Interest Rates Essays (Examples)

Interest Rates: History And Overview
One may think of 'interest rates' as merely a concern of cutting edge modern economic news. Indeed, the rate of interest has been the obsession of the business media of recent weeks. One March 21, 2005 Business eek article proclaimed, "Pop! Goes the Auto Bubble -- with oil prices and interest rates rising! (Mandel, 2005) But in actual fact interest rates are simply the percent at which an individual is charged for borrowing money, either from a bank, a human being, or another entity such as a credit card company. Interest rates are an old institution -- once, the rate of interest was called 'usury' and banned by the church. Now charging a reasonable rate of interest for borrowing money is considered a necessary fact of modern life, particularly for large, durable goods such as cars, houses, and appliances.

Unsurprisingly, the lesser the rate of…

Public choice theorists focus on the question of what government policies are likely to be implemented in a given political setting, rather than what policies would produce a desirable outcome if they were implemented. The conclusions of the public choice theory tend to increase skepticism towards the prospect that giving government power over various areas of human affairs will actually have beneficial results, regardless of the democratic control exercised by the citizens.

One of the basic insights that underlie the public choice theory is that good government policies in a democracy are an underprovided public good, because of the rational ignorance of the voters. Each voter is faced with an infinitesimally small probability that his vote will change the result of the elections, while gathering the relevant information necessary for a well-informed voting decision requires substantial time and effort. Therefore, the rational decision for each voter is to be generally…

NPV

This becomes more complicated when trying to determine the changes that would occur to the net present value of today's dollars, especially given the uncertainties involved with changes in the interest rate. On the one hand, the value of future dollars (i.e. today's dollars saved) is eroded by inflation, so a lower interest rate is detrimental to NPV; on the other hand, higher interest rates mean more lucrative lending and higher returns on many investment, which would mean a dollar invested today would be worth more in the future (Investopedia 2011). At the same time, higher interest rates could slow the pace of business and damage gains in the stock market, leading to diminished returns (Magnuson 2008). The effect of interest rates on the NPV, then, depends on other macroeconomic and financial effects.

WACC

The Weighted Average Cost of Capital would basically increase due to a change in interest…

Interest Rate Swaps
The assertion that interest rate swaps require markets to be inefficient is inaccurate. hile swap markets benefit from some inefficiency, firms may have compelling non-financial reasons for wanting to make changes to the timing of their cash flows, which is the basis for firms undertaking swaps. For these end users of swaps, the swap is most beneficial at fair value, and that is the price at which the swap will typically be set. The counterparties are expected to agree on the expected future direction of the floating component of the swap, meaning that swaps depend more on efficient markets than inefficient markets -- the latter makes it more difficult for the counterparties to agree on fair value.

Interest rate swaps are contractual arrangements between two parties, where they agree to exchange payments based on a principal amount, for a fixed period of time (CDIAC, 2007). The most…

In the article, they surveyed 69 different countries, searching for answers on what affects FDI. Where, they found that interest rates will affect FDI flow: as the cost of financing, purchasing new equipment and the strength or weakness of the economy will play an important part. In the case of Australia, this is significant because the low interest rates that they have had in place since the 1980's, have helped contribute to this capital inflow. This is an interesting point, because the interest rates were lower in Australia than China. As a result, because of the lower interest rates, Australia attracted the largest amounts of FDI.
Clearly, interest rates play a major role in determining the overall flow of investment capital. This is because higher or lower rates will affect everything from the cost of purchasing equipment to consumer activity. As a result, the level of interest rates will have…

Interest Rates and Pension Plans
The strength of private retirement plans must be maintained in the upcoming years due to the increasing number of Baby Boomers who will be retiring in the United States. Many retired Americans rely on private pensions and employer-sponsored retirement savings as a secondary source of income in addition to Social Security (Brinner 131). In addition, because the human life expectancy has increased dramatically over recent years, it is very important that policymakers encourage the growth of employer-sponsored retirement plans (Hungerford et al. 13).

Defined benefit plans are employer-provided retirement plans that provide a guaranteed retirement income (Blomquist and ijkander 32). The employer typically assumes all of the investment risk and the benefits are guaranteed by the Pension Benefit Guaranty Corporation. In the United States alone, there are approximately 50,000 defined benefit plans that cover about 23 million workers (Hungerford et al. 16)

History of Discount…

Economics
Mexico; How Interest ates Can Be Used to Manage an Economy

The management of the economy, undertaken with strategies from the government and decision fro the central bank, is usually undertaken with the aim of promoting and supporting a stable economy, balancing the desire for sustainable growth with the need to constrain inflation. This is an issue faced by almost all countries; inflation can be harmful to an economy, impacting not only in the internal stakeholders, but influencing the exchange rate. The control of inflation, often through the use of interest rates, may also help to stifle growth. This can be a conundrum, as stimulating growth and constraining inflation requires a very careful balance of economic policies. Mexico has been faced with this issue and in March 2013 the Banco de Mexico

made a surprise decision to reduce their interest rates from 4.5% to 4% (Trading Economics, 2013), and…

educing operational costs is thus a key element in making microcredit less usurious. Extending larger loans to a group of individuals, so the cost of the loan is dispersed to a community, rather than used to burden a single individual is another potential solution.
The charges of usury are also rooted in the highly variable rates of interest around the world of microfinance, which can create the perception of injustice. Furthermore, some loan rates are shocking, especially for loans extended by supposedly charitable institutions and programs: "in 2007, for example, a controversy erupted around Compartamos, a Mexican MFI that was earning a 55% return on shareholders' equity by charging its borrowers interest rates around 85%" (Are microcredit interest rates excessive, 2009, CGAP). On average, the median interest rate for profitable microfinance institutions (MFI)s was about 26% in 2006. While this is around the interest rate of some credit cards in…

