What is one of the attractions of the Eurobond market? Multiple Choice A) There are more stringent disclosure requirements than for domestic bond markets. B) They offer higher interest rates on deposits. C) There is no translation exposure. D) There is regulatory control by the national government.
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- 3) Unlike most money market securities, commercial paper A) in general, has a time to maturity that is longer than a year. B) is not generally traded in a secondary market. C) is not popular with most money market investors because of the high default risk. D) all of the above.Identify two (2) derivative investment products and how they allow investors to hedge against risk while creating unnecessary risk to the global economy.How does a bank adjust its pricing of a loan with high default risk? Use average historical cost of funds instead of marginal cost. Add 1.5% to the applicable cost irrespective of the risk level. Add a default risk premium to the applicable weighted marginal cost of funds. None of the above.
- Which type of risk are savings institutions least susceptible to? Interest rate risk Liquidity risk Credit risk Exchange rate risk Which of the following assets is a savings institution's smallest source of credit risk? Cash Repurchase agreements Mortgages Mortgage-backed securitiesSecuritization of home mortgage loans was a key factor contributing to the Great Depression O helped end the Great Recession creates a type of security that cannot be traded in open markets O reduces the amount any one lender must face from a given loanJane, who works for the economic research department in a multinational corporation, is preparing a report for the advisory board of the company. The report intends to clarify in which country they should invest given the expected change in demand. The objective is, of course, to identify the country with greater change in demand. Jane analyzes countries A and B that currently have the same demand. She calculates the partial derivatives of demand with respect to income and finds that for country A it is greater than for country B. Demand in country A is measured in pounds and in country B in Kg. Can we conclude that if the only change expected in both countries is a change in income of 3.5%, then the company should invest in country A? no, we should calculate instead the income elasticity for the consumption of the good the company sells in each country. There is no statistic that can illuminate the advisory board on this problem. yes, because the derivative tells us that for each…
- D & R A1 6 Question 6. Foreign Currency Futures and Arbitrage Strategy Today is May 23, 2016. The spot rate for British pounds is 1.9032 CAD/£. The Canadian risk-free rate is 0.52%, and the British risk-free rate is 0.45%. Both risk-free rates are compounded continuously. The vote by the British population for U.K. exit from the European Union (commonly referred to as Brexit) will occur in exactly one month. Due to the uncertainty from this event, market volatility on the British pounds futures is quite high. As an example, the British pound futures contract, which expires on September 23, is priced below the spot rate at 1.4497CAD/£. The futures contract size is 62,500 British pounds. Is the futures contract incorrectly priced? If so, construct a risk-free arbitrage strategy to take advantage of the mispricing. Assume there are 365 days in the year, and the Canadian dollar is the domestic currency.You are an investor currently holding 1.5 million U.S. dollars, and you are contemplating the following strategies. 1)Investing in the U.S. 5-year treasury bonds.2)Investing in the 5-year government bonds of one of the countries listed below. Your strategy is to exchange your funds on the spot market into the foreign currency, buy the local government bond, and after the bond’s maturity, exercise a forward to change your funds back into USD. Spot and forward rates are listed below. There are no put and call rates (the spread is equal to zero). The forward, however, costs 2% of the exchanged value.Required:1.Find the most profitable strategy. Calculate the future and present values of all 11 strategies (U.S. treasury bonds and 10 foreign government bonds).2.Explore the concept of arbitrage on the currency exchange markets and critically evaluate how it relates to this situation.Equity securities consist of:
- Suppose that you and your friends all have savings accounts which require you to give 6 months' notice before you make a withdrawal. Your bank lends me money and requires that I repay it in 2 years' time. What is the process called? a) Risk transformation b) Wholesale banking c) Transmission of funds d) Maturity transformationFinancial intermediaries are firms that: match buyers and sellers of bonds. O conduct open market operations. match buyers and sellers of stocks. extend credit to borrowers using funds from savers.Assets Fill in the blank options (Building and Furniture OR Checkable Desposits OR Loans OR Net Worth OR Reserves) ($450,000 OR $1,350,000 OR $1,800,000 OR $4,500,000) Liabilities fill in the blank options (Building and Furniture OR Checkable Desposits OR Loans OR Net Worth OR Reserves) ($450,000 OR $1,350,000 OR $1,800,000 OR $4,500,000) .. in an overall increase of.. fill in the blank options ($720,000 OR $5,400,000 OR $7,200,000) .. in checkable deposits and a... fill in the blank options ($720,000 OR $5,400,000 OR $7,200,000) thank you so much!!!
