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Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Indirect Intervention
How can a central bank use indirect intervention to change the value of a currency?
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- Q. If barriers to international securities markets are reduced, will a country’s interest rate be more or less susceptible to foreign lending and borrowing activities? Explain.arrow_forwardwhy is commercial paper considered as cash equivalent?arrow_forwardHow do you determine and calculate return and risk on foreign exchange transactions?arrow_forward
- The questions about Risks when investing in another countryarrow_forwardWhich of the following is not an example of sovereign risk? a. Changes in tax rates b. Changes in currency denominations c. Changes in exchange rates d. Changes in regulationsarrow_forwardWhy the single currency eliminates exchange rate fluctuation and why is better for the countries to use the a common currency?arrow_forward
- The company DstriBut.inc decides to take a technological shift by replacing its old distribution center with a new one that is more oriented towards technology and less dependent on manpower. The entire installation is estimated at $6,000,000 amortized at the rate of 30% decreasing. An immediate expense of $30,000 (taxable and non-depreciable) is planned to ensure the training of the personnel who will operate on the new installations. This investment creates a working capital requirement of $400,000, fully recoverable. The company estimates to increase its operating cash flow by $1,500,000 before tax. On the other hand, the company must assume an expense for the maintenance and replacement of consumable components of new installations in the amount of $50,000 every 2 years. This investment will have a residual value of $2,500,000 at the end of the investment horizon, which is set at 5 years by senior management. The tax rate is 40% and the rate of return required by senior management…arrow_forwardWhy do governments intervene in the foreign exchange market? Check all that apply: To maintain exchange rate boundaries To reduce fear in financial markets To smooth out the business cycle To smooth out exchange rate movements To earn a profit for the governmentarrow_forwardD3) Finance Use covered interest rate parity (CIP) to show that a fixed exchange rate and free capital flows imply that a central bank cannot set the interest rate independently from the interest rate set by the reference currency's central bank.arrow_forward
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