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Romashka [77]
3 years ago
8

Suppose the U.S. yield curve is flat at 3% and the euro yield curve is flat at 4%. The current exchange rate is $1.35 per euro.

What will be the swap rate on an agreement to exchange currency over a 3-year period? The swap will call for the exchange of 2.1 million euros for a given number of dollars in each year. (Do not round intermediate calculations. Enter your answer in millions rounded to 4 decimal places.)
Business
1 answer:
Debora [2.8K]3 years ago
3 0

Answer:

2.7814 millions per year

Explanation:

The rate that is determined by the contracting parties of a swap is known as swap rate.

The swap rate is decided by the receiver and paid by the payer in order to compensate the uncertainty bear by the receiver related to the fluctuations in floating rate.

Amount Delivered = Forward Exchange Rate * Exchange Amount

Year 1  

= $1.35 * ( 1.03 / 1.04 ) * Euro 2.1 million

= $2.8077 millions

Year 2

= $1.35 * ( 1.03 / 1.04 )∧2 * Euro 2.1 million

= $2.7807 millions

Year 3  

= $1.35 * ( 1.03 / 1.04 )∧3 * Euro 2.1 million

= $2.7540 millions

Now Swap per year =

[F/(1+0.3) + F/(1+0.03)∧2 + F/(1+0.03)∧3 ]= [ $2.8077 ( 1+0.03)∧2 + $2.7807 (1+0.03) + $2.7540 ] / ( 1+0.03)∧3

= F [ 2.8286 ] = 7.8674

F = 2.7814 millions per year

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The substitution bias in the consumer price index refers to the idea that consumers​ ______ the quantity of products they buy in
dsp73

Answer:

change; over-estimates

Explanation:

Substitution bias refers to a tendency in which economic index numbers don't include information about the changes in consumer spending when they switch expensive products for cheaper ones or buy less units as prices change. This changes are not reflected in the market basket from which the CPI is built which can cause inflation rates to be over-estimated.

7 0
2 years ago
The process of a company gathering information about the competitive environment, including competitor’s plans, activities and p
jeyben [28]

Answer:

The correct answer is competitive intelligence.

Explanation:

Competitive intelligence is the systematic collection of open information, which once combined and analyzed provides a better understanding of the structure, culture, behavior, capabilities, and weaknesses of a competitor's firm.  

It is a very important activity because it helps companies to better understand how the business works. This way you can learn to be better than your competitors.

Companies use competitive intelligence to compare themselves with others, allowing them to make informed decisions. Most firms today realize the importance of knowing what their competitors are doing, and the information collected allows organizations to find out about their strengths and weaknesses.

3 0
3 years ago
Dan saves a portion of his income in an interest-earning account. in the loanable funds market, dan is:________
AlexFokin [52]

Answer:

Dan is the "supplier" of the funds

Explanation:

Given their willingness to lend their money, savers in this marketplace are on the supply side of the economy.

What is the loanable fund market?

The market that connects savers and borrowers is the loanable funds market.

Model of the market for loanable money

To make what occurs in the economy when borrowers and savers interact more understandable, the loanable funds market model is utilized. A modification to the market model for commodities and services is the market model for loanable funds. In this hypothetical scenario, the exchange of money takes the place of a good and the interest rate replaces the price. In essence, it describes how loans are made and borrowed money is exchanged between borrowers and lenders.

To know more about the loanable fund market visit:- brainly.com/question/15851247

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3 0
2 years ago
If Second National Bank has more rate-sensitive liabilities than rate-sensitive assets, it can reduce interest-rate risk with a
Contact [7]

Answer: Pay fixed rate while receiving floating rate.

     

Explanation:

  According to the given question, If the second national bank contain more rate of liabilities as compared to the rate of asset in any organization then it basically reducing the risk of the interest rate by using the technique swapping with paying some fixed amount of rate at the time of receiving the floating rate.

The process of fixed to floating swap is one of the contractual process between any two types of companies or members so that they can swap their cash flow system.  

 Therefore, The given answer is correct.  

3 0
3 years ago
In 1970 Professor Fellswoop earned $12,000; in 1980 he earned $24,000; and in 1990 he earned $36,000. If the CPI was 40 in 1970,
Arte-miy333 [17]

Answer:

In 1980

Explanation:

Year        Salary        Percentage Salary Increase        CPI Increase

1970       $12,000     -                                                      -

1980       $24,000    100                                                 50

1990       $36,000    50                                                   83.3

As can be seen in the table, the Professor's salary increase from 1970 to 1980 was twice as much as the CPI increase during the same period.

On the contrary, his salary increase from 1980 to 1990 was significantly less than the CPI increase during the same period.

Therefore, the professor's salary was highest in 1980.

4 0
3 years ago
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