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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.
Discuss and compare hedging transaction exposure by using the forward contract vs. money market instruments. While do the alternative hedging approaches generate similar result?
What factors does Standard & Poor’s analyze in determining the credit rating it assigns a sovereign government? Answer: In rating a sovereign government, Standard & Poor’s anal
Water Wheelies manufactures high-pressure sprinkler heads. These are produced periodically at a rate of 20,000 per month. Demand is steady at 15,000 per month. Each production run
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types of working managment policies
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Yield to put is the rate at which the present value of cash flow to the first put date is equal to the price plus interest rate. It is used for
Q. Define Implicit cost and explicit costs? Implicit cost and explicit costs: the implicit cost is the rate of return associated with the best invests opportunity for the firm
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