domestic policy that uses funding from general tax revenues to administer programs that provide benefits to certain businesses, groups, or individuals is known as _____.

Answers

Answer 1

Domestic policy that uses funding from general tax revenue to administer programs that provide benefits to certain businesses, groups, or individuals is known as fiscal policy.

What is  fiscal policy?

A fiscal policy is one in which the government use taxation, public expenditure, and public borrowing as tools to accomplish specific economic policy goals. In a nutshell, it is the practise of using taxes and expenditure by the government to generate sustainable growth. For instance, governments can decrease taxes and increase spending to stimulate the economy if necessary; normally, they spend on social programmes and infrastructure projects that generate income and jobs. Or, if the economy is strong, a government may decide to cut spending while raising taxes. Fiscal policy is the use of government revenue collection and expenditure to affect a nation's economy in economics and political science.

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Related Questions

Frank decides that a social media campaign is the best way for him to attract new business to Slice of Life Pizza. After Frank identifies his trategies and goals, the next step in the campaign is Multiple Choice o to identify the target audience
o to monitor and change o to experiment and engage

Answers

Frank identifies his trategies and goals, the next step in the campaign is  identify your target audience.

How do you identify strategic & goals?A company's strategic goals are the precise financial and non-financial objectives and outcomes it wants to attain over a given time frame, often the next three to five years.The fundamental strategic factors that should be taken into account when you develop a future strategy are products, services, clients, markets, money, personnel, technology, and production capacity.A strategic plan should have the following 7 fundamental components: a vision, mission, SWOT analysis, list of core values, goals, objectives, and action plans.Ranging from three to five. People don't feel overburdened with too much to accomplish when they concentrate on tasks that are between three and five. It conveys a loud and unambiguous message about what must be done right away.

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the reason that castle and cooke processes and packages dole pineapple products in hawaii is more than likely because of low energy costs. T/F

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The fact that Castle company Cooke produces as well as packages Dole pineapple goods in Hawaii most likely results from the region's affordable energy.

The given statement is False.

What is affordable energy?

Nuclear energy offers minimal fuel costs and produces no carbon dioxide. Fuel expenses and emissions from solar and wind energy are nonexistent. Fuel costs are one factor, but each innovation has other expenses.

How does production management work?

Monitoring and enhancing the effectiveness of the processes, supplies, human capital, and financial resources used to manufacture things is the goal of production management. Depending on the industry, production results can differ. A production manager makes sure that production meets the intended output goals and is completed on schedule and within budget.

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discuss the pros and cons of a mnc having a centralized cash manager handle all investment and borrowing for all affiliates of the mnc versus each affiliate having a local manager who performs the cash management activities of the affiliate.

Answers

A centralized global is an mnc that centralizes management and decisions in the home country.

What are cash management activities?Since a multinational corporation conducts business in several different currencies, the cost of foreign exchange transactions adds another layer of complexity to the cash management process within the MNC.Establish Effective Accounts Process for collecting receivables: Any company's balance statements will have a sizable chunk devoted to receivables. Especially if you are the manager of a B2B company, the money you are due may remain in the receivables stage for months.Utilize Payment Terms: Making use of payment terms and understanding when bills are due can help you keep money in your bank account for longer and avoid potential cash flow problems while your company waits for payment from clients.A multinational organisation is an organization that has assets or centers in multiple countries. While they usually have a main workplace in their home us of a, these organizations may have offices, factories and other locations spread out across the globe.

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espn uses marketing research to develop profiles of its audience. based on this information, the company decided to advertise its new nfl football programming in those magazines read by fans of monday night football. with this media choice, it appears that espn is aiming this advertising at .

Answers

With this media choice, it appears that ESPN is aiming this advertising at it's current target market.

In a world where businesses are constantly vying for attention, advertising and marketing are more important than ever. By creating compelling ads and promotions, businesses can reach new customers and grow their sales.

With the help of advertising and marketing, businesses can connect with their target audiences and deliver their message in a way that is both effective and memorable. In today’s competitive marketplace, a well-executed advertising and marketing campaign can be the difference between success and failure.

