13.) What are derivative securities? Why do they exist? 14.) 2020 was year the COVID-19 global pandemic. Specifically explain how both monetary and fiscal policy have been used in the United States as a reaction to date. 15.) What causes the basic changes to overall supply and demand for money and loanable funds?
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- A money market mutual fund manager is looking for some profitable investment opportunities and observes the following one-year interest rates on government securities and exchange rates: rUS = 12%, rUK = 9%, S = $1.50/£, f = $1.6/£, where S is the spot exchange rate and f is the forward exchange rate. Which of the two types of government securities would constitute a better investment?For each of the following monetary policy tools:A. The BSP buys securities in the open market.B. The BSP sells foreign exchange currentC. The BSP increases the reserve requirement ratio.D. The BSP applies its moral suasion ability requesting commercial banks to lowerdown interest rates.E. The government decided to deposit funds at the BSP.1. Determine whether the monetary tool imposed by the BSP is an expansionary or acontractionary policy.18 The following are the monetary policy tools EXCEPT:* A. buying and selling of short-term sukuk B. change the interest rates C. change the reserve requirements D. change in government spending and tax rates
- To strengthen the dollar using sterilized intervention, the Fed would simultaneously Treasury securities. O buy, buy O buy; sell O sell; sell O sell; buy dollars andA financial institution has assets denominated in British pound sterling of $125 million andsterling liabilities of $100 million.a) What is the FI's net exposure?b) Is the FI exposed to a dollar appreciation or depreciation?c) How can the FI use futures or forward contracts to hedge its FX rate risk? d) What is the number of futures contracts to be utilized to hedge fully the FI's currencyrisk exposure?e) If the British pound falls from $1.60/£ to $1.50/£, what will be the impact on the FI'scash position?f) If the British pound futures price falls from $1.55/£ to $1.45/£, what will be the impacton the FI's futures position.In the current pandemic situation, State Bank of Pakistan lower the interest rate (KIBOR) from13.75% to 7%. How this change could help to revive the economy? What other monetarypolicy measures could be taken by state bank of Pakistan in this situation?
- Analyze and explain the current state of the international monetary system. Then, discuss the effects of the U.S. dollar fluctuations on the American balance of payments.Conducting monetary policy so that the FF rate = 1.25%, where the FF rate is the nominal federal funds interest rate, is an example of : A. an active policy rule. B. a passive policy rule. C. discretionary policy. D. an automatic stabilizer.Assume U.S. interest rates are generally above foreign interest rates. What does this suggest about the future strength or weakness of the dollar based on the IFE? Should U.S. investors invest in foreign securities if they believe in the IFE? Should foreign investors invest in U.S. securities if they believe in the IFE?
- During crises like the COVID-19 crisis, major currencies such as U.S. Dollar and Euro should appreciate against currencies associated with developing countries. Do you agree with this statement? Discuss. Your answer should be linked to different concepts (e.g., PPP, IRP, IFE, and currency hedging)Which of the following Federal Reserve actions could lead to an appreciation of the U.S. dollar? Select one : (1)An increase in the monetary base (2)A discount rate decrease (3) A required reserve ratio reduction (4)A sale of government bonds (5)A purchase of government bondsGive typing answer with explanation and conclusion Consider the prevailing condition of inflation (including changes in global oil price), the economy, budget deficit, decreases in expected remittance inflow, and the central bank monetary policy that could affect interest rate. Based on the prevailing conditions do you think bond price will increase or decreases in next six-month period. In the real economic environment which other factors may affect the bond price? Which factor in your opinion will have biggest impact on bond price? Assess the above given situations.