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How is the exchange rate determined? What is the theory of the Purchasing Power Parity (PPP)?

Economics Exchange Rate Determination in the Long Run – Data Evidence of the Theory of Purchasing Power Parity Nowadays, most countries are involved in international trade, which requires them to convert their currencies into other countries’ currencies to make investments, and/or export or import goods. An essential task of economists in any country is the […]

How does the Fed stimulate the economy? How does the Fed affect interest rates?

Marketing Fed stimulate the economy How does the Fed stimulate the economy? How does the Fed affect interest rates? Does the Fed have complete control over U.S. interest rates; that is, can it set rates at any level it chooses? Why or why not? What is country risk? What is exchange rate risk? On what […]

Consider a one-year forward contract on GBP/USD. What is one-year forward ex-change rate?

Using the balance sheet information of the commercial bank below compute its risk-weightedassets and capital ratio requirements (CET1, Tier 1 capital, total capital) with risk weightsas per Basel I and Basel III.1 Question 2. Derivatives. Share ForwardSuppose that the current price of Stock ABC is $30 and the one-year interest rate is 3%.(a) What is […]

Should the company go ahead with either project? If it must choose between them, which should it take?Discuss

Carpet Baggers Inc. is proposing to construct a new bagging plant in a country in Europe. The two prime candidates are Germany and Switzerland. The forecasted cash flows from the proposed plants are as follows: The spot exchange rate for euros is $1.3/€, while the rate for Swiss francs is CHF 1.5/$. The interest rate […]

Explain how changes in the exchange rate would affect profitability for exports from a different country to the United States.

OVERVIEW Write a 250–500 word analysis in which you examine the issue of currency exchange and the risks associated with changes in the exchange rate. Fluctuations in currency exchange rates can have significant effects on business costs, asset values, and profitability. Therefore, it is important for managers to be familiar with exchange rates and currency […]

Critically discuss the concepts of Triangular Arbitrage and Covered Interest Arbitrage with relevant examples.

a)Critically discuss the concepts of Triangular Arbitrage and Covered Interest Arbitrage with relevant examples. (40%) b)Using the numerical software package as explained in the online lectures and using any exchange-rate data on the Internet (daily, weekly, monthly or yearly) produce a report examining how triangular arbitrage would apply and compute the profit from this strategy […]

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