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Explain how Eurocurrency is created.Answer: The center of the international money market is the Eurocurrency market. A Eurocurrency is a time deposit of money in an international bank situated in a country dissimilar from the country that issues the currency. For instance, Eurodollars are deposits of U.S. dollars in banks situated outside of the United States. As an example, suppose a U.S. Importer purchases $100 of merchandise from a German Exporter and pays for the purchase by drawing a $100 test on his U.S. checking account (demand deposit).
If the funds are not required for the operation of the business, the German Exporter should be deposit the $100 in a time deposit in a bank outside the U.S. and get a greater rate of interest as compared to if the funds were put in a U.S. time deposit. Suppose the German Exporter deposits the funds in a London Eurobank. The London Eurobank credits the German Exporter along with a $100 time deposit and deposits the $100 into its correspondent bank account (demand deposit) along with the U.S. Bank (banking system) to hold as reserves. Two points are noteworthy. First, the whole $100 remains on deposit in the U.s. Bank. Second, the $100 time deposit of the German Exporter in the London Eurobank denotes the creation of Eurodollars. This deposit exists additionally to the dollars deposited in the U.S. therefore; no dollars have flowed out of the U.S. banking system in the creation of Eurodollars.
Q. What is risk adjusted discount rate? The risk adjusted discount rate includes two rates viz (i) Risk-free rate: - Risk free rate is the usual rate or the usual discount r
a. Talk about the role of banking in business. b. Set out the precise role played by Investment Banking and the challenges of corporate governance.
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Evaluate d importance of leverage in a financial management of a small sacle business
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Explain the distinction in the translation process among the monetary/nonmonetary method and the temporal method. Answer: Within the monetary or nonmonetary method, every mone
For what kinds of needs do you think a firm would issue securities in the money market versus the capital market?
Typically in a bond, we find an inverse relation between the price and the required yield. We know that the price of the bond is the present val
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