Calculate a currency's foward premium or discount based on interest rate differentials.

Q: Define the structure of interest rates and list two theories used to explain the structure.

A: Introduction Structure of interest rates: The yield curve, or term structure of interest rates,…

Q: Compare and contrast dollar returns and rates of return.

A: The returns from any investment can be calculated in terms of value (amount terms) or percentages.

Q: How do you calculate inflation premium

A: Inflation refers to the sustained increase in the general level of prices of goods and services in…

Q: fferent ty

A: Define interest. In finance, or economics interest can be defined as the payment of a proportion…

Q: Nominal values are measured in ________ and real values take account of

A: Given  Nominal values are measured ? Real values taken account of?

Q: Explain The Need for an External Interest Rate?

A: There is a strong need for the external interest rate because it helps in making financial…

Q: interest

A: Exact Interest = P*r*(t/365) Ordinary Interest = P*r*(t/360)

Q: direct and indirect relationships between balance of payment and inflation rate.

A:

Q: What is the basis for the discount rate in a DCF analysis? Describe how this rate mightbe estimated.

A: Basis of discount rate in DCF analysis is to compute the PVF of future Cash Flows expected as it is…

Q: explain the application of compounding measures: effective or nominal / interest or discount rates,…

A: The sum that the lender demands from the borrower in addition to the principal amount is known as…

Q: What is the Relationship between the Incremental Cost and the Loan-to-Value Ratio?

A: The question is based on the concept loan to value ratio and its relationship with incremental cost.

Q: When using the internal rate of return method, interest payments should OA. not be discounted OB. be…

A: While using Internal rate of return calculation we have to discount each element of income and cost…

Q: Describe the difference between a trade discount and a cash discount.

A: Discounts are essential in commercial transactions because they affect buyers' decisions and help…

Q: Explain the difference between a trade discount and a cash discount.

A: Discount is the deduction from the cost of product or service that a seller offers to the buyer…

Q: The cost of money is expressed through interest rates. Describe three different “premiums” that have…

A: Solution:- Interest rate is the price of money. It can be interpreted in 3 ways: i) Required rate of…

Q: What is interest rate parity?

A: Interest rate parity: Interest rate parity is a theory concerning the association among spot…

Q: Fisher effect defines the relationship between nominal rates, real rates, inflation, default…

A: Fischer effect- It is named after economist Irving Fischer.

Q: Explain the determinants of credit olicy variables. 2. Explain the hotives for the extension of the…

A: The important dimensions of a firm’s credit policy are credit standards, credit period, cash…

Q: Notes Receivable with an Effective and Nominal Rate should report interest expense as?   Effective…

A: Solution: Notes Receivable with an Effective and Nominal Rate should report interest expense as…

Q: Define Trade discounts.

A: Business:   It refers to a commercial activity involving buying and selling of a product or a…

Q: Differentiate between a stated rate of interest and effective rate of interest.

A: Answer: Stated interest rate: This is the interest rate quoted or the average rate offered by the…

Q: Define Short-Term Interest-Bearing Notes.

A: Short-term interest-bearing note:   The short-term interest-bearing note is a note on which interest…

Q: What does the annuity factor indicate?

A: Annuity factor It indicates the discounted factor’s sum for all the n maturities when all n…

Q: Define discount percentage (credit)

A: The discount rate is the amount paid on debit and credit card payments to a dealer for payment…

Q: How do differences in fiscal policies. impact interest rate parity?

A: Interest rate parity (IRP), a cornerstone of international finance that states that the difference…

Q: What does the term structure of interest rates indicate?

A: The term structure of interest rates, also known as the yield curve, is a graphical representation…

Q: What is net interest margin(NİM)?

A: There are various profitability ratios

Q: What are the implications of interest rate parity theorem.

A: Interest rate Parity:- The interest rate parity (IRP) theory states that the difference between the…

Q: Summarize the varying effective interest rates per payment period under compounding frequencies?

A: The varying effective rate per payment period in case of compounding frequencies as under: When…

Q: Distinguish between the initial rate of interest and the expected yield on an ARM. What is the…

A: Introduction: The adjustable rate mortgage is one of the method used to calculate the interest rate…

Q: Explain an example of Short-Term Interest-Bearing Notes.

A: Short-term interest-bearing note: The short-term interest-bearing note is a note on which interest…

Q: Briefly explain how each of the factors below influence interest rates: A.   Inflation    B.…

A: Inflation refers to the general increase in the price level of goods and services in an economy over…

Q: What is a functional currency? What is the Intercst Coverage (Times Intcrest Earned) Ratio?

A:

Q: Discuss when and how to use the WACC as a discount rate for valuation.

A: WACC- It is the combined cost of capital of the company. A company generally does not finance…

Q: Which are two types of interest rates are used in equivalence calculations?

A: Equivalence calculation is used for analysis of an investment or a project based upon the the…

Currency Market

The currency market, also known as the foreign exchange market, consists of currencies worldwide. This market determines the rate of all currencies based on the buying and selling of forex. It is an over-the-counter market. It is the largest and most liquid market based on trade volume.