Interest rates form the basis for valuation models around the world. They are used in almost every industry, country, and geography. Interest rates can also influence corporate and consumer behaviors. For example, depending on the inherent risk of a consumer, credit card rates determine how much an individual must pay on a month basis to the financial institution. Corporations looking to borrow funds to expand their market share must consider the variable interest rates being changed and their ability to service the debt. Even governments must be mindful of the extent of their borrowers and the corresponding impact of interest rates on their ability to services the debt. Due primarily to their importance in key elements of human civilization, interest rates are a closely watched tool by individual investors, general consumers, and corporations. Banks in particular are heavily influenced by the change in interest rates as they operate as financial…

Banking and Spreads: How Commercial Banks Utilize Spreads to Maintain Profitability
Commercial banks are institutions that provide services to their customers, including accepting deposits, cashing checks, lending money for various purposes, and providing investment products. Commercial banks are for-profit institutions, and while they rely on various sources of profit, including fees, their main source of profit is the interest rate spread (Investopedia, 2016). Interest rate spread refers to the difference between the interest rate charged by banks on loans to the private sector and the interest rate paid on various savings accounts. A simple numerical equation to describe the interest rate spread is Spread = Interest charged -- Interest paid. The interest rate paid by the bank is lower than the amount it charges to customers who have loans, and the difference between these two rates is how commercial banks derive the bulk of their income.

While a bank may…

Vasicek model is a model used in finance that depicts the development, movement or evolution of interest rates. The model is based on one single factor or source of market risk but it is useful in evaluating the pricing of derivatives or interest rates. Developed in 1977 by Oldrich Vasicek, the model also has a function in stochastic charting (Vasicek, 1977). Vasicek himself characterized it as an equilibrium within the term structure.
The formula for the model is and shows that stochastic differential equation gives place to the instant interest rate. It is the parameter of the standard deviation that allows for volatility to be determined (James, Webber, 2000).

Vasicek (1977) notes that a number of assumptions are at play in this formula -- such as the idea that spot interest "follows a diffusion process" and that it is on the spot rate that "discount bond" prices are dependent; the…

Part 1: The US Dollar There are several advantages for a nation to have its own currency. The biggest advantage is probably that having one's own currency allows a nation to print more money, which can help it to avoid debt default (Wood, 2011). This is tied to other issues of sovereignty, and especially fiscal and monetary sovereignty, where a nation can manage the value of its currency and use the currency as a means of influencing trade, and by extension the nation's economy (Wood, 2011).
In Europe, where most nations are on the Euro, the fact that these advantages do not exist became a critical issue during the recession of 2008-2009. Several smaller Eurozone nations faced high debt loads, but were unable to do anything about those debt loads. The reason is that the Eurozone economy as a whole is driven primarily by three large industrial nations – Germany,…

Defense of the Fed's New Interest-ate Policy, which was published by The Wall Street Journal on January 6th, 2013, financial reporters Frederic S. Mishkin and Michael Woodford carefully craft a justification of the Federal eserve's latest revision to its federal-funds rate target. The purpose of the article is to inform readers about the Fed's recent Federal Open Market Committee (FOMC), which resulted in the decision to keep the federal-funds rate near zero with a contingency based on the national unemployment and inflation rates. By linking the federal-funds rate target to a baseline of 6.5% unemployment, and a predicted rate of 2.5% inflation, while also providing public notice regarding its previously private policy criteria, the Fed is renewing its efforts to stabilize an economy battered by a prolonged recession. As Mishkin and Woodford state in the article, this "commitment not to raise rates in the future as soon as might have…

China announced on Oct. 28, 2004 the first interest rate rise in nine years. In this manner, Beijing is showing its willingness to adopt additional market-oriented reforms in order to have a tighter macro-economic control on the already overheated economy. Although the news regarding the evolution of the Chinese interest rate were contradictory, it would appear that North American economists are welcoming this interest rate increase.
The Chinese economy is rapidly becoming one of the most important in the world, with an annual 8% growth-rate, constant expansion in the preceding years and a history of twenty years of economic reforms. The global economy and especially neighboring countries such Taiwan and Hong Kong are feeling the pressure of the Chinese machine. Investors have made public their fears, since April 2004, that the economy will overheat and are now expecting the austerity measures by the Government to slow the growth and provide…

In the contemporary financial environment, individuals who deposit money in the banks earn interest from their deposits. Similarly, commercial banks also receive interests from lodging funds with central banks. In other words, banks compensate savers by adding some percentages of the amount saved in the banks. In a sense, savers are lending their money to banks in order to be used elsewhere. In return, banks compensate savers interest incomes. Meanwhile, the interest rates are quoted as APY (annual percentage of yield) and savings account earns 3% APY. However, negative interest rates reverse this arrangement where savers or depositors are obliged to pay banks for holding their money. Moreover, central banks penalize commercial banks for depositing their funds with them. For example, The ECB (European Central Bank), some smaller European banks, and Bank of Japan have introduced the negative interest rate policy where banks, as well as other financial institutions, will…

risk management tools: interest rate futures, interest rate options, forward rate agreement and interest rate swaps.
Interest Rate Futures

An interest rate futures contract is a financial derivative. It allows the buyer of the contract to lock in a future investment rate. Like all derivatives, interest rate futures are based on an underlying security, which is a debt obligation that moves in value as interest rates change (Ord, 2011).

The interest rate future is a contract between the buyer and the seller in which they agree to the future delivery of any interest-bearing asset. The interest rate future allows the buyer and seller to lock in the price of the interest-bearing asset for a future date.

Some examples of underlying instruments of interest rate futures include:

Treasury bills in the case of Treasury bill futures traded on the Chicago Mercantile Exchange (CME)

Treasury bonds in the case of Treasury bond…

Japan
On January 29th, 2016, the Japanese government instituted a negative interest rate for the first time in history. The stated objective of this policy is to "encourage banks to lend, business to invest and savers to spend," but the policy has come under heavy criticism. It is, ultimately, a high-risk policy that essentially takes Japan into uncharted waters (euters, 2016). To suggest that this policy is unorthodox is an understatement, but it highlights the rather unique position that Japan is in with respect to its economy. Economists in particular will be observing what happens with this policy closely, because it is a new situation, and the impacts can only be theorized at this point. This paper will outline the context for this decision, and analyze whether it not this is a good move by the Bank of Japan.

Background on the Japanese Economy, 1940s to 1980s

Understanding how this…

Fed Policy Change
The most recent Fed policy change was the decision to raise rates by 25 basis points. It is expected that the Fed will raise rates three more times (probably by the same amount) in 2018 and there are roughly 60% odds that the Fed will raise one more time this year (perhaps in December). However, I do not expect this trend to continue, because the debt of the nation is so great that it is simply unserviceable. If rates are raised, the interest owed on the debt will increase and that means more money going just to pay the interest on the loans the country has racked up. At the same time, pension funds and other types of funds are chasing yield in risky markets (the stock market is at an all-time high this year) because they cannot earn enough in interest by purchasing bonds (since rates…

Negative Effect of the Euro
The major issue facing the euro as a single currency is the potential problems that EU nations may face in absorbing future economic shocks. This is largely due to the fact that unlike most monetary unions, the euro will not be governed by a central fiscal policy since most member states are reluctant to give up control of taxation and expenditure policies. To compensate, euro countries are bound to observe fiscal guidelines laid down by the Maastricht Treaty of 1992 and the Stability and Growth Pact drawn up in 1997.

The Maastricht Treaty defined criteria that entails annual budget deficits held to 3% of GDP and the gross debt-to-GDP ratio reduced to 60% in order to avoid excessive borrowing by member states. Subsequently the Stability and Growth Pact defined the penalty sanctions to be imposed on defaulting nations. The EU believed that these measures would…

Essay Prompt The History of the Interest Rate

Research the history of the prime interest rate since 1980.

Create a chart that shows the changing interest rate and depicts the economic and political conditions, factors, and reasons for the changing interest rate. Include a written summary of your findings. Your response should be 2-3 paragraphs (5-7 sentences).
The History of the Interest Rate
The prime interest rate peaked on 19 December 1980 at 21.50% from where it gradually declined 4% over the next four months before rising again to 20.50% by mid-1981. However, this marked the end of high interest rates, as from that point on the Fed took a sharp turn downward. By 1985, interest rates were at 10%. By 1992, they were at 6%. They flirted briefly with a return to 10% till 2000, whereupon the bursting of the tech bubble/dotcom bubble precipitated a further decline4% by 2003followed…

8 for August, 2008, the most recent available (next release is October 20th). This represents a decline over the previous month, and the lowest level of the year. Over the past three months, this index has trended down. In June this was at 102.0, then 101.3 in July. Prior to that the level it had been stable all year (either 101.9 or 102.0).
In terms of individual components, the following components were up: average weekly unemployment initial claims, stock prices, manufacturing new orders (consumer goods) and index of consumer expectations. Of these, it should be noted that the stock prices are lower than at any other point this year except for July. Average weekly unemployment initial claims rising is a negative component, so a rise will reduce the leading indicators index. Manufacturing orders represented a slight increase but is well down for the year. Therefore, only consumer expectations made a…

But when the Fed declared a moratorium on its consistent hikes in 2006, not everyone cheered. Said one economist: "According to their statement, the main reason is that the Fed believes inflation is destined to fall even in the absence of further monetary tightening. I find both good news and bad news in that rationale. The good news is that the Fed is looking ahead, acting on a forecast, rather than just opening the window, taking the economy's temperature and deciding what to do. The bad news is that inflation forecasts are not very accurate. And the other bad news is that if the Fed expects a weak economy to drag inflation down appreciably, it must be pessimistic about the outlook for growth" ("Commentary: The pros & cons of unchanged interest rates," Nightly Business Report. PBS.com, 2006). Little had really changed in the economy, said some economists, the Fed was…

interest paid at the beginning of a loan period than at the end of the loan period?
Whether an equal total payment plan is adopted or an equal principle plan, in both cases the interest paid at the beginning of a loan repayment period is more than at the end. This is because the interest is calculated on the amount that is loaned. When the first payment is made then a specific principle amount that the borrower has paid for is deducted from the total loan given. Thus the total amount loaned reduces and hence the interest on the new amount is lesser for the second payment.