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constructive discharge occurs when an employer, to avoid conflict among workers, discharges an employee engaging in an unconventional act, such as wearing a hijab.

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Constructive discharge occurs when an employer, to avoid conflict among workers, discharges an employee engaging in an unconventional act, such as wearing a hijab is False.

What is the hijab's true purpose?

The Qur'an commands Muslim men and women to conduct themselves modestly, and some Muslim girls and women choose to cover their faces with the hijab in order to be modest and shielded from unrelated males. Men's and women's "gaze, walk, clothing, and genitalia" are all considered to fall under the category of modesty, according to the Encyclopedia of Islam and the Muslim World.

Is the hijab a requirement?

Hijabs are optional or regulated in other Muslim-dominated and majority non-Muslim nations, whereas they are required in some Islamic nations. Muslim women in the Indonesian province of Aceh are forced to wear the headscarf, much as all women in Iran and Afghanistan are required to do so regardless of their religious affiliation.

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One of the most important concepts in marketing is the price elasticity of demand, which is the
A. degree to which the price of a product affects consumers' purchasing behavior.
B. point at which the costs of producing a product equal the revenue made from selling the product.
C. price that consumers consider reasonable and fair for a product.
D. percentage a product is marked up in response to consumer demand.
E. percentage change in quantity demanded in response to a percentage change in price.
Answer: E

Answers

The price elasticity of demand, or the percentage change in the quantity required in response to a percentage change in price, is one of the most crucial ideas in marketing.

The responsiveness of the quantity required for a product to a change in price is measured by the price elasticity of demand. One of the most crucial ideas in business, especially when deciding on pricing and other aspects of the marketing mix.

The relationship between the percentage change in a product's quantity demanded and the percentage change in price is known as price elasticity of demand. It helps economists comprehend how supply and demand shift in response to changes in a product's price.

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Supply-side economics is a theory that maintains that increasing the supply of goods and services is the engine for economic growth. It advocates tax cuts as a way to encourage job creation, business expansion, and entrepreneurial activity.

Answers

According to supply-side economics, a nation's economy will grow if its supply of goods is increased.

What three sorts of economics are there?

Free market, military, and mixed economies are the three primary types. The chart that follows contrasts command and free-market economies; mixed economies combine the two. Both people and corporations are free to choose their own economic course. All national economic choices are made by the state's central government.

What does economics actually entail?

From the decisions we make in daily life to how corporations or governments accomplish their goals, economics gives the insights and research model necessary to comprehend how our world functions. People make decisions every day that have a major or minor impact on their life.

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Based on the following information, compute cash flows from investing activities under GAAP.
Cash collections from customers $750
Purchase of used equipment 175
Depreciation expense 175
Sale of investments 400
Dividends received 100
Interest received 175
Cash Flows From Investing Activities:

Answers

The cash flow from investing activities will be $500.

The cash generated or spent in relation to investment activities is shown in the cash flow from investing activities portion of the cash flow statement. Buying tangible assets, investing in securities, or selling securities or assets are all examples of investing activity.

Cash flow

= (  Purchase of used equip. + sale of investments + dividends received + interest received )
= $(175+400+100+175)= $500          

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innovation efforts of the firm often benefit from partnering with non-business entities such as universities and government agencies. t/f

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Innovation efforts of the firm often benefit from partnering with non-business entities such as universities and government agencies. This is a false statement.

How are innovation efforts assessed?

Innovation rate is calculated as the revenue share of innovations divided by total revenue multiplied by 100. Your innovation activity as a percentage of revenue is represented by this ratio. Additionally, because it assesses the sales you have already generated with the innovations, it demonstrates if your new developments are commercially successful or not.

Which four main tasks are involved in innovation?

In her book, Kanter outlines a dynamic model of innovation that may be aided by organization and leadership (Kanter, 2000). Four main "innovation tasks" are identified: (1) idea production or activation; (2) coalition building; (3) ideal realization; and (4) transmission, or dissemination.

