Questions from Financial Markets

Q: Why must the current account balance equal the value of the capital

Why must the current account balance equal the value of the capital plus financial account balance (in opposite sign)?

Q: If the Swiss franc is expected to depreciate relative to the U

If the Swiss franc is expected to depreciate relative to the U.S. dollar in the near future, would a U.S.-based FI in Bern City prefer to be net long or net short in its asset positions? Discuss.

Q: A U.S. insurance company invests $1,000

A U.S. insurance company invests $1,000,000 in a private placement of British bonds. Each bond pays £300 in interest per year for 20 years. If the current exchange rate is £1.364/$, what is the nature...

Q: How did the Bretton Woods and the Smithsonian Agreements affect the ability

How did the Bretton Woods and the Smithsonian Agreements affect the ability of foreign exchange rates to float freely? How did the elimination of exchange boundaries in 1973 affect the ability of fore...

Q: Calculate the fair present value of the following bonds, all of

Calculate the fair present value of the following bonds, all of which have a 10 percent coupon rate (paid semiannually), face value of $1,000, and a required rate of return of 8 percent. a. The bond h...

Q: How are foreign exchange markets open 24 hours per day?

How are foreign exchange markets open 24 hours per day?

Q: What is the spot market for FX? What is the forward

What is the spot market for FX? What is the forward market for FX? What is the position of being net long in a currency?

Q: What motivates FI managers to hedge foreign currency exposures? What are

What motivates FI managers to hedge foreign currency exposures? What are the limitations to hedging foreign currency exposures?

Q: What are the two primary methods of hedging FX risk for an

What are the two primary methods of hedging FX risk for an FI? What conditions are necessary to achieve a perfect hedge through on-balance-sheet hedging? What are the advantages and disadvantages of o...

Q: If international capital markets are well integrated and operate efficiently, will

If international capital markets are well integrated and operate efficiently, will FIs be exposed to foreign exchange risk? What are the sources of foreign exchange risk for FIs?