Accounting The demand for the Iberian escudo in the foreign exchange market equals 16000- 3000e and the supply of escudos in the foreign exchange market equals 2000+1000e, where e is the nominal exchange rate expressed in Latinian pesos per escudo. If the escudo is fixed at 4 Latinian pesos per escudo, answer the following questions: i. (5 points) Find the fundamental value of the escudo. Is it overvalued or undervalued? ii. (5 points) Find the balance of payments deficit/surplus. In order to maintain the fixed exchange rate, should the central bank of Iberia buy or sell escudos? iii. (5 points) Show in a graph the supply and demand curves for the escudo, the fundamental value of the escudo, its fixed exchange rate and the balance of payments deficit/surplus. iv. (5 points) Suppose now that financial investors fear a devaluation of the escudo and launch a speculative attack