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the united states imposed a duty of on wind towers produced in china and vietnam and imported to the united states after they found evidence both countries were selling them at below fair market value, or , the practice of charging less than its costs or less than it charges at home to win a market. group of answer choices

Answers

The correct answer to the given question about United States imposed duty on wind towers is option b) 44.99 % to 47.59 %

The basic idea behind how a wind turbine  operates is that, unlike a fan, which creates wind by using energy, a wind turbine creates electricity by utilizing wind. A turbine's blades, which resemble propellers, rotate around a rotor, spinning a generator to produce power. A crucial component of Iranian traditional architecture is the wind turbine. Settlements in hot, hot-dry, and hot-humid regions can see it. On Iran's historic cities, they appear in the skyline as large chimneys. They have vents on top that allow desired air to enter the interior spaces and offer thermal comfort. They are vertical shafts. This structural component demonstrates how well-suited architectural design is to the surrounding environment. It operates under the tenets of sustainability and conserves energy.

Question

the united states imposed a duty of on wind towers produced in china and vietnam and imported to the united states after they found evidence both countries were selling them at below fair market value, or , the practice of charging less than its costs or less than it charges at home to win a market. Options

a) 25% to 30%

b) 44.99% to 47.59%

c) 80% to 82.5%

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2. Which of the following services would you expect a depository institution to offer?
a. Pension fund management
b. Electronic funds transfer
c. Accounting transfer management (ATM)
d. Inventory control of revenues
e. All of the above
3. The Banking Act of 1933 gave the Federal Reserve System the authority to:
a. Allows banks to set their own interest rates
b. Ban interest on demand deposits
c. Require customers to have minimum deposits before they can use many of the bank’s services
d. Declare that credit cards can and do replace money
e. Do all of the above

Answers

2. Based on the financial institution perspective and the available options, the services I would expect a depository institution to offer is B. Electronic funds transfer.

3. The Banking Act of 1933 gave the Federal Reserve System the authority to B. Ban interest-on-demand deposits.

What is a depository institution?

A depository institution is a term used to describe the type of financial institution common in the United States that is legally allowed to accept monetary deposits from consumers. Generally, according to federal law, however, a depository institution is limited to banks and savings associations but not credit unions.

Therefore, in this case, it is concluded that depository institution services include Electronic funds transfer and checking and savings accounts.Also, in the second part, the Banking Act of 1933 was a law enacted by the United States Congress that ascertained the Federal Deposit Insurance Corporation (FDIC) and imposed various other banking reforms.

The Banking Act of 1933 gave the Federal Reserve System the authority to do the following:

keep banks from investing in specific securitiesregulate interest rates on time depositstell banks how much reserve to maintainban interest on demand deposits

Hence, in this case, it is concluded that the correct answer is Option B and Option B respectively for the two questions.

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two logging companies, peehl brother and stump logging, share the rights to log national forest land. they agree to cut trees 4 feet in diameter or greater to sustain the plot. they can cheat and cut smaller diameter trees and earn greater profit. the payoff matrix of their profits under different strategies is shown.

Answers

If Peehl is cutting trees 4 feet and greater, Stump's dominant strategy is to cut anything. This is true. Thus, the given statement is true.

If Peehl is cutting trees 4 feet and greater, and Stump's strategy is to maximize profit, then it is likely that Stump's dominant strategy would be to cut anything (including trees with smaller diameters).

This is because if Peehl is only cutting larger trees, Stump may have a competitive advantage by cutting smaller trees and earning greater profit. However, without specific values in the payoff matrix, it is challenging to determine the precise dominant strategy.

Thus, the given statement is true.

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Probably the full question is:

Two logging companies, Peehl Brothers and Stump Logging, share the rights to log national forest land. They agree to cut trees 4 feet in diameter or greater to sustain the plot. They can cheat and cut trees with smaller diameters and earn greater profit. The payoff matrix of their profits under different strategies is shown.

True or False: If Peehl is cutting trees 4 feet and greater, Stump's dominant strategy is to cut anything. This is _____.

(a) as(p100) (b) as(p125) (c) as(p75) p q p q p q 125 $ 560 125 $ 500 125 $ 620 100 500 100 440 100 560 75 440 75 380 75 500 suppose the full employment level of real output (q) for a hypothetical economy is $500, the price level (p) initially is 100, and prices and wages are flexible both upward and downward. refer to the accompanying short-run aggregate supply schedules. in the long run, a fall in the price level from 100 to 75 will

Answers

Consider a hypothetical economy where the initial price level (P) is 100 and the level of real output (Q) at full employment is $250.

What occurs if, due to a decline in aggregate demand, the price level unexpectedly drops from 100 to 75?

Again, in accordance with schedule AS(P125), the real production falls from $250 to $ 220 if the price level unexpectedly drops from $100 to $75 due to a decline in aggregate demand. As a result, it is seen that the output level changes along with changes in the price level.

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Because many services involve a process of continuous interaction between the service organization and the customer, _____ marketing is an important strategy.

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Because many services involve a process of continuous interaction between the service or The importance of location in determining distribution strategy cannot be overstated.

Depending on the type of products and services, a strategic location may differ. Relationship marketing at the second level is frequently more interaction than relationship marketing at the first level. At this level, the firm uses financial and social bonds again, but this time structural bonds are included in the overstated. Possession processing entails performing tangible actions on the customer's goods and other physical possessions. Airfreight, lawn mowing, and cleaning services are examples of possession processing. oganization and the customer, relationship  marketing is an important strategy.

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natalya operates a retail store in romania. she buys consumer electronics from vendors in china and japan to sell in her store. natalya is engaging in ,

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Natalya operates a retail store in Romania. She buys consumer electronics from vendors in China and Japan to sell in her store. Natalya is engaging in importing.

How Do Imports Work?

A product or service that was created in another nation but was purchased in one is an import. The two pillars of international trade are imports and exports. A nation's trade balance, commonly referred to as its trade deficit, is negative if the value of its imports exceeds the value of its exports.

Why do imports and exports occur?

Selling goods and services that were produced or sourced in the home country abroad is known as exporting. Purchasing products and services abroad and re-importing them into one's own nation is referred to as importation.

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machine learning is still not as good as people in most cases but in some cases better than people in regard to

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Machine learning is still not as good as people in most cases but in some cases better than people in regard to recognizing patterns and relationships.

What is a machine, simply put?

A machine is something that humans have made to facilitate work. It is an invention or tool that increases the impact of human effort. A mechanical advantage is produced by the machine.

How does it work?

A machine's function may be limited to the simple modification and transmission of forces and motions, or it may involve the conversion of chemical, thermal, electrical, nuclear, or other forms of energy into mechanical energy. Every machine has an input, an output, a device for transforming, modifying, and transmitting, as well as a device.

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according to chvorinov's rule (check the last page), in a sand casting mold, the v/a ratio of the riser should be which one of the following relative to the v/a ratio of the casting itself?

Answers

In a sand casting mold, the riser's v/a ratio should be greater than one of the following in comparison to the casting's v/a ratio in accordance with Chvorinov's rule (see the last page).

According to Chvorinov's rule, areas of the casting with a high volume-to-surface area ratio should take a while to firm. When designing castings, these hot regions should be avoided as they may be the location of porosity flaws.

In order to ensure adequate post-feeding and the subsequent correction of the risers' solidification shrinkage, Chvorinov's rule can be utilized to ensure that the risers solidify later than the casting (or that the casting solidifies prior to the risers).

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Varying a product's price according to the supply situation of the seller is called ______ pricing

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Dynamic pricing refers to changing a product's price in response to the seller's supply situation.

Describe dynamic pricing and provide an example.

Dynamic pricing, often referred to as surge pricing, demand pricing, or time-based pricing, is a tactic used by businesses to change the price of their products in response to shifting demand. For instance, a flight's departure time, the quantity of available seats, and the type of seat will all affect the price of a seat.

How should customers be informed about dynamic pricing?

Dynamic pricing is a type of pricing strategy where changeable prices are used in place of fixed ones. The dynamic pricing model's fundamental premise is to provide the same product to various customer segments at various costs.

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Employability Skills

Answers

Answer:

Employ-ability skills should have:

good communication.

motivation and initiative, leadership,reliability/dependability ,following instructions, team work, patience, adaptability.

