Assume that the United States invests heavily in government and corporate securities of Country K. In addition, residents of Country K invest heavily in the United States. Approximately $10 billion worth of investment transactions occur between these two countries each year. The total dollar value of trade transactions per year is about $8 million. This information is expected to also hold in the future.
Because your firm exports goods to Country K, your job as international cash manager requires you to forecast the value of Country K’s currency (the krank) with respect to the dollar. Complete the following: