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Q: Which of the following statements is incorrect? a. when market rates are changing, the discount rate…

A: b. money market interest rates tend to respond quickly to Federal Reserve open market operations:…

Q: A country’s current account position moves from a surplus to a deficit. What will be the result?…

A: Current Account Current Account means recording a nation’s transactions with the rest of the world.…

Q: If there is inflation how does this affect LIFO reserves? Does it increase or decrease it?

A: LIFO Last-in-first out is a method used to issue material. It is a method of pricing the issues of…

Q: vny does the Fed use the RRF rate as a supplem the interest on reserve balances rate? Because…

A: Federal bank maintain money supply by the increase or decrease the RRP ON Reverse repo rate and IORB…

Q: rence rat

A: Introduction :  In simple words, Reference rate can be understood as the rate that is utilized to…

Q: Federal Reserve impact on inflation, growth and exchange rates: What happens to inflation, growth…

A: The Federal Reserve is America's central bank which is responsible for controlling demand and supply…

Q: Is default risk premium likely to be pro-cyclical (i.e., increasing during economic expansion) or…

A: The difference between the company's actual interest rate and risk free rate within the industry is…

Q: Explain the interest rate sensitivity of government debt as a function of: i) its maturity and ii)…

A: Financing price affectability may be a proportion of what quantity the value of a fixed-pay resource…

Q: Inflation rates and interest rates: O shift both demand and supply for a foreign currency at the…

A: Inflation rates and interest rates play a crucial role in shaping the dynamics of the foreign…

Q: If the U.S. Treasury deposits income tax receipts into its account at the Federal Reserve, then

A: As per Bartleby honor code, when multiple questions are asked, the expert is required to solve the…

Q: What is the present value index for Project A?

A: Present Value Index: It represents the ratio of the project's net present value to the initial cost…

Q: The Federal Reserve increasing interest rates in the hope that the dollar appreciates is an example…

A: The objective of the question is to determine whether the action of the Federal Reserve increasing…

Q: Equilibrium in the market for bank reserves determines ?

A: Hi, since there are multiple questions posted, we will answer the first question. If you want any…

Q: Assume that initially, the risk premium, ρ = 0 and that the domestic and foreign interest rates are…

A: The additional return or compensation that investors seek for accepting greater levels of risk in…

Q: What is the primary function of the Federal Reserve in the United States? a) Fiscal policy b)…

A: The Federal Reserve System looks after the financial activities and operations of the banking…

Q: The following are the monetary policy tools EXCEPT:*         A. buying and selling of short-term…

A: Monetary policies are operated by the Central bank of the country which regulates the banking system…

Q: What happens over time to the currencies of countries with higher inflation ratesthan U.S. inflation…

A: The question is based on the concept of future currency exchange rate with difference in inflation…

Q: If interest rates increase because of a previously unanticipated inflation rate risk?…

A: Answer -  If interest rates increase because of a previously unanticipated inflation rate risk as a…

Q: Explain what a first-to-default credit default swap is. Does its value increase or decrease as the…

A: A First-to-Default Credit Default Swap (FTD CDS) is a financial derivative instrument used in the…

Q: A weaker dollar places pressure on U.S. inflation, which in turn places------ pressure. on u.s.…

A: In this question, we are required to fill in the blanks.

Q: Has the development of the Eurodollar market made it easier ormore difficult for the Federal Reserve…

A: Eurodollars are held on to the interest-bearing account. The interest that is paid on these deposits…

Q: Will National Debt in the U.S. will ever be 0?

A: Congress has made numerous attempts to reduce the national debt, but it has been unable to slow the…

Q: Should the economy’s current fragile recovery gather momentum, it is likely the Federal Reserve will…

A: Federal bank had responsibility of monetary policy so do it by open market operations.

Q: Why do bond prices vary inversely with interest rates?

A: Interest rate is the amount charge by the lender for the use of an asset. It is charged on the…

Q: value of a currency rises due to demand and supply factors, is it correct to say that the currency…

A: A fixed exchange rate can be understood as the government or national bank-imposed policy that links…

Q: None

A: Fiscal policies, which encompass government spending and taxation decisions, can significantly…

Q: Explain how higher interest ra increases the rate of inflation.

A: Generally, higher interest rates increase the worth of a given country's currency. the higher…

Q: To fight inflation, another monetary policy tool the Fed could use is to change the reserve…

A: Inflation is the continuous increase in prices of goods and this is not good for economy as whole.

Q: The US treasury issues inflation-indexed bonds known as tips. TRUE/FALSE?

A: US Government issues bonds linked with the index called treasury inflation-protected securities…

Q: Is the price of a long term bond or the price of a short term security more sensitive to a change in…

A: Bond prices and interest rates are inversely related. A fall in interest rate increases the Bond…

Q: How can a company mitigate risk using interest rate swaps?

A: Interest rate swaps means swapping the rate of interest between 2 counter-parties.It can be used to…

Q: What specific interest rate is targeted by the Fed Open Market Committee? Inflationary rate primary…

A: Federal open Market committee is always responsible for changing the monetary policy in the United…

Q: Why is the Overnight Reverse Repurchase rate (ON RRP rate) the actual price floor in the Federal…

A: Overnight Reverse Repurchase rate (ON RRP rate) - By the means of this ON RRP facility, government…

Exchange Rate Risk

It is the possibility that the value of a currency will fluctuate in the future. In the wake of globalization, business establishments have increasingly ventured into international markets. The volume of international trade has prospered excellently in the near past and is expected to be more affluent in the future. The use of exchange-traded derivative financial instruments has been multi-folded to provide for the requirements of various MNCs and offshore potential investors. Most banks and financial institutions have helped integrate the global economies. Our Government has introduced some bold and extreme measures to fulfil the purpose behind the fiscal, industrial, and monetary policies. The enactment of GST is a huge step towards streamlining the taxation system of the country. Owing to Covid-19, this aspect of corporate risk management has become critical.