once the capital markets are integrated it is difficult for a country to maintain a fixed exchange rate, explain why this may be so

Q: Explain the International Fisher effect and Interest Rate Parity. If these parity exists, explain…

A: Interest parity rate shows the balance and comparison of difference of interest rates between two…

Q: A country with a fixed exchange rate experiences downward pressure on the exchange rate value of its…

A: The exchange rates in financial markets are rates at which the currencies of different countries are…

Q: Why do nations use a crawling peg exchange rate system? What role does speculation play in this…

A: A crawling peg is a rate zone within which a fixed-rate exchange rate currency is permitted to vary.…

Q: Exchange rates fluctuate under both the fixed exchange rate and floatingexchange rate systems. What,…

A: Fixed exchange rate: Fixed exchange rate is formally set by the administration or monetary authority…

Q: The factors used to convert from one country's currency to another country's currency is called…

A: Strike price is the price at which a call or put option can be exercised. Cost of capital is the…

Q: The mobility of international capital flows is causing emerging market nations to choose between a…

A: Mobility of, Capital is a common phenomenon post-globalization of world Economy  The exchange rate…

Q: A second function of the foreign exchange market is to provide exchange possibility that unpredicted…

A: Since you have not mentioned the specific question we will just answer the first question in case…

Q: Leads are deliberate early payments of amounts due to be paid in foreign currency to overseas…

A: Leads are deliberate early payments of amounts due to be paid in foreign currency to overseas…

Q: Does Arbitrage destabilize foreign exchange markets? Support your logic about that statement

A: Solution- F = S*1+if/1+id  F= Forward Exchange Rate  S= Current Spot Exchange Rate  Id= Interest…

Q: Define short exposure and explain the relationship between the variability of the domestic currency…

A: Domestic currency is referred to as the legal tender in an economy as well as issuance through the…

Q: Once capital markets are integrated, it is difficult for a country to maintain a fixed exchange…

A: Capital markets are places where money is exchanged between people who supply capital and those who…

Q: Would exchange rate changes always increase the risk of foreign investment

A: No, it is not necessary that the exchange rate changes always increse the risk of foriegn…

Q: Which of the following is a major benefit of international lending? It eliminates exchange rate risk…

A: Lending is a form of agreement in which one party agrees to allow the other party to use a sum of…

Q: Which of the following refers to exposure netting?  1. It is a strategy based on adjustments of the…

A: exposure netting is defined as a method of hedging transaction risk by offsetting exposure in one…

Q: As exchange rates change, the rates A. all of these options are true. B. change the relative…

A: Exchange rate can change either because of appreciation or depreciation of currency value with…

Q: e the real exchange rate is constant – say, at the level required for net exports (or the current…

A: Nominal exchange rate includes the exchange rate after consideration of inflation and real exchange…

Q: chains of events affected the Foreign Exchange Rates long term and short term

A: Factors affecting foreign exchange rates in short term: Interest rates: depreciation or appreciation…

Q: Answer the following: a. Explain why the interest parity condition must hold if the foreign exchange…

A: Foreign exchange market is referred as the market, where the different currencies used to get…

Q: Exchange rates can move up or down, and spot rates could move favourably as well as adversely.…

A: Currencies constantly rise and fall, thus imposing risk to importers, exporters and local industries…

Q: Fisher effect and Interest Rate Parity theories. If these theories exist, explain MNCs'…

A: There are different theories and models that help to predict the forward exchange rates based on…

Q: All of the following typically tend to be short-term determinants of exchange rates between currency…

A: Exchange Rate: The value of a nation's currency in relation to the currency of another country or…

Q: Foreign exchange risk

A: Foreign currency is necessary for worldwide business coordination. Foreign exchange administration…

Q: What is meant by spot rate in case of foreign currency transaction?

A: Spot rate is the rate at which currencies can be exchanged right away. It is the current market…

Q: What is the effect of external transfers from expatriate employment on maintaining the stability of…

A: WHAT IS REMITTANCE? Remittance is an installment of cash that is moved to another gathering.…

Q: Explain why the following statement is true or false: “The smaller and less liquid markets and…

A: Currency market or foreign exchange market is defined as the global decentralized or OTC market…

Q: Discuss the condition under which exchange rate changes may actually reduce the risk of foreign…

A: Exchange rate changes are largely unpredictable. Exchange rates are nonstationary and may deviate…

Q: If a country’s par exchange rate is overvalued, what kind of intervention would that country’s…

A: The rate at which one currency can be exchanged for another is referred to as the exchange rate.…

Q: Why the single currency eliminates exchange rate fluctuation and why is better for the countries to…

A: Single Currency refers to the currency used by more than one country. In other words, when more than…

Q: age destabilize foreign exchange markets? If yes, which argument do you

A: Foreign exchange market : The foreign exchange market is the market where national currencies are…

Q: Because capital flows were an important element in the currency crises, it has been advocated that…

A: Capital is the main concern through which the economy of a country has financially stable and…

Q: long position in foreign exchange? Does a successful Long position mean the currency price becomes…

A: A Long Position  also known as simply Long is the buying of stock, currency or commodity with the…

Q: Which of the following is/are TRUE with respect to spot market liquidity? I. The market liquidity…

A: We know that Spot market is used for immediate liquity which is normally happens on T+2 Days. It is…

Q: What are the advantages or the disadvantages of hedging with currency options as opposed to future…

A: Hedging is used to insulate the investor of the risks of currency fluctuations in an international…

Q: Direct Intervention How can a central bank use direct intervention to change the value of a…

A: Central bank can make a direct intervention to change the value of a currency. This is achieved by…

Q: What modifications may be made to the domestic cost of capital for a foreign venture to account for…

A: Introduction: The question is founded on the idea of international risk management in terms of cost…