Using an example of an equal principle plan, if a borrower borrows $10,000 for a repayment plan of 10 years at the rate of 10% per annum, the premium will be divided equally in 10 parts. Which means that each year $1,000 will…

These high costs will lead to a considerable decrease in the amount of investments in the housing market and will decrease the demand for real estate.
3. Elasticity of interest rates

The elasticity denotes whether or not the interest rate curve can be moved from a point to another and adjusted to the market requests based on the demand and supply for housing loans. The elasticity of the interest rate has been widely discussed by specialized economists, their opinions on the subject varying. In 1998, economists Robert liss and David Smith concluded that "the elasticity of interest rate volatility, the coefficient linking interest rate volatility to interest rate levels, is 1.5.." Furthermore, in regard with the highly elastic interest rates and low elastic interest rates, the two economists stated that "a moderately elastic interest rate process can capture the dependence of volatility on the level of interest rates, while highly…

International Monetary Econ
The rates obtained were as of market close on November 25, 2011. Historical rates are difficult to obtain online so this approach is more realistic. The spot rate for USD/JPY is 77.13 and the spot rate for USD/GBP is 0.64399 (Oanda.com, 2011).

The six-month forward rate for USD-JPY is 75.39 and for USD-GBP is 0.6279. The 6-month T-bill rates are for the U.S. 0.05%; for the UK 0.53% and for Japan 0.0%.

If covered interest rate parity holds, then there should be no arbitrage opportunity in trading forwards of these currencies. So for USD-GBP we have the following:

(1 + r£)/(1+r$) = (£/$f)/(£/$s)

For this relationship, interest rate parity does not hold. For the USD-JPY relationship we have the following:

r¥)/(1+r$) = (¥/$f)/( ¥/$s)

/ 1.0005 = 75.39/77.13

0.999 = 0.977

For this relationship, covered interest rate parity also does not hold.

If I have $10,000, my…

Federal Funds Rate
The federal fund rate was part of the solution, comprised in the Federal Reserve Act of 1913, to centralize the banking system and gain public control of the money supply, inflation, and economic growth. The banking crisis of 1907 was a result of decentralized, unregulated banking that caused confusion with private bank notes being used as currency. There were occasional episodes of monetary mismanagement where the money supply was not appropriate to fulfill the needs of the economy. Too much money caused rapid inflation where too little money stunted economic growth by hindering production and the exchange of goods and services. There were no nationally consistent banking policies and no one entity had control to implement policies until the Federal Reserve Act of 1913 became a national law.

The Federal Reserve System was created with the Federal Reserve Act of 1913 with a oard of Governors to…

Financial Management
Significance of Interest to the economy:

Interest rates keep on changing with the passage of time; the rates which were present a month ago are quite different from the current rates. This is because the interest rates change with the change in the growth of the economy. The expectations of lenders and borrowers regarding the future prices also affect the interest rates (Trainer, 2012).

The interest rates in U.S. are affected by the values of the dollar, by foreign interest rates and also by the close examination of the monetary policy actions which are taken by the Federal eserve. In our market economy a great role is played by the interest rates. Interest rates work just like traffic signals. The way in which the signals direct the traffic on intersecting roads, similarly interest rates manage the flow of money to borrowers from savers. Usually in the fund movement,…

Balancing Mortgage ates
Problems Faced While Balancing Mortgage ates

In general terms the monetary policies that contradict themselves mostly involve the process of changing the amount and level of the supply of money in a particular country. When it comes to talking about the expansionary monetary policy, it means that it expands and increases the flow and supply of money, then the impact it has on the monetary policies is that the flow or supply money decreases and hence so does the currency (Fisher, 1932).

Expansionary Monetary Policy

In the U.S., when the government wants to increase the supply of money, it can do so with a combination of three points.

By purchasing various securities from the open market which are also known as the open market operations

It can also be done by lowering the discount rate by the federal government.

It can also be done by lowering the…

Exchange Rate Volatility on Trade Flows
Exchange Rate Volatility

Impact on International Trade Flows

Exchange Rate Volatility

Impact on International Trade Flows

Bretton oods

Trade Flow

Trade Flow Responsiveness

Commodities

The dissolution of the Bretton-oods system in 1973 introduced a new era for international markets. No longer would the exchange rates be pegged and fluctuating exchange rates changed the game for international trade and investment. The newly introduced increase in volatility in the foreign exchange markets also increases the risk of uncertainty for all international transactions. The floating rates produce new complexities that have implications for any individual or organization who buys sells, makes, or trades goods or currencies. These implications directly affect nation's balance of trade; however they also literally indirectly affect every individual's lives in one way or another.

The exchange rate volatility has had mixed theories produced by academia in terms of its effects on trade flows.…

Exchange Rate Fluctuations
Forex's opening trade on February 14, 2012 for the U.S. Dollar- Euro was one Dollar for .7593 Euros (Google Finance.com. February 14, 2012). Over the period covering the "Great Recession" and the subsequent recovery, the Euro has moved in a yo-yo pattern, at times buoyed by a weak dollar policy of the U.S., and alternately battered by a flight to safety as investors seek the relative strength of the world's reserve currency. Most recently the Dollar- Euro trade has seen the impact of a contagion sovereign debt crisis which has caused vicissitude swings in the currency trade. At the core of these movements however, is the fundamental question of what are the causes and factors of exchange rate fluctuations, and ultimately who are the beneficiaries?

