Given that your business has receivables in a foreign currency, you may want to consider financing in that same foreign currency to offset the exposure. Compare the recent interest rate of the foreign currency of concern to the U.S. interest rate: Is the foreign interest rate typically higher or lower than the U.S. interest rate? Would you see financing in that currency to offset receivables? Explain.
Foreign interest rates are set by the central banks to ensure their currency trade well in foreign countries. Besides, interest rates tend to rise with an increase in the rate of inflation. With the interest rates set in the country, the central bank can determine the APR rates to offer in the market.
My business’s investment avenue is in France, where it is in the same country that the firm has account receivables. Currently, the French Euro currency interest rate stands at 1.86% in comparison to the 5.6% interest rate for the U.S dollar currency. Based on the comparative analysis of both currencies, it is evident that the French Euro bears a lower rate to the U.S. dollar. I do not see in the French currency offsetting or balancing receivables since a low-interest rate implies a weak currency hence unattractive to the U.S. investors in the specific case.
A177
Discuss the merits of the following statement: The evidence indicates that proposers in dictator games care about fairness because they send responders more money than they have to.
Dictator games is a well-established economic and social psychology experimental instrument which the derivative of the ultimatum game. The term game represents the decision of each player to send money to the others in the business environment.
The pros of the above statement are several. To begin with, the responder is unresponsive to the offer of a proposer. Since a responder is passive of the offer, the responder will receive genuine prosocial offers by eliminating the likelihood of zero-zero outcome due to a lack of competition. Secondly, the proposer has no chance of pure selfishness. Geared by the dominance in decision making, a responder liaises with the choice made. Thirdly, the proposer is rescued of punishment resulting from unfair conduct in the enforcement of social fairness.
A178
Develop a cause and effect (fishbone) diagram to address everything that impacts your grade in this course. How much is under your control? What is the impact of your faith?
What is in my control is the criteria I used when designing the factors affecting my grade. For instance, my behavioural change concerning academics and my colleagues’ opinion of my conduct. By focusing on the aspects that I can change personally, the grade will take a significant positive shift. Significantly, therefore, what I would change would possibly account for ¼ per cent of the total impact of my grade. My faith also has a marked effect on the course grade since I managed to score above the set cut off points from the former score, which was far below the cut-off mark. Thus, the impact of my faith is also tremendously high.
A179
What role do financial markets play in our economy, and what is the relationship between financial institutions and financial markets? Define the concept of the financial market. Establish the importance of financial markets in the economy. Mention the financial institutions that regulate the way of doing business in the USA. Establish a relationship between institutions and financial markets.
Financial markets refer to the market trading the securities, which include the forex and stock market, among others. The trading of securities plays a significant role in the growth of the economy as it enables a smooth cash flow circulation in the market.
The principal role of financial markets in an economy is to aid investment and savings flow through ways that promote production and capital accumulation. The existing relationship between financial institutions and financial markets is that the latter depends on financial institutions for access to financial assets on investors’ behalf. Secondly, the prices of financial instruments in financial markets are majorly influenced by the financial institution’s activities. The idea of a financial market is a kind of market engaged in the trade of financial assets like shares and debentures. The importance of financial markets in an economy is to facilitate proper resource allocation in an economy through structured and controlled exchanges. In the United States, there exist three principal institutions, namely Federal Reserve Board, Federal Reserve Insurance Corporation, and the Securities and Exchange Commission, whose function is to regulate the country’s trade operations. Investors of financial assets often trade through financial institutions as opposed to direct trading. Thus, the financial institutions provide a forum for trading the assets, financial market. A180
How can a retail investor trade in European government credit default swaps?
A credit swap can be defined as an agreement of credit derivative between two parties in the market. These contracts include the periodic payment paid by the buyer to the seller, who, in turn, receives payoff when a primary financial instrument is exposed to a related credit event.
Credit Default Swaps were initially introduced in the European Union in the late 20th century as a credit hedge. Necessarily, the CDS are a vital index of default peril since, for instance, an increased spread of CDS implies a more substantial default risk by the issuer. Thus, the metric can provide valuable information regarding how financial markets estimate the risk of default on foreign or corporate debtors. A retail investor can trade in European government CDS by paying a fee to a seller, which is usually quoted as a percentage of the insured capital.