Dear All,

I got this assignment that I cannot manage to do. If not I will not pass my course, and I won't get my degree. Can you guys please help me out. Thank you all.

Question 1
On the 4th of June 2012, the Central Bank of Terrania sells 100 million Terranian Kwacha worth of foreign exchange in order to support the currency. Over the same week the Central Bank earned 10 million Kwacha a day of earnings on it assets.

If the Central Bank's aim is to keep the monetary base unchanged every day, which of the following is an approriate open market operation?
A) to buy 110 million kwacha of money market instruments on June 4th
B) to sell 110 million kwacha of money market instruments on June 4th
C) to buy 90 million kwacha of money market instruments on June 4th
D) to sell 90 million kwacha of money market instruments on June 4th
E) to buy 110 million kwacha of money market instruments on June 6th
F) to sell 100 million kwacha of money market instruments on June 6th
G) to buy 90 million kwacha of money market instruments on June 6th
H) to sell 90 million kwacha of money market instruments on June 6th
Question 2
On the 5th of June 2012 The Central Bank of Oceanania 100 million Oceananian pesos worth of foreign exchange but decides not to sterlize that operation, the consequence will be
A) a 100 million increase in Oceanian M0 on June 5th
B) a 100 million decrease in Oceanian M0 on June 5th
C) a 100 million increase in Oceanian M0 on June 7th
D) a 100 million increase in Oceanian M0 on June 7th
Qustion 3
The central bank of Terrania announces that it will conduct significant foreign exchange purchases for the next 5 years. Since Portfolio balance effects are important, market participants expect these actions to change the risk premium by 1% (at an annual rate) for five years. The change in the spot rate today is
A) a depreciation of the Terranian Kwacha of 1%
B) an appreciation of the Terranian Kwacha of 1%
C) a depreciation of the Terrania Kwacha of 5%
D) an appreciation of the Terranian Kwacha of 5%
Question 4
At the beginning of year 1 the terranian central bank conducted k100 million of dollar selling/terranian kwacha buying intervention. The intervention was undertaken at the rate of 1 dollar per kwacha and immediately afterwards the currency strengthened to 1.1 dollars per kwacha and stayed there.

At the end of year 5 the exchange rate is still at 1.1 whilst kwacha 1 year interest rates are (and have always been) 6% whilst dollar 1 year interest rates are (and have always) been 1%.
The profit/loss of the intervention at then end of year 5 is ________ million Kwacha.
Hint: quote you answer to 1 decimal place and express a loss by putting a '-' in front of your answer (if a profit do not put a ' ')
Question 5
At the beginning of year 1 the terranian central bank conducted k100 million of dollar selling/terranian kwacha buying intervention. The intervention was undertaken at the rate of 1 dollar per kwacha and immediately afterwards the currency strengthened to 1.2 dollars per kwacha and stayed there.

At the end of year 5 the exchange rate is still at 1.1 whilst kwacha 1 year interest rates are (and have always been) 6% whilst dollar 1 year interest rates are (and have always) been 1%.
The profit/loss of the intervention at then end of year 5 is _________ million Kwacha.
Hint: quote you answer to 1 decimal place and express a loss by putting a '-' in front of your answer (if a profit do not put a ' ')
Question 6
The Terranian Central Bank holds 2 billion dollars of foreign exchange reserves, has a negative forward position of 1 billion dollars and has issued 1 billion of US dollar denominated Central Bank Bills.

Its net foreign exchange reserves are
A) 2 billion dollars
B) 1 billion dollars
C) 0
D) -1 billion dollars