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Question:
(a) Describe the Interest Rate Parity Theory.
(b) A company needs to pay in 3 months USD 1 million. The USD are already at disposal in the company, thus the company decides how to invest them in the given period. You have the following data:
$ 3-month deposit rate: 8% (annualised) £ 3-month deposit rate: 10% (annualised) Direct quotes: Spot rate: $1,80/£ 3-month forward rate: $1,78/£
By giving detailed reasoning, answer the given questions:
(i) Where should the company invest in the USA or in UK?
(ii) Consider that the interest rates and the spot rate stay the same, what forward rate ensure that there is no arbitrage?
The price of the pound sterling in Paris is Euros 1.2724 and 2.0556 CHF in Zürich. In Frankfurt we can come across with the exchange rate Euro 0.6338/CHF.
(i) How is it possible for an arbitrageur from London to realize profits? Describe.
(ii) All else being equal, which rate in Paris would ensure the no arbitrage condition?
At the end of March, 20X6 the balances in the several accounts of Nitin & Company are as follows:
Q. Show Factors influencing participation? Factors influencing participation: several research studies have shown that the intensity of participation depends on four factors.
Flex budget
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The United States has experienced continuous current account deficits as the early 1980s. What do you think are the major causes for the deficits? What would be the results of cont
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Church Inc. is currently enjoying relatively high growth because of a surge in the demand for its latest product. Management expects earnings and dividends to grow at a rate of 25
Basics of Convertible Bonds The provision of conversion in a corporate bond entitles the bondholder the right to convert the bond into a predetermined number of shares of commo
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1. role financial intermediaries 2. nature and role of money markets
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