Causes and Factors of Exchange Rate Fluctuations

hen discussing the exchange rate there are two components; the nominal exchange rate and the…

fixed and floating exchange rates mechanisms are the exact opposites of one another, the advantages of one are generally the disadvantages of the other. Anyhow, in order to be able to evaluate for each case in part its positive and negative aspects, we should start with defining each, as most of the advantages and disadvantages derive there from.
The fixed exchange rate mechanism refers to a mechanism where "the government (central bank) sets and maintains the official exchange rate)

." The key word in this mechanism is pegging, which means that the currency has a price set against a major currency of the world and that the central bank ensures that this rate is kept throughout the entire period the currency is pegged.

The main advantage in this case refers to stability. Indeed, a fixed exchange rate mechanism helps eliminate or speculative activity on the respective currency. With no more…

International Monetary System and Exchange ate Policies
A report/essay: chapter 17, multinational companies. select topic research write: Multinational vs. domestic financial management exchange rates international trade international monetary system exchange rate policies trading foreign exchange european monetary union interest

rate parity/purchasing power parity international capital structures.

The international monetary system and exchange rate policies

International Monetary systems

These are a set of rules and that regulate how international trade and payments are handled. It facilitates the exchange of capital, goods and services among countries. However, this system does not have a physical presence but, it consists of interlacing rules and procedures and is influenced by the market of foreign exchange. An example of an international monetary system is the International monetary fund. These interlacing rules and procedures are referred to as exchange rate Policies.

Exchange rate policies

These are rules that officials of public finance from different nations have developed…

Theoretically speaking, there is only one factor affecting the exchange rate of a country adopting a floating exchange rate regime: the supply and demand of the respective currency on the international market. In this sense, if demand exceeds supply, then the value of the currency will go up and the respective currency will appreciate. On the other hand, if supply exceeds demand, the currency will depreciate and the price of the currency will decrease.
Starting from this statement, however, we can discuss several different factors that make the demand and supply vary, affecting thus the exchange. First of all, we have the level of the interest rate in a country. If the interest rates are higher, then foreign investors will choose to enter the national capital markets, purchase local currency and invest in local bonds or T-bills, which bring high returns, due to high interest rates. This mechanism will lead…

Fed aises Key ate Again"(Henderson, 2005), which appeared in The Washington Post, outlines the reasons Federal eserve officials recently implemented a short-term interest rate increase. The current federal funds rate stands at 4%, the highest level since 2001, and reflects a quarter percent increase. Furthermore, this raise is the twelfth consecutive one since June 2004 (Henderson, 2005) and is, as Federal eserve officers note, only one in a series of anticipated increases. The next raise is likely to take place at the end of January 2006, bringing the federal funds rate to 4.5%. However, certain analysts expect increases in December. Some specialists claim a projected rate of 5.5% by July of next year, which they say will conclude the cycle of increases. Naturally, with Greenspan retiring at the end of January, the proposed raises are speculative as Bernanke has yet to demonstrate his intentions as the future Federal eserve Chairman.…

forward discount in predicting exchange rate modifications. The conclusion of the literature review is that the forward discount is a biased predictor and that are two possible explanations for this situation. One cause would be the presence of a time varying risk premium, and the other the failure of agents to make rational expectations (the inability to use all available information in an efficient manner).
The forward discount puzzle (as a predictor of exchange rate modifications) is a very discussed puzzle in the international finance literature, since its importance is quite high. As a result, numerous studies have concentrated on this issue, i.e. On the causes on the bias. Some authors (Fama, 1984), believe that this problem is traceable to the existence of a time-varying risk premium. Others connect it to learning effect (Lewis, 1989) or irrationality (Bilson, 1981) the "peso problem" (Krasker, 1980),

The "peso problem term" was introduced…

Finance
Managing Financial isk including Currency Exchange ate isks

Deere and Company are suffering as the string dollar is impacting negative on sales in the Euro zone. The firm is suffering not only due to the exchange rate, but also the high level of competition from other European firms that are operating in the Euro.

If companies operate across international boarders they will face risks associated with exchange rate movement. In the case of a strong home currency, this will make the goods more expensive to purchase if the pricing is based in the home currency. The basing of the price on the dollar, even if it is converted to Euro's effectively passes the risk to the purchaser. The impact can be the price becoming uncompetitive, especially when there are firms that are basing their pricing structure on the same currency as the purchasers.

The firm may deal with the…

Owning a home is one of the core tenets of the American dream. As of , nearly 64% of Americans owned their home indicating just how important this asset is to American culture. Fueling the recent rise in homeownerships rates are record low interest rates. These record low interest rates have encouraged a record number of Americans to engage within the homeownership process. Low interest rates allow more individuals to borrower for the purchase of a home. With lower interest rates, consumers can afford much higher home prices as their monthly debt service payments will be low. Likewise, those who already own a home are able to refinance their home if they are paying a higher interest rate to begin with. Each of these elements have fueled a very robust mortgage market that has persisted even throughout the pandemic.As the…

