1. Exchange Rate Systems Explain the exchange rate system that existed during the 1950s and 1960s. How did the Smithsonian Agreement in 1971 revise it? How does today’s exchange rate system differ? 6 Impact of Economic Conditions Assume that Switzerland has a very strong economy, putting upward pressure on both inflation and interest rates. Explain how these conditions could put pressure on the value of the Swiss franc, and determine whether the franc’s value will rise or fall.
1. Currency Futures Use the following information to determine the probability distribution of per unit gains from selling Mexican peso futures.
■ Spot rate of the peso is $0.10.
■ Price of peso futures is $0.102 per unit.
■ Your expectation of the peso spot rate at maturity of the futures contract is: