Explain the concepts of present value and future value

Reference no: EM13897882

1. Explain the concepts of present value and future value.

2. If the dollar interest rate is positive, explain why the value of $1,000,000 received every year for 10 years is not $10,000,000 today.

3. Describe how you would calculate a 5-year forward exchange rate of yen per dollar if you knew the current spot exchange rate and the prices of 5-year pure discount bonds denominated in yen and dollars. Explain why this has to be the market price.

4. If interest rate parity is satisfied, there are no opportunities for covered interest arbitrage. What does this imply about the relationship between spot and forward exchange rates when the foreign currency money market investment offers a higher return than the domestic money market investment?

Reference no: EM13897882

Questions Cloud

What will the government force exporter to do : An exporter has future foreign currency receivables, what will the government force him to do? Second, how does this help the government in defending their exchange rate peg?

Determine the current rate of return on risk-free assets : Determine the current rate of return on risk-free assets

Determine the exchange rate system croatia runs : Find the Web site of Croatia's central bank and determine the exchange rate system Croatia runs. Suppose the kuna weakens substantially relative to the euro.

How much energy must the ice absorb : How much energy must the ice absorb if it is to completely melt? If the ice were mixed with 360 grams of water initially at 30°C and the system is assumed to be closed, would the water be able to lose enough energy to melt all the ice? Show calc..

Explain the concepts of present value and future value : Explain the concepts of present value and future value. If the dollar interest rate is positive, explain why the value of $1,000,000 received every year for 10 years is not $10,000,000 today.

What do economists mean by the external currency market : What do economists mean by the external currency market? What determines the bid-ask spread in the external currency market? Why is it usually so small?

Define marginal cost of capital : Define marginal cost of capital

What is the displacement of the first aid kit : A mountain climber is steadily descending at -1.94 m/s using a rope. (Assume the positive direction is upward.) and After 3.7 seconds, what is the displacement of the first aid kit from the mountain climber (how far below)

Find the slope which is the spring constant : Plot force (weight) versus ΔL. Fit a line for graph of force (weight) versus ΔL and find the slope which is the spring constant (k)

User Account

All Pages