Explanation:

what is Employ-ability Skills?

Employ-ability Skills can be defined as the transferable skills needed by an individual to make them 'employable'. Along with good technical understanding and subject knowledge, employers often outline a set of skills that they want from an employee.

Which is a disadvantage of accepting credit cards as a form of payment?

Customers rarely expect businesses to accept credit cards as payment.
Processing receipts at the end of each day can be time-consuming.
You need some kind of device to swipe the credit card for processing.
You put your employees at greater risk of theft by accepting credit cards.

Answers

Answer

B. Processing receipts at the end of each day can be time-consuming.

Explanation

Lets use logical.

Firstly, A, it doesn't make sense (Customers rarely expect businesses to accept credit cards as payment.), pure nonsense in 2022.

Next, B, this seems much more probable, but lets continue.

Now, C, this isn't entirely true, you don't need a device to swipe the card, payments can be charged in various other ways.

Finally, D, while I do see how someone could think this is a valid answer, you are NOT putting the in person employers at risk and even if you were, you have the customers information.

Coca-Cola's "Share a Coke" campaign targeting millennials can best be described as segmenting the market by ______ factors.

Answers

Coca-Cola's "Share a Coke" campaign aimed at millennials is best described as segmenting the market based on demographic factors.

When did the Share-a-Cola campaign start?

Share a Coke was a marketing campaign launched by Coca-Cola UK in his 2013 and 2014. We replaced the iconic logo with the country's most popular name and printed it on the Coca-Cola label. Our Share a Coke tour also allowed people to personalize their own Coca-Cola bottles

What was the marketing strategy for the Share a Coke campaign?

Coca-Cola had two goals they wanted to achieve with their Share a Coke campaign. (i) The first major objective during Australia's summer time was to increase sales. (ii) The second purpose was to connect with customers by talking to them.

What targeting strategy does Coca-Cola use?

Coca-Cola initially relied on undifferentiated targeting strategies. Recently, they have started localizing their products to make them more acceptable. This includes two basic marketing channels: personal and impersonal.

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Which of the following is an advantage of investing in limited partnerships, REITs, mortgages, or participation certificates?
A) A possible hedge against inflation
B) Easy entry
C) No management concerns
D) Financial leverage
E) All of these

Answers

The correct answer is option ( E ).

Limited Partnership:

A limited partnership (LP) is a collaboration having two or more participants that is distinct from a limited liability partnership (LLP). Limited partners are not involved in business management; instead, the general partner manages and controls the company. A limited partnership limited partners, on the other hand, are only liable for the amount of their investment, with the general partner of the limited partnership having unlimited liability for the debt.

Understanding Limited Partnerships:

Having both general partners and limited partners is a requirement for a limited partnership, which is something to keep in mind. General partners have unrestricted liability and complete management authority over the company. Limited partners managerial engagement is minimal to nonexistent, but their liability is constrained to the amount of money they invested in the LP.

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Based on the following information, the value of the M1 measure of the money supply is _____ and the value of the M2 measure of the money supply is _____.-Billions of $ Currency = 20-Demand Deposits = 300-Money Market Mutual Funds = 800-Traveler's Checks = 10-Savings Deposits = 1800-Other Checkable Deposits = 200-Small Denomination time deposits = 1100-Credit Card Balances = 900A. $530 billion; $3,700 billionB. $330 billion; $4,230 billionC. $520 billion; $3,330 billionD. $530 billion; $4,230 billion

Answers

Based on the following information, the value of the M1 measure of the money supply is $530 billion and the value of the M2 measure of the money supply is $4,230 billion. The Option D is correct.

What is M1 in money supply?

In economics, M1 denote the money supply that is composed of currency, demand deposits and other liquid deposits such as savings deposits.  The "M1" in money supply, includes the most liquid portions of the money supply because it contains currency and assets that either are or can be quickly converted to cash.

M1:

= Currency + Demand Deposits + Travelers' Checks + Other Checkable Deposits

= $20 + $300 +  $10 + $200

= $530 billion.

What is M2 in money supply?

