1. Financial Institutions and Markets Winter 2009-10 FIN 304 Dr. Andrew L. H. Parkes Day 16 “How do financial markets work?” 卜安吉

2. Jan. 21, 2010Financial Institutions & Markets, Day 162 China/U.S. Ex Rate Assignment Technically: Technically: –12 pt. Times New Roman font –1” margins (top, bottom and sides) –Double spaced –1 page ONLY (references on a second page as well as any graphs – ok) –Due at the beginning of class, March 2, 2010 –15 points

3. Jan. 21, 2010Financial Institutions & Markets, Day 163 China/U.S. Ex Rate Assignment First read pp. 854-858 in your MACROECONOMICS textbook by Krugman/Wells – especially focus on the article “China Pegs the Yuan” on p. 858. First read pp. 854-858 in your MACROECONOMICS textbook by Krugman/Wells – especially focus on the article “China Pegs the Yuan” on p. 858. Secondly, read the questions – Check your understanding and make sure to read the answers in the back of the book too!!! Secondly, read the questions – Check your understanding and make sure to read the answers in the back of the book too!!!

4. Jan. 21, 2010Financial Institutions & Markets, Day 164 China/U.S. Ex Rate Assignment Thirdly, read about (and take notes about) China’s long run/short run exchange rate factors – inflation, productivity, preferences for goods, tariffs/quotas, and interest rates COMPARED TO AMERICA!!! So, for example: how is the U.S. inflation rate compared to China’s, productivity, etc.? Thirdly, read about (and take notes about) China’s long run/short run exchange rate factors – inflation, productivity, preferences for goods, tariffs/quotas, and interest rates COMPARED TO AMERICA!!! So, for example: how is the U.S. inflation rate compared to China’s, productivity, etc.? Use both a short-term (money market) interest rate AND a long-run (capital market) interest rate in your comparisons. Use both a short-term (money market) interest rate AND a long-run (capital market) interest rate in your comparisons.

5. Jan. 21, 2010Financial Institutions & Markets, Day 165 China/U.S. Ex Rate Assignment Now explain your expectations for the exchange rate – is there pressure on the yuan to appreciate over the near term? Now explain your expectations for the exchange rate – is there pressure on the yuan to appreciate over the near term? List inflation comparisons, preferences for goods, tariff/quota CHANGES, and productivity for each country as well as the interest rates. List inflation comparisons, preferences for goods, tariff/quota CHANGES, and productivity for each country as well as the interest rates. Will the government continue to “peg” the yuan to the dollar? Remember that the PBOC is now tightening the money supply and raising interest rates. Will the government continue to “peg” the yuan to the dollar? Remember that the PBOC is now tightening the money supply and raising interest rates. Your time horizon is 6 months – over the next 6 months or so, what you anticipate? Your time horizon is 6 months – over the next 6 months or so, what you anticipate?

6. Jan. 21, 2010Financial Institutions & Markets, Day 166 China/U.S. Ex Rate Assignment Only 1 page so you must be succinct and precise in your answers. Only 1 page so you must be succinct and precise in your answers. Full sentences ARE required Full sentences ARE required References ARE required References ARE required 5 marks for language, grammar, etc. 5 marks for language, grammar, etc. 10 points, does your analysis make economic and financial sense? 10 points, does your analysis make economic and financial sense?