UK interest rate on value of the spot exchange rate on a graph. Make sure to name all the axes, lines and show the equilibrium points. Please explain the reason the shifts on the graph. Note that Foreign country is United Kingdom and its money is Pound.

g) Using the Rate of Return diagram, analyze the increase in the expected exchange rate on value of the spot exchange rate on a graph. Make sure to name all the axes, lines and show the equilibrium points. Please explain the reason the shifts on the graph.

h)Note that Foreign country is United Kingdom and its money is Pound.

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