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A financial institution has entered into a 10-year currency swap with company Y. Under the terms of the swap, the financial institution receives interest at 3% per annum in Swiss francs and pays interest at 8% per annum in U.S. dollars. Interest payments are exchanged once a year. The principal amounts are 7 million dollars and 10 million francs. Suppose that company Y declares bankruptcy at the end of year 6, when the exchange rate is $0.80 per franc. What is the cost to the financial institution? Assume that, at the end of year 6, the interest rate is 3% per annum in Swiss francs and 8% per annum in U.S. dollars for all maturities. All interest rates are quoted with annual compounding. Explain.
Draw the function Y = F(K, L¯) in terms of Y and K, for some fixed L. On the same graph, plot the cost function for renting a certain amount of capital at a rental price of R, i.e. RK. For a profit maximizing firm, illustrate graphically how much cap..
If a price in a competitive market is "too high to clear the market," what does this normally mean. Assume upward-sloping supply curves.
Explain how a bill become a law in order.the bill goes back to the floor of the senate for consideration. the house committee, compairised of members from both houses of congress,works outany differences concerning the bill.
In 2010, The Fed reduce the Discount rate by eleven times, to 1.50%, the reason for this action was to:
At the moment the market is completely ignoring things like record U.S. trade deficits and the widening curent account deficit. It is also largely ignoring the possibility of Federal Reserve rate cuts. In what way is fiscal easing in Japan relevant h..
The article also notes that, as a consequence of the rent control laws, the price of owner occupied housing has increased greatly. Utilize a supply and demand model to model this phenomenon as well.
Draw an arbitrary budget constraint for a person, assuming that he or she receives no government subsidies. Then draw in the budget constraint that arises from the above housing subsidy proposal.
Compare also contrast the yields also maturities for each of the securities. Argue elucidate which you would hold also Elucidate why relative to interest rate risk.
Given the following annual information about a hypothetical country, answer questions a through d
You win the lottery and are promised by the Lottery Commission $12,000 a year for 6 years, starting next year. Assume the interest rate is 9%. What is the present value of this prize?
The US government could not pass its annual budget. As a result, the US government has partially shut-down: roughly about 800000 federal employees of non-essential services are out of work
If inflation expectations rise, how do the short-run Phillips curve and unemployment change?
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