Narsee Monjee Assignments April 2022 The 180day forward U

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Business Economics

1. Given that the USD-SGD sport rate is 1.35
Calculate:
a. The 90-day forward USD-SGD exchange rate, given that the
90-day risk free interest rate in the United States is 1.25%
90-day risk free interest rate in Singapore is 2%

b. The 180-day forward USD-SGD exchange rate, given that the
180-day risk free interest rate in the United States is 1.25%
180-day risk free interest rate in Singapore is 2%

c. If the risk free interest rate in the US remains the same, while the interest rate in Singapore increases by 25 bps, how would the calculations in (a) and (b) change. (10 Marks)

2. The decisions made by different agents in an economy is described by the following equations:

Consumption function: C = 40 + 0.8 (Yd); Yd = disposable income
Tax function: T = 20
Investment function: I = 55 2r
Government spending function: G = 20
Exports: X = 10
Imports: M = 10

a. Find the equation for goods market equilibrium for the economy described above.
b. Given that the real interest rate in the economy is 4%, calculate
i. Consumption
ii. Investment
c. What would happen to the goods market equilibrium in the economy change, if the marginal propensity to consume decreases to 0.7 and the interest sensitivity of investment increases to 3? (10 Marks)

3. Case:
Please read the article from the link below and discuss the following based on the arguments given in the article.
https://consumerist.com/2015/01/12/burger-king-brings-back-
15-cent-chicken-nugges-in-price-war-with-mcdonalds/
a. What market structure exists in the market segment discussed in the article? How would you evaluate the action taken by the player(s)? (5 Marks)

b. If a new player is planning to enter this market segment, how would you advise them on product placement and pricing strategy? (5 Marks)

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[email protected]
+9195030-94040