Quantitative easing is alternative monetary policy

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Reference no: EM132039930

1. Calculate the market interest rate for a project with a life time of 3 years, where general inflation over the three years of project is estimated as 5%, 7% and 3%. Assume the zero-inflation interest rate is 4%. (report the answer in "percent". For example, put 30, instead of 30% or 0.3)

2. LSE, a London based stock exchange, makes more money from its clearing operations than from trading securities. Critically evaluate how the clearing works and what role do the cash flows connected to various currency derivatives play in it.

3. Quantitative Easing (QE) is an alternative monetary policy which aims at increasing money supply when traditional instruments such as lowering interest rates fail. Explain how QE works and how does it infuse new money in circulation . Critically evaluate its benefits and drawbacks.

Reference no: EM132039930

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