Exhibit 11.1

Assume the following: (1) the interest rate on six-month treasury bills is 8 percent per annum in the United Kingdom and 4 percent per annum in the United States; (2) today's spot price of the pound is $1.50, while the six-month forward price of the pound is $1.485.

-Refer to Figure 12.2.If the United States decreases tariffs on imports from Switzerland, then there would occur a decrease in the demand for francs and a decrease in the dollar price of the franc.

Question

Exhibit 11.1

Assume the following: (1) the interest rate on six-month treasury bills is 8 percent per annum in the United Kingdom and 4 percent per annum in the United States; (2) today's spot price of the pound is $1.50, while the six-month forward price of the pound is $1.485.

-Refer to Figure 12.2.If the United States decreases tariffs on imports from Switzerland, then there would occur a decrease in the demand for francs and a decrease in the dollar price of the franc.

Quizplus · Accepted Answer

A decrease in tariffs on imports from Switzerland would likely increase the demand for Swiss goods in the United States, leading to an increase in the demand for francs to pay for these goods, potentially increasing the dollar price of the franc.

Exhibit 11.1 Assume the Following: (1) the Interest Rate on Six-Month Treasury