Finance
Managing exchange rate risk can be a daunting task for many international firms attempting to expand overseas, acquire new companies, or simply manage its cash flows. Globalization has created a dynamic environment in which competition can arise to disrupt entire industries. Aspects such as technology, pharmaceuticals, banking, and automobiles have all experienced rapid change as a result of globalization and the competitive forces that underline it. As a result, companies, particularly smaller firms, have a higher propensity to experience volatile earnings overtime. Aspects that impact one sector of the globe can have a residual impact on other areas of the individual firm or industry. Managing exchange rates is therefore a viable option for firms to reduce volatility in earnings while subsequently managing its cash flows from operations. Below, is a 5 step program which could be implemented by a firm attempting to manage its exchange rate risk after an…

Exchange Rate Crisis
Exchange rate crises are quite common phenomena in the economic world. From the 1994 Mexican crisis and the 1997 Asian crisis to the 1999 Argentine crisis, currency crises have occurred with a somewhat remarkable frequency. Also, known as currency crises or balance of payments (BOP) crisis, exchange rate crises occur when a country's monetary authority (central bank) has inadequate foreign exchange reserves to sustain its set exchange rates. This is usually caused by trade shocks, persistent budget deficits, foreign interest rate shocks, political uncertainty, banking system weaknesses, and moral hazard problems. An exchange rate crisis is often symbolised by factors such as hyper-inflation, banking crisis, devaluation, and economic recession, clearly indicating the dire consequences a currency crisis can have on the economy. More importantly, an exchange rate crisis can easily spread beyond the national boundary, underscoring the need for measures to prevent the crisis. This paper discusses…

Currency
Appreciate, depreciate

Changes in the spot rate of exchange between two countries can occur as the result of a change in the relative interest rates in those countries, a change in the balance of trade between those countries and changes in the inflation rates in those countries (Van Bergen, 2015).

The two that are most closely followed are the differences in the interest rates, and the differences in the inflation rates.

A forward is a contract that is written between a party and a counterparty, to exchange currency in a set amount at a set rate in the future. This is proprietary between the parties. A future is publicly-traded. So while it also sets a future date and price for a currency, it is publicly traded, the dates do not change, and the amount is fixed -- to increase the amount you have to buy or sell more futures.…

exchange rate risk can be hedged. The current cost of the room is £50 per day, which is: 50 * 1.50 = $75.00. For a consumer, the easiest way to hedge this risk would be to purchase pounds today, so that the cost of those pounds is locked in. The transaction is a money-loser because of the time value of money, except that in this situation the nominal amount of pounds is locked in, so the nominal amount of pounds needed will not change. Only the opportunity to make interest on that money changes. For £50 and one year, this amount is negligible, but for larger transactions the time value of money is significant and important, making this an undesirable option.
If the transaction was larger, it could be hedged on the futures market or with interest rate swaps. A forward contract could also be purchased. Futures have a downside…

IMF and World Bank in global financing and exchange rate fluctuations
he International Monetary Fund plays a crucial role in the world's economy, especially in global financing and exchange rate fluctuations. However, its influence ranges well beyond those disciplines.

he main responsibility of the International Monetary Fund is to provide loans to nations experiencing balance of payments difficulties. he International Monetary Fund's involvement allows these countries to stabilize their currencies, rebuild their international reserves, continue to import much needed goods, and generally set the stage for strong economic growth.

A country can only ask for International Monetary Fund assistance when it has a serious balance of payments deficit, as in, more money goes out than comes in, and it cannot get financing to meet its international obligations.

he general understanding is similar to the United States Bankruptcy Code, which is, no one benefits from insolvency, neither the debtor nor the…

This means those companies that are in industries that are exposed to tremendous amounts of volatility should be engaging in these activities. Some of the different areas they will become involved in are: currencies, stocks, futures, options and commodities. The reason why, is because these kinds of companies are often exposed to large swings that could happen at any point in time (due to adverse changes in the economy or the markets). This will have a negative effect on earnings and it will become difficult from them to make accurate projections. When a company begins using hedging, this will provide more consistent earnings stability to their business model. This is point that they can provide more stable returns to shareholders.
However, not all firms should be hedging. In some cases, this activity could be considered to be speculation. As, the hedge may not provide any kind significant benefit to the…

1555209 / .1545953
R/2 =.0059872 c) the ask price for dollars in three months is 1 / 6.435 =.1554001; therefore for FFR 1,000,000 you will receive $155,400.10 d) the bid price for francs in six months is 1 / 6.430 =.1555209; therefore it will cost $77, 760.45 for the FFR 500,000.

3. The bid from the Paris dealer would be.03/.2 =.15.

The ask from the Paris dealer would be.0335 / .202 =.1658415

4. The DEM is undervalued as of December 31, 1999. The PPP calculations for the DEM as follows:

5225 (1.05/1.025) =.5352438;.5252438 (1.045 / 1.02) =.5483624;.5483624 (1.055 / 1.035) =.5589587 should have been the value of the DEM on December 31, 1999.

5. Given the 1% mandatory profit, arbitrage opportunities exist with DEM/FFR exchanges in Frankfurt and Paris. Three point arbitrage opportunities are also possible with transactions beginning with the purchase of FFR in New York; the purchase of…

Exposure
Transaction exposure risk may be defined as "cash flow risk" and is associated with the impact of FX rate moves on exposure due to transactional accounts, regarding exports, import or dividend repatriation: and FX "rate change in the currency of denomination of any such contract will result in a direct transaction exchange rate risk" (Papaioannou, 2006, p. 4), thus impacting the multinational corporation in terms of affecting the inflow and outflow of cash over a given period.

