Please answer the following questions
1. Foreign Exchange Market
a. How is the Foreign Exchange Rate for a country Determined?
b. Is the Foreign Exchange Market Efficient? What are its implications for Finance manager?
2. Currency Swaps
a. Illustrate using a specific example the advantages and challenges for participants engaged in a Cross Currency Swap.
3. Interest Rates and Exchange Rates; Interest Rate Parity
a. Illustrate the concept of ‘Interest Rate Parity’ [IRP] and ‘Covered Interest Arbitrage’ with a numerical example of your own.
b. What is Currency Carry-Trade? Explain using your own example. What are the popular global carry-trade strategies? What are its inherent risks?
c. What are the implications of IRP and Carry-Trade, for Foreign Exchange Market.?