Finance Use covered interest rate parity (CIP) to show that a fixed exchange rate and free capital flows imply that a central bank cannot set the interest rate independently from the interest rate set by the reference currency's central bank.
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A: Mergers are a type of agreement where two or more companies decide to form a single entity.
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A: Face value (FV) = $1075 Interest rate = 9.85% Quarterly interest rate (r) = 9.85%/4 = 2.4625% Yield…
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A: Face value of the bond = $1075 Coupon rate = 9.85% Quarterly coupon rate = 9.85%/4 = 2.4625% Yield…
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A: Price of bond is present value of the coupon payment and present value of the par value of bond.
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A: Solved using Financial Calculator PMT = 3000 N = 3 I/Y = 8 CPT FV = 9739.20
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Q: Present Value versus Future Value
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A: The systematic risk of the portfolio is a measure of the beta of the portfolio
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A: The systematic risk of a portfolio is measured by the beta of the portfolio
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- Answer the following: a. Explain why the interest parity condition must hold if the foreign exchange market is in equilibrium. b. Explain why overshooting occurs. What can the Central Bank do to mitigate its effects?Which one of the following is not a money market instrument? A. Treasury bill B. Negotiable certificate of deposit C. Commercial paper D. Treasury bond E. Eurodollar account Please explain all points without plagiarism Upvote ?sureA foreign currency loan is a typical example for O a. Currency Risk O b. Interest rate risk O c. Translation Exposure O d. Transaction Exposure
- What type of banking risk includes deterioration of the value of the local currency in terms of the bank’s base currency; convertibility or transfer risks. a. Credit Risk b. Liquidity Risk c. Foreign Exchange Risk d. Interest Rate Riskwhy a organisation should consider hedging net payables or net receivables with currency options rather than: forward contracts, and future contracts.Which hedging strategy uses an exchange rate agreed to today for future delivery of currency to minimize the financial institution’s risk exposure? a. Hedging with forwards. b. On balance sheet hedging. c. Off balance sheet hedging. d. Spot hedging.
- Due to ____, market forces should realign the relationship between the interest rate differential of two currencies and the forward premium (or discount) on the forward exchange rate between the two currencies. A. forward realignment arbitrage B. triangular arbitrage C. covered interest arbitrage D. locational arbitrageDescribe techniques for “hedging” againstlosses from fluctuations in exchange rates.According to PFRS 7, it is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting all similar financial instruments traded in the market. Interest rate risk Currency risk Credit risk Other price risk
- Explain how changes in interest rates are likely to affect exchange rates.The deterioration of economic conditions; deterioration of the value of the local currency in terms of the bank’s base currency; convertibility or transfer risks; market crisis are examples of what kinds of risk? Select one: a. Solvency risk b. Foreign exchange risk c. Sovereign risk d. Credit risk1. What is the optimum currency area? 2. What is the specie-flow mechanism?