Given the following Euro to $ Exchange rate of 1.46, what is the information contained in this quote? If the Purchasing Power Parity Theory is correct, what is true about the relationship between the US dollar and the Euro at this exchange rate? a. 3. A US multinational company is required to report its financial results in US dollars.
Monetary Policy Aaron Ashburn MMPBL/501 Feb-21, 2011 Dr. George Sharghi Introduction There is a consensus among analysts regarding the ability of economist’s to accurately forecast inflation, and consequently it appears that the relationship between real economic activity and inflation is ambiguous. It is the Fed's job to do what it can to reduce unemployment in order for the economy to sustain and to make sure that inflation returns to a level more consistent with its mandate. The central focus of U.S. monetary policy is price stability. Thanks to its control of money markets and banks, the Fed influences interest rates, asset prices, and credit flows throughout the financial system. To help attain inflation goals the Federal
Arbitrage in the Government Bond Market (Case Analysis) Overview: On January 7, 1991, Samantha Thompson found out that there were major discrepancies in prices of long-term US Treasury bonds, and this anomaly could be used to make an arbitrage profit. Since the market is the largest, most liquid and closely watched fixed-income market in the world, it is uncommon to find an arbitrage opportunity in the government bond market. Ms. Thompson observed that she could create a synthetic bond whose coupon rate, maturity and par value could be exactly the same as the callable bond by combining non-callable bonds and zero coupon bonds. Clearly, this new bond is better than callable bond. If Ms. Thompson’s analysis was right, for investors holding callable bonds, they could make money from these discrepancies.
They will need to understand the tax law e.g. how is tax collected and paid and what type of VAT is applicable. E Ltd will need to take into account relevant employment law e.g. holiday entitlement, pensions, and Health and Safety requirements if they are setting up a subsidiary branch. Economic factors E ltd will face many economic factors when deciding on expanding into Europe.
To use fundamental forecasting, firstly, Logan has to develop a model to determinethe economic variables and how they impact the pound’s value. Subsequently, Logan could forecast the future value of the pound by using the information along with forecasts of the economic variables. It is believed the fundamental forecast would reflect depreciation of the pound. This is because the pound depreciated when British inflation was high in the past andLogan expects British inflation to be high in the future as well. Therefore, based on the forecast of this economic variable and the relationship between inflation and the pound’s value, the pound would be expected to depreciate.
What impact does these interest rate swaps have on the bank’s interest rate sensitivity, liquidity, accounting ratios and capital ratios? Make sure you work through the Appendix to the case. Interest rate risk : is the unexpected changes in the interest rate which can alter the bank’s profitability and the market value of equity. To hedge against interest rate risk a verity of techniques can be used that are classifieds into direct and synthetic methods. The direct method is relies on changing the contractual characteristics of Asset and Liabilities to reach a particular duration and maturity gap to get over any Asset and Liability mismatch.
Because these loans are IOUs, they can be offset by printing more money. This gives central banks an unlimited supply of money. Overdoing this will lead to inflation that hurts the economy (Colander, 2010, p. 406). One problem in government accounting is how they classify debt and expenditures. Accounting addresses several ways a business may classify an expenditure and depreciation over time.
The Fed is able to effectively manipulate the United States money supply in three primary ways: the first was is by setting the federal funds rate. That is the price that banks charge one another for loans. The federal funds rate then directly influences the concession rate: which is the set price that banks may borrow money from the Federal Reserve banks at. Banks are then able to lend to consumers at slightly higher rates, which is one way banks make money. The discount rate, in turn, directly affects the rates at which banks can lend money to its customers.
Therefore, GM’s financial policies were based on specific financial targets such as book value, debt-to-total capital ratios, interest coverage ratios, and cash flow coverage ratios. Also, financing policy at GM is structured around matching liabilities to assets, hence ensuring that liabilities were related to earning assets; consequently, impact on operating cash flow caused by movements in interest rates was offset by changes in the value of the firm’s liability portfolio. 2. GM’s options positions GM’s off-balance sheet exposure to foreign exchange forward contracts and exchange options was $16.8bn and $12.3bn in 1991 and 1991 respectively. Swaps: since 1986, the GM had entered into 8 interest swaps, 7 of which were done in 1991, only for the central office activities Caps: no caps transaction before 1991; between 1991 and 1992, GM entered in13 transaction for a notional principal value of $2.6bn.
“Economic data and the signals they contain are central to business conditions analysis.” Economists spend much of their time gathering, interpreting, and manipulating macroeconomic data. This is important because the data they obtain provides signals which are used to predict what will happen in the trade over a set period of time. Signals are divided into two categories that economists focus on, and they are direct and indirect signals. There is a difference between direct and indirect signals. Direct signals are signals that are measurable in terms of validity and reliability.