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Question 1:
a) Describe fully why and how government intervenes in the foreign exchange market.
b) "Changes in the equilibrium exchange rate between a pair of currencies rely on changes in the growth rates and interest rates in the two countries". Critically comment on this statement hypothesis.
Question 2:
a) What are options? Discuss their rationales.
b) Write down and explain the Black-Scholes European call option pricing formula. Discuss how call prices change with each of the inputs to the calculation.
c) What is the price of a European call option on a non-dividend paying stock when the stock price is $53, the strike price is $50 and the risk-free rate is 12% per annum, the volatility is 20% per annum and the time to maturity is three months?
d) Differentiate between a Bull and a Bear Spread using illustrative examples.
Normally, floater coupon rate moves in the same direction as the reference rate. That is, with an increase in the reference rate, the floater coupon rate also increases
The Pennington Corporation issued a new series of bonds on January 1, 1979. The bonds were sold at par ($1,000), have a 12 percent coupon, and mature in 30 years, on December 31,
State what is Average cost Average cost represents weighted average of the costs of each source of fundsemployed by enterprise, weights being the relative share of each source
The banking sector has a vital and active role in the money market. The transactions taking place in these securities are large in size, both in terms of volumes
Define the term- Earnings per share (EPS) EPS = Profit available to ordinary shareholders (PAT) / Weighted average number of shares in issue(p per share) This ratio illustra
Define the following terms that relate to a convertible bond: conversion ratio, conversion value, and straight bond value. The term conversion ratio is the number of shares of c
Effective Duration and Convexity The modified duration is a measure of the sensitivity of a bond's price to interest rate changes; the assumption made here is that the expected
AThe project is expected to have an initial outlay of $200million and generate cash inflows of $64million for the next 12 yearssk question #Minimum 100 words accepted#
Q. Illustrate Miller-Orr model recognises? The Miller-Orr model recognises which cash balance requirements are likely to fluctuate and that active management is required in r
The Directors of Rohan Plc are discussing the importance of the dividend policy on the market value of their firm. The Chairman considers that the dividend is important and does a
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