and

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: 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: 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: 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: 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: 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: Which of the following Federal Reserve actions could lead to an appreciation of the U.S. dollar?…

A: Increase in interest rates will increase the value of currency because decrease in liquidity will…

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: 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: Which of the following is not an example of sovereign risk? a. Changes in tax rates b. Changes…

A: The objective of the question is to identify which of the given options does not represent an…

Q: None

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

Q: What is the effect on a country’s economy of an artificially lowexchange rate? Of an artificially…

A: An exchange rate is the money of one country versus another country's or economic zone's currency.

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.

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.