Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
Effect on Exchange Rates
As we know, one of the most vital determinants of changes in relative exchange rates is the relative inflation rate. Assuming a free and open market, it is expected that an inflationary currency will depreciate against the currency having relatively stable inflation rate and the amount of depreciation will approximately equal the difference in inflation rates. The Purchasing Power Parity (PPP) theory says that spot exchange rates can shift to adjust perfectly to inflation differentials. The empirical evidence suggests that PPP gives improper reasoning for the fluctuations in the short-term exchange rate movements. In 1983, Adler and Dumas[6] discovered that concomitant inflation differentials revealed less than 5% of monthly exchange rate movements recorded in the 1970s. Although the short-term movements in exchange rates were not closely attached to the relative inflation shift, several researchers predicted that this relationship can be applicable to the longer period.
The non-existence of a strong short-term relationship can be related to the difficulty faced in calculating inflation rate and the relatively slow speed of adjustment for the change in the inflation rate observed in the goods markets. It is also possible that a foreign exchange rate, instead of adjusting exclusively on concurrent inflation rates also reflects the expected inflation rates. This suggests that current exchange rates are more affected by future expectations rather than the historical inflation rates.
Explain how to measure the firm risk of a capital budgeting project. The firm risk of a capital budgeting project measures the force of adding a new project to the existing pro
Explain in detail various sources of finance. Which is the most appropriate one?
Explain the factors affecting the choice of a minimum cash balance amount. The smallest cash balance amount is determined by how easy it is to raise funds when needed, how expe
Accept-Reject Rule: The decision rule is to accept the project if the computed payback period is less than the standard. If not, reject it. While ranking the projects, projec
It better to buy shares of a company or its assets? The choice among buying shares of a company and buying its assets depends mostly on the fiscal differences and on the possib
Assume that you have been consistently impressed by David and Tom Gardner of The Motley Fool since you first heard of their rather improbable rise to prominence in financial circ
What is the Benefits of divestment ¸ Releases cash tied up to finance more promising opportunities. ¸ Reduces diversification and complexity of a group in case of a demerger
MONOPOLY Several governments consider it necessary to prevent or control monopolies. A untainted monopoly exists when one organisation controls the production or supply of a go
What are the misconceptions about Financial Management?
The key parameters taken into account while rating a debt instrument are as follows: 1. Industry Evaluation - This involves an evaluation of the
Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!
whatsapp: +91-977-207-8620
Phone: +91-977-207-8620
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd