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Briefly explain a major driver for the increase in FX rate risk. (100 words)
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- Explain risk-free interest rate (the nominal short-term rate)When the quantity of a financial security supplied or demanded changes at every given interest rate in response to a change in a factor, this causes a shift in the supply or demand curve true or false ?K possible Risk-Free Rate. What is a risk-free rate? Give an example of an investment with a risk free rate. Why is there no risk? A risk-free rate is: (Select the best answer below.) OA. an interest rate that is not guaranteed on an investment for a specified period. OB. an interest rate guaranteed on an investment for a unspecified period. OC. an interest rate guaranteed on an investment for a specified period. OD. an interest rate that is not guaranteed on an investment for an unspecified period. There is no risk because a risk-free investment: (Select the best answer below.) OA. pays an interest rate guaranteed on an investment for an unspecified period. OB. would pay investors even if the financial institution went into bankruptcy. OC. is a checking account. OD. is a zero interest loan.
- According to the single index model, the inflation risk is an example of the:An efficient capital market is best defined as a market in which security prices reflect which one of the following? Multiple Choice A Current inflation B A risk premium C All available information D The historical arithmetic rate of return E The historical geometric rate of return1. Explain how interest rate risk works?2. Explain the difference between a positively sloping and inverted (downward sloping) yield curve.3. What is the duration and why do we measure it?
- What security provides a good estimate of the long-term nominalrisk-free rate?Explain risk-free nominal rate of interest rate10. An announcement that the prices of goods and services in the market are risking would cause an increase in which of the following? O a. The default risk premium O o The risk free rate ) r The liquidity risk premium O o The inflation risk premium