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Question 1:
a) Describe fully why and how government intervenes in the foreign exchange market.
b) "Changes in the equilibrium exchange rate between a pair of currencies rely on changes in the growth rates and interest rates in the two countries". Critically comment on this statement hypothesis.
Question 2:
a) What are options? Discuss their rationales.
b) Write down and explain the Black-Scholes European call option pricing formula. Discuss how call prices change with each of the inputs to the calculation.
c) What is the price of a European call option on a non-dividend paying stock when the stock price is $53, the strike price is $50 and the risk-free rate is 12% per annum, the volatility is 20% per annum and the time to maturity is three months?
d) Differentiate between a Bull and a Bear Spread using illustrative examples.
Calculate the expected rate of return and risk of return
Bid The price buyers provide to acquire securities or privacy from sellers.
Details on budgetary control process
Degree of Operating Leverage A measure of the firm's operating leverage, which is calculated as the contribution margin distributed by income before taxes. A rigid with a high
To evaluate a company using enterprise discounted cash flow (DCF), we discount free cash flow by the weighted average cost of capital (WACC). The weighted average cost of capital r
Factors of Importance of returns in any investment Importance of returns in any investment decision can be traced to the following factors: It enables investors to
how to estimated
It shows the date and corresponding prices at which the issuer can call back bonds. The issuer pays higher premium over the par value of the bond if the bond is c
What does the "weight" refer to in the weighted average cost of capital? The weight pass on to in weighted average cost of capital refers to the portion of the total capital in
Using details from table 8, let us compute the 6-month forward rate. Simple arbitrage principle, like the one used to compute the spot rates are used in this proc
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