Translation risk may be defined as the FX rate risk associated with the balance sheet of a company's holdings. The notion is that exchange rates affect the value of a subsidiary in a foreign country and in instances where the subsidiary is consolidated to the parent balance sheet, the risk becomes translational. The way to measure this risk for a company is by assessing the net asset exposure and measuring it against…

country can interfere in the foreign exchange markets. In many cases, the motivation for doing so lies with propping up exporters, by lowering the value of the domestic currency. While this is the most common reason for currency manipulation, it is not the only one. In some cases, currency manipulation aids in the cause of making debt disappear, lowering the value of that debt in order that it might be paid back early. This paper will discuss some of the different ways that countries can affect their exchange rates.
A freely-traded currency should reflect the economic strength of a nation, in particular the expectations for future interest rates. Where expectations for future rates are relatively low, that means that the economy is expected to perform worse. This is the case for Japan. The country has adopted a policy recently of a low yen, in order to provide some spark to…

interest and compound interest? hy is knowing the difference important? hat is the formula for determining the future value of an amount? hy is a dollar today worth more than a dollar received in the future?
First Student Response:

Interest in financial terms is when your initial investment yields benefits. You invest an amount and a percentage of that basic investment turns into financial surplus. You gain funds through your investment. There are two types of interest: simple interest and complex interest (Buckelew). Simple interest is when the amount gained does not change. There is a formula which goes I (interest) = P (principle) multiplied by r (rate of interest) and multiplied again by t (time). So the interest you get is based on the amount you put in, the rate of interest, and the time you leave your interest to grow. Compound interest is more complicated than this. In…

Contrary to what is often seen on the nightly news programs, there are still many people in this country and throughout the world who want to live in safe places and who would be interested in making their town better. Often, they do not know what they can do to improve the poorer parts of town, so they simply choose not to live or work there. This only leads to the decay of those areas and the rising crime rate. While unfortunate, it is not entirely unexpected. However, urban revitalization has begun in a lot of cities and towns, both big and small, in recent years. Although the economy has slowed some of that, there are still many areas where it is moving forward. This will, in time, lower the number of sexual assaults and other crimes in those revitalization areas. If more people would help to improve their neighborhoods,…

Pension Plan eplacement ates
Public Pension eplacement ates

The portion of monthly pre-retirement income that will be replaced by monthly pension plan funds is called the pension plan replacement rate (Quadagno, 2011). In the United States, the majority of pre-retirement income replacement comes from Social Security payments (Quadagno, 2011). The actual replacement rate for wage earners with lower incomes is higher than for those who have had higher wages during their working years (Quadagno, 2011). But overall, wealthier recipients of Social Security payments still achieve higher income replacement (Quadagno, 2011). "By 2030, a worker who retires at age 62 will receive only 70% of the whole retirement benefit, and workers who want to receive the maximum benefit will have to wait until they reach age 67" (Quadagno, 2011, p. 10). How does this compare with the situation in other countries? Comparing prior earning replacement rates for Greece and the United…

Managing Exchange ate isk
For a number of multinational corporations, currency fluctuations can pose an extreme risk for them. This is because of sudden changes and dramatic amounts of volatility inside the marketplace can have a negative effect on their bottom line results. When this happens, there is a realistic possibility that these challenges could negatively impact their financial position and ability to compete inside many different markets. (Berger, 2011)

In the case of Fed Ex, the company has operations around the globe and is one the larger overnight package delivery services. This means that sudden shifts in the currency could negatively impact their earnings. To fully understand the overall scope and the way they are able to deal with these challenges requires focusing on how this impacts their operations, options financial managers can use to manage it and the benefits / drawbacks of these strategies. Together, these elements will…

Public administration is one of the constructs upon which every government functions. It incorporates the concepts of administrative responsibility and public interest upon which the idea of ethical obligation and the dilemma brought about by the privatization of government functions ride. Anytime the electorate cast their votes and express their preference for one candidate over another, they do so in the expectation that the candidate will work towards satisfying the public's interests, rather than their own, and that they will use their positions to help people, rather than dominate them. This expectation is, however, not often given the significance it deserves, despite the fact that it advances from the party that stands to either benefit or lose directly from a public administrator's actions.
The Concept of Public Interest

Although it is difficult to give an explicit definition of the constituents of public interest, experts have repeatedly referred to it as…

China's Interests in Iran
The following hite Paper is an examination of the prospects and pitfalls for China in pursuing further economic opportunity through its investment in the future of Iran. As the two nations proceed with the explicit intention of further entwining prospects both economically and diplomatically, China must move forward with care and precision. As the discussion here will demonstrate, its opportunities and the level of commitment already pursued are quite ample, but it will also be necessary for China to take a more active role in helping to reign in some of Iran's behavioral excesses if it is to enjoy the benefits of this relationship. And quite to the point, it will also appear to be in the best interests of Iran to accommodate calls for a more moderate disposition in world affairs if it is to benefit from the opportunities presented by China. The mutuality of…

circle around. I am interested in exploring the tensions between the stated goals and the process of achieving them. The readings in this course have demonstrated that there are many pitfalls within the community building community itself. Some of these are as black as white as: who is the most important factor in a mobilizing effort -- the individual or the group. Some of the tensions, like those about roles and the future, are more nuanced and are answered with a well it depends. At the heart of my response to this course is the recognition that there are and always will be competing objective in a world with limited resources. And that despite those limitations the objective is to find ways to adapt and evolve while retaining the human connections to one another that allow us to effectively problem solve so that we may all live well. To that…

National Interest as a key determinant in Foreign Policy
National Interest and Foreign Policy

National Interest Defined:

The national interest is, very simply, the objectives of a country ranging from the macro goals i.e. economy, military to the micro goals like social use cyber space. National interest is an integral part of international relations as it is a concept based out of the realist school of though. This will be discussed in more detail in the paper.

Foreign Policy Defined:

Foreign policy, very simply, is the strategy that guides all international dealings and associations of a country

When dealing with national interest, one has to wonder about the degree to which domestic politics is vital for the comprehension of that country's foreign policy. Domestic politics is not of immense significance; this has been depicted by an eminent assumption related to structural realism, global association. The systemic vigour of the global…

Carlson, Bitterman, and Jenkins (2012) were interested in the effects of home literacy environment on a sample of preschool children with disabilities. Home literacy environment refers to a number of conditions that foster the development of reading and writing skills in children. Carlson et al. (2012) reviewed the previous research findings and determined that the frequency that parents read to their children (joint reading) has dominated this research and findings and generally finds that a significant amount of the variance in reading achievement, literacy, and language abilities can be treated to joint reading of toddlers and preschoolers. They also discuss two major categories of home literacy experiences: formal literacy experiences (activities in which parents actively teach children to read and write) an informal literacy experiences (joint reading or reading story books focusing on the story rather than the reading skills). The research has generally found that informal literacy experiences explain…

Marital Success
The high divorce rates in First World nations have encouraged researchers, family counselors, and religious advocates to investigate the core foundations for the creation of a successful marriage. Starting in the 1960s, evolving social context ultimately shifted the rationale in why individuals choose to marry, and over time, divorce has come to be viewed as the preferred alternative to an unhappy marriage. One main fundamental principle to achieve marital success is to recognize women desire love, while men simultaneously need respect to feel fulfilled within the relationship. Emotional intelligence within a relationship and acknowledging various marital myths also contribute to the fundamental elements of marital success. Dissociating from marital myths and misconceptions is an essential part to understanding the true foundations for a happy and successful marriage. Appreciating and understanding how attachment styles affect marital relationships is also essential. These beliefs and attachment styles contribute to the marital…

suicide has been of interest from the beginning of Western civilization. For philosophers, clergy and social scientists, the subject raises myriad of conceptual, theological, moral, and psychological questions, such as What makes a person's behavior suicidal? What motivates such an action? Is suicide morally permissible, or even morally required in some extraordinary circumstances? Is suicidal behavior rational? How does suicide affect those that remain? The fictional books Virgin Suicides and Norwegian Wood address some of these topics, only to find, as in real life, that each situation differs and the ones who are left must find a way to personally resolve their confusion and move on.
The definition of suicide is confusing. People have long looked at suicide in a negative fashion, although someone who dies to save others is more likely to be seen in a better light than someone who has done so to relieve mental or physical…

Strategy to Improve the E-Mail Marketing esponse ates
A company intends to improve its email marketing system to measure its response rates from its email advertisements by carrying out the evaluation process using different combination of "two (2) options of the three (3) key factors: E-Mail Heading (Detailed, Generic); Email Open (No, Yes); and E-Mail Body (Text, HTML). Each of the combinations in the design was repeated on two (2) different occasions." (Email Attachment, 2015 p 1).

The objective of this paper is to develop the email advertising strategy to assist the company to increase the response rates.

Conducting a DOE ( design of experiment) to test a cause-and-effect relationship of the Company Business Processes

2.

Using the data in the table 1, the paper develops graphical illustrations to test relationships of the company's business process .

Fig 1: Sum of the esponse ate by Email Body and Email Open…

e., males and females per nurse specialty).
Variables & Measures

Variables for the study are as follows: workload management, work environment, burnout rate, and job satisfaction. In addition to these variables, instruments gauging the level of burnout experienced will be used, particularly the Maslach Burnout Inventory (MBI). An index of attitudes and perceptions on workload management, work environment, and job satisfaction will also be formulated, and will be tested for internal and construct validity.

FGD Guide / Survey Instrument

The FGD Guide will have four (4) sections, focusing on the following broad themes/topics: workload management as experienced by the discussants, work environment, burnout (concepts and experiences), and job satisfaction (as related to burnout). The survey instrument or questionnaire will also have the sections used in the FGD guide, with an additional section allotted for the Maslach Burnout Inventory (MBI).

Data Analysis

Data analysis will make use of both bivariate and…

Macroeconomics
Guyana -- Inflation ate

Inflation rate is an important concern to assess the economic condition of any country. This report focuses on the inflation rate of the South American country, Guyana.

The economy of Guyana mainly depends upon the production of rice, sugar, shrimp, fresh fruits, vegetables and fish. The important industries of Guyana include mining of diamond, gold and bauxite, manufacturing of pharmaceuticals, footwear, clothing, beverage and foodstuff processing.

In Guyana, inflation rate is measured through consumer price index. It is normally used by the Government, international organizations and public members and trade unions to assess the ratio of increase in prices or inflation. Data is collected monthly however it is published quarterly.

Since consumer price index measures the changes in prices of the consumer goods and services i.e. fixed basket of goods but not include capital goods. There are 9 main categories of fixed basket of goods…