Please give examples/be specific while answering: You attend a alumni event in S
ID: 1149145 • Letter: P
Question
Please give examples/be specific while answering:
You attend a alumni event in Santiago Chile and you meet the Governor of the central bank. The governor tells you that the country experiences “deficits in the capital account of the Balance of Payments.” Based on this statement, what do you infer about the Peruvian economy?
Explain the meaning of the forward discount of the $ relative to Euro. If the forward discount of the $ relative to Euro is 5%, does this mean that the forward premium of the Euro relative to the dollar is 5%? Why or why not?
Explanation / Answer
The deficit shows that Peru exports less products than it imports. Also there might be flight of capital.
Yes it means forward premium of euro relative to dollar is 5% since the discount of one currency with respect to other is equal premium of other currency relative to that currency