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BFC3240 : WEEK 1 Tutorial Question, Problems, and Discussion Questions: 1. Question: What are the disadvantages and dangers of a strong Aussie dollar? What are the benefits and disadvantages of a lower value of the Aussie dollar? Advantages of strong -

Low price of import

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Increase import

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Better choices of goods and services

Disadvantages of strong (for long term) -

Low demand of exported good

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Decrease in export

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Exports become less competitive due to its price competitiveness (substitute good)

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Less export, less revenue; less profit; less employment rate; may results in business closedown

** If it contains so strong for so long, it makes Australia exports uncompetitive. Contributed to some business closing CAUSALITY – ROOT CAUSE AND CONSEQUENCES Benefits of low Australian dollar -

Increase demand for export

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Export become more competitive (cheaper)

Disadvantages -

Expensive imported goods

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Local have to pay higher price to pay imported goods, raw material

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Imports become less competitive

** Exports become more competitive (cheaper). But the disadvantage of a low Australian dollar is also bold. Especially when other currencies are rising relative to the Australian dollar, so import becomes more expensive.

a. India, Mumbai b. United Kingdom, London c. 102.95 d. 0.15015, 56.14

BFC3240 : WEEK 2 Tutorial Question, Problems, and Discussion Questions: Question 1: Which assets play the most critical role in linking the major institutions that make up the global financial marketplace? 

The debt securities issued by the Governments - These are low risk or risk free assets form the foundation for the creation, trading and pricing of other financial assets like bank loans, corporate bonds and equities (stock) - In recent years a number of additional securities have been created from the existing securities – derivative, whose value is based on market value changes in the underlying securities. - The health and securities of the global financial system relies on the quality of these assets

Question 2: Reciprocals. Convert the following indirect quotes to direct quotes and direct quotes to indirect quotes: a. Euro: €1.22/$ (Indirect quotes) - 1 USD = 1.22 Euro - 1 Euro = 0.8197$ / 1 Euro (Direct quotes) b. Russia: Rub 30/$ (Indirect Quotes) - 1 USD = 30 Rub - 1 Rub = 0.03 => 0.03$ / Rub (Direct Quotes) c. Canada: $0.72/C$ (Direct Quotes) - 1 C = 0.72 USD - 1 USD = 1.39 C

=> 1.39 C/ $ (Indirect Quotes)

d. Denmark: $0.1644/DKr (Direct Quotes) -

1 DKR = 0.1644$

$ = 6.08272 Dkr => 6.08272 Dkr/ $ (Indirect Quotes)

Question 3: Direct and Indirect Quotes. following:

Define and give an example of the

a. An example of a direct quote between the U.S. dollar and the Mexican peso, where the United States is designated as the home country. United States/ Mexican peso (Direct Quote) $0.01050 / Peso Direct Quote; Home country is the numerator b. An example of an indirect quote between the Japanese yen and the Chinese renminbi (yuan), where China is designated as the home country. China / Japanese Yuan (Direct Quote) $ 0.11 Rmb / Japanese Yuan Direct Quote; Home country is the numerator Japanese Yuan / China (Indirect Quote)

Problems in excel file

Additional readings: 1. World debt bomb is ticking, new IMF debt database shows. Financial Review, 21 May 2018. Discussion: According to the article, what have been the major drivers for debt accumulation internationally? -

The big driver of the jump in debt over the past decades have been China, the US government, and corporations around the world. The US government (with massive fiscal deficit) and corporations around the world (enjoying growth after GFC accompanied by low cost of debt)

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As well as ultra-low interest rates, tax distortions have incentivized companies and individuals to leverage up. The deductibility of interest means equity and investments

2. Time is cheap (When interest rate turns negative). The Economist May 8th 2021. Discussion: According to the article, what is the problem of low(negative) interest rate in the long run? -

In the short term, low interest rates can be a boom for profits by stimulating an economy and pushing up asset prices both of which boost banks

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But persistent low interest rates are thorn in banker’s side as they are associated with lower net interest income. It can be hard for bankers to pass low deposit rates on as interest rates decline, but they must often lower rates on loans

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USD is depreciating / Brazilian is appreciating

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We don’t know how the currency is going to move.

BFC3240 : WEEK 3 Tutorial Question, Problems, and Discussion Questions: Question 1: The Impossible Trinity. Explain what is meant by the term

impossible trinity and why it is in fact "impossible."

Question 2: Currency Board or Dollarization. Fixed exchange rate regimes are

sometimes implemented through a currency board (Hong Kong) or dollarization (Ecuador). What is the difference between the two approaches? Problems in excel file Additional readings: 1.

When the prices are too damn high: Daily chart” The Economist (Online); London (Feb 5, 2018).

Discussion: According to the article, What is the definition of hyperinflation from the Economists and Banker’s point of view? Why Venezuelan government went deep into deficit and made them print more money? And why it led to hyperinflation? 2. The Economist explains. Why the Swiss unpegged the franc. The Economist, Jan 18th 2015.

Discussion: According to the article, Why did the Swiss central bank ‘unpeg’ from the Euro? 3. Resilient no more: For the first time, Lebanon defaults on its debts. The Economist, Mar 8th 2020.

Discussion: According to the article, what are the roots of current economic freeze in Lebanon and what did the peged exchange rate system fail to achieve?...