The type of foreign market intervention that Central Bank of Colombia can conduct to keep the exchange rate at par in terms of PPP. Concept Introduction: Central Banks of the various countries can intervene and cause adequate adjustments in the exchange rate to bring parity with the index. This is done in order to avoid any under or over valuation in terms of PPP. Hedging: is a strategy that involves transferring or lowering the risk of a portfolio by diversifying the investment types and range Interest Rates: may be increased or decreased to manipulate the degree of capital flow from /to Colombian Banks and monetary system Speculative Adjustments: may be made to purchase assets with the expectation that its value will increase at a future date.

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Chapter 21, Problem 5Q

To determine

The type of foreign market intervention that Central Bank of Colombia can conduct to keep the exchange rate at par in terms of PPP.

Concept Introduction:

Central Banks of the various countries can intervene and cause adequate adjustments in the exchange rate to bring parity with the index. This is done in order to avoid any under or over valuation in terms of PPP.

Hedging: is a strategy that involves transferring or lowering the risk of a portfolio by diversifying the investment types and range

Interest Rates: may be increased or decreased to manipulate the degree of capital flow from /to Colombian Banks and monetary system

Speculative Adjustments: may be made to purchase assets with the expectation that its value will increase at a future date.

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