International Financial Management
14th Edition
ISBN: 9780357130698
Author: Madura
Publisher: Cengage
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Define each of the following terms: f. Spot rate; forward exchange rate; discount on forward rate; premium on forward rate
Demonstrate how interest rate and currency swaps are constructed and discuss the comparative advantage argument used to illustrate the popularity of swaps.
a)analyze and discuss the following factors on a European call option: time to expiration, exercise price, interest rate, volatility, and dividends.
b) identify, analyze, and discuss the following characteristics of a European put option: maximum value, intrinsic value, time value, lower bound, and payoff at expiration.
c) analyze and discuss the following factors on a European put option: time to expiration, exercise price, interest rate, volatility, and dividends.
d) discuss the relationship between American and European option prices.
e) derive the put-call parity and discuss its implications.
f) discuss the characteristics of a currency option.
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- Put options place a _____________ on what currency proceeds may be received and call options place a _____________ to what currency proceeds will cost? Group of answer choices ceiling (high limit), floor (low limit) floor (low limit), ceiling (high limit)arrow_forwardDiscuss the payoff structures for call and put options and the determinants of call and put option prices. Explain how the option pricing theory can be applied in credit risk modelling.arrow_forwardExplain the basic differences between the operation of a currency forward market and a futures market. Then, discuss the main difference in the obligation of one with a long position in futures (or forward) contract in comparison to an options contractarrow_forward
- The _______ models the relationship between inflation rate, nominal return, and real return. Multiple Choice Interest Rate Parity. Put-Call Parity. Fisher Effect. Law of One Price. Purchasing Power Parity.arrow_forwardAdvantages of currency futures contracts relative to forward contracts include _ a. Higher liquidity b. Standardized contract specifications c. Freedom to sell the contract before maturity d. All of the abovearrow_forward(a) Outline in detail what is meant by a forward and futures contract. Evaluate the relationship between futures price and spot price, and give reasons to justify the necessity for exchange margin accounts. (b) Explain the concept of cost of carry model and its role in the pricing of financial futures contracts.arrow_forward
- The holder of a put currency option has the obligation toarrow_forwardWhat is the current market view on AUD/USD? (Will it appreciate and which depreciate? and why?)arrow_forwardBased on the efficient markets hypothesis, the current price reflects to Select one:the discounted net present valuefuture interest paymentsNone of the answers are correctall available and relevant informationthe cost price.arrow_forward
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