Question

what does the nominal interest rate parity state? Would the condition be violated if nominal interest...

what does the nominal interest rate parity state? Would the condition be violated if nominal interest rates in the domestic and foreign country were different on two securities that were identical in all aspects? A currency premium would lead to a modification of the nominal interest rate parity condition. Why?(essay)

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1


0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
According to the interest rate parity theory, any violation of the parity condition will lead to:...
According to the interest rate parity theory, any violation of the parity condition will lead to: a)      stable equilibrium conditions covered interest arbitrage identical rates of return in dollars on domestic and foreign riskfree T-bills
If interest rate parity holds, what would happen to the forward rates when the foreign currency...
If interest rate parity holds, what would happen to the forward rates when the foreign currency money market offers a higher return than the domestic money market? What would happen if the adjustment does not take place? Explain your answer
Suppose the interest parity condition holds and that the domestic interest rate is greater than the...
Suppose the interest parity condition holds and that the domestic interest rate is greater than the foreign interest rate. What does this imply about the current versus future expected exchange rate? Explain.
TRUE FALSE. If false CORRECT the wrong word/words An increase in the nominal exchange rate ($...
TRUE FALSE. If false CORRECT the wrong word/words An increase in the nominal exchange rate ($ per Euro) will make the dollar less expensive to foreigners If iD= 10% and iF = 5%, for investors to be indifferent between holding both one year financial assets, they should expect expect that over the next year the domestic currency will appreciate. A trade deficit implies that that country will require a surplus in the financial account compensating that deficit. An increase in...
Does interest rate parity imply that interest rates are the same in all countries? Why might...
Does interest rate parity imply that interest rates are the same in all countries? Why might purchasing power parity fail to hold?
4. Interest rate parity The rise of globalization is due to the many companies that have...
4. Interest rate parity The rise of globalization is due to the many companies that have become multinational corporations for various reasons—for example, to access better technology, to enter new markets, to obtain more raw materials, to find funding resources, to minimize production costs, or to diversify business risk. This multimarket presence exposes companies to different kinds of risk as well—for example, political risk and exchange rate risk. The relationship between interest rates and exchange rates can be represented through...
Economic logic may tell us that a country with a higher interest rate, thus a higher...
Economic logic may tell us that a country with a higher interest rate, thus a higher rate of return, should be able to attract foreign capital and that a country with a lower interest rate, thus a lower rate of return, should experience an outflow of capital. If a country is experiencing a large net capital inflow its currency is likely to appreciate, while a country experiencing a large net capital outflow would likely see its currency depreciate (assuming a...
In a market with an unchanged current exchange rate where the interest parity condition​ holds, if...
In a market with an unchanged current exchange rate where the interest parity condition​ holds, if investors now expect the exchange rate to be 6.00​% lower a year from​ now, the return on foreign bonds with an interest rate of 7.50​% would be _______%​(Enter your response rounded to two decimal​ places.)
Explain why, in order to preserve the interest rate parity (IRP), a country with a higher...
Explain why, in order to preserve the interest rate parity (IRP), a country with a higher nominal interest rate should have its currency's forward exchange rate reflect expected depreciation against currencies of countries with lower interest rates.
12. Explain. why., in. order. to preserve. the interest. rate. parity. (IRP), a country. with a...
12. Explain. why., in. order. to preserve. the interest. rate. parity. (IRP), a country. with a higher nominal interest rate should have its currency's forward exchange rate reflect expected depreciation against currencies of countries with lower interest rates.
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT