A UK-based firm has identified three variables that impacts its cash flow, hence risk associated with its cashflow. The identified variables are interest rates (INT), the euro/sterling exchange rate (EXCH), and the price of gas (GAS). The relationship between the variables can be expressed as follows: Change in cash flow = ₔ+ ß1 INT + ß2 EXCH + ß3 GAS + ҙ (a) Explain the relationship as expressed in the multiple regression analysis. (b) Identify the dependent variable and independent variables and type of risks associated to each variable and how to manage these risks. (c) How do you describe the relationship between the independent variables and the dependent variable. (d) Identify and briefly explain the three commonly used approaches to quantifying financial risks.
A UK-based firm has identified three variables that impacts its cash flow, hence risk associated with its cashflow. The identified variables are interest rates (INT), the euro/sterling exchange rate (EXCH), and the price of gas (GAS). The relationship between the variables can be expressed as follows: Change in cash flow = ₔ+ ß1 INT + ß2 EXCH + ß3 GAS + ҙ (a) Explain the relationship as expressed in the multiple regression analysis. (b) Identify the dependent variable and independent variables and type of risks associated to each variable and how to manage these risks. (c) How do you describe the relationship between the independent variables and the dependent variable. (d) Identify and briefly explain the three commonly used approaches to quantifying financial risks.
Chapter4: Exchange Rate Determination
Section: Chapter Questions
Problem 17QA
Related questions
Question
A UK-based firm has identified three variables that impacts its cash flow, hence risk associated with its cashflow. The identified variables are interest rates (INT), the euro/sterling exchange rate (EXCH), and the price of gas (GAS). The relationship between the variables can be expressed as follows:
Change in cash flow = ₔ+ ß1 INT + ß2 EXCH + ß3 GAS + ҙ
(a) Explain the relationship as expressed in the multiple regression analysis.
(b) Identify the dependent variable and independent variables and type of risks associated to each variable and how to manage these risks.
(c) How do you describe the relationship between the independent variables and the dependent variable. (d) Identify and briefly explain the three commonly used approaches to quantifying financial risks.
AI-Generated Solution
AI-generated content may present inaccurate or offensive content that does not represent bartleby’s views.
Unlock instant AI solutions
Tap the button
to generate a solution
Recommended textbooks for you