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Discuss (IN DETAIL) the components of Balance of Payment
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- Explain the money market debt securities and capital market debt securitiesCaspian Bank has negotiated a plain vanilla swap in which it will exchange fixed payments of 8% for floating payments equal to LIBOR plus 0.5% at the end of each of the next three years. In the first year, LIBOR is 8%; in the second year, 9%; in the third year, 7%. What is the total net payment Caspian Bank receives, over the three-year period, if the notional principal is $10 million? (Please explain work)Compare the onshore private banking with offshore private banking.
- What is sovereign debt? What specific characteristic of sovereign debt constitutes the greatest risk to a sovereign issuer?Define in-the-money and out-of-the-money swaps.How BMW Dealt with Exchange Rate Risk BMW Group, owner of the BMW, Mini and Rolls-Royce brands, has been based in Munich since its founding in 1916. But by 2011, only 17 per cent of the cars it sold were bought in Germany. In recent years, China has become BMW's fastest-growing market, accounting for 14 per cent of BMW's global sales volume in 2011. India, Russia and Eastern Europe have also become key markets. The Challenge Despite rising sales revenues, BMW was conscious that its profits were often severely eroded by changes in exchange rates. The company's own calculations in its annual reports suggest that the negative effect of exchange rates totalled 2.4bn between 2005 and 2009. BMW did not want to pass on its exchange rate costs to consumers through price increases. Its rival Porsche had done this at the end of the 1980s in the US and sales had plunged. The Strategy BMW took a two-pronged approach to managing its foreign exchange exposure. One strategy was to use a "natural…
