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International financial management
Finance & Accounting
Pages 4 (1004 words)
International Financial Management [Author’s Name] [Institution’s Name] Section-A Ans-1) (d). the rate given is the rate for dealing directly with a financial institution Ans-2) 1.7475 * (1+0.99%) = 1.7575 – 82 (c). 1.7575 - 82 Ans-3) (d). the Interest Rate Parity Theory Ans-4) Bid rate at Intercontnental Bank = 1.6685 Bid Rate at MegaBank = 1.6585 Ask Rate Intercontenantal Bank = 1.6695 Ask Rate MegaBank = 1.6595 If one buys from the Mega Bank, then he will get this price 1.6595 And sell on the rate of 1.6685, and then arbitrage profit of 5,432 could be gain accordingly (b).
Forward contracts can be traded on recognized markets, whilst futures contracts can not Ans-9) (a). Enter into a 90-day forward contract to sell US Dollars for Euros Ans-10) (e). Insufficient data given to enable the calculation to be made Section B Q1 a) The political risk refers to the scenario where the economic yield would be influenced and undergoes due to the uncertain changes in political environment that cause volatility in the state (MCKELLAR, Robert, 2012, pp. 36). Any uncertain circumstances directly impact the investment returns that could be ranging from switching the governments, change in regulation bodies, amendments in foreign policy or military state of affairs (OVERHOLT, William H., 1982, pp.74 ). It is a common consensus that political risk cannot be measured but it can be assessed. This particular statement is quite right as political risk cannot be measured, because there is no method or tool available from which one can assess the level and proportion of risk found under political uncertainty (BRINK, Charlotte H, 2004,pp. 152). ...
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