It measure the money stock that includes M1 (currency and coins held by the non-bank public, checkable deposits, and travelers' checks) plus savings deposits, small time deposits under $100,000, and shares in retail money market mutual funds.

M2:

= M1  + Savings Deposits + Money Market Mutual Funds + Savings Deposits

= $530 +$1,800 +  $800 + $1,100

= $4,230 billion

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in the skeleton of a house cat, compact bone forms the hard, white outer region, and bone lies inside the compact bone.

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In the skeleton of a house cat, compact bone forms the hard, white outer region, and bone lies inside the compact bone. This is true.

What is skeleton?

The structural framework that holds an animal's body upright is its skeleton. The exoskeleton, which is an organism's stable outer shell, the endoskeleton, and other skeleton types are among them.

Compact Bone can be found in the diaphyses of long bones and beneath the periosteum, where it offers support and security. An osteon, also known as the Haversian system, is the tiny structural component of compact bone.

A house cat's skeleton is made up of compact bone, which is the hard, white outer region, and bone inside of it.

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Complete question

In the skeleton of a house cat, compact bone forms the hard, white outer region, and bone lies inside the compact bone. True or false.

fast logistics inc. has a project with an initial cost of $75,550. the project is expected to generate annual cash flows of $17,900 for the next 6 years. the project's internal rate of return is .O 13.51%
O 15.42%
O 19.32%
O 11.08%
O 16.23%

Answers

The project is expected to generate annual cash flows of $17,900 for the next 6 years. the project's internal rate of return is 16.23%

How to Calculate  internal rate of return?

internal rate of return =Cash Flows/1+r)n−Initial Cost of the Project

=17900*6

=10770/75550*100

=16.23

The internal rate of return (IRR), also known as the rate of return earned by the project without the external component, is calculated by discounting cash flow. According to the definition of IRR, it is the discounting rate at which the initial investment and the present value of all future cash flows are equal, or the rate at which corporate investments become profitable.The IIRR is the interest rate at which all cash flows have a zero net present value (NPV). The present value of cash inflows (estimated profit) minus the present value of cash outflows (estimated expenditure) over a given period of time is known as the net present value, or NPV. NPV equals the present value of inflows and outflows when it is set to zero

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Rough Water LLC and Schafer enter into a contract for the delivery of a used fishing boat. Until the boat is delivered and paid for these parties have O an executed contract O a quasi contract O no contract O an executory contract.

Answers

A deal is made between Schafer and Rough Water LLC for the delivery of an old fishing boat. These parties have an executory contract up until the boat is delivered and paid for.

Executory refers to a contract that has not been entirely performed or executed. It is a contract in which both parties have significant performance obligations still to fulfil.

An obligation to pay money, an especially significant one, typically does not render a contract enforceable.

According to US bankruptcy law, an "executory contract" is one in which ongoing obligations are present on both parties at the time of the bankruptcy filing. The debtor and the counterparty shall continue to perform.

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a jeans maker is designing a new line of jeans called slams. slams will sell for $295 per unit and cost $188.80 per unit in variable costs to make. fixed costs total $68,000. (round your answers to 2 decimal places.)

Answers

The company needs to sell 641.19 units or generate $189,500.00 in sales to break even.

What is the break-even?

Generally, The contribution margin per unit of the Slams jeans is $295 - $188.80 = $106.20.The contribution margin ratio is the contribution margin per unit divided by the selling price per unit, or $106.20/$295 = 0.36.

To break even, the company needs to generate enough sales to cover its fixed costs. The break-even point in units is the fixed costs divided by the contribution margin per unit, or $68,000/$106.20 = 641.19 units.

To break even in dollars, the company needs to generate $68,000 in sales. The break-even point in dollars is the fixed costs divided by the contribution margin ratio or $68,000/0.36 = $189,444.44.or $189,500.00So, the company needs to sell 641.19 units or generate $189,444.44 in sales to break even.

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Missing parts;

In the image attached to the answer

a _____ program is one for which the recipient qualifies on the basis of _____. group of answer choices means-tested; age social insurance; need means-tested; income social insurance; income

Answers

Option C is correct, A means-tested program is one for which the recipient qualifies on the basis of income.

A means test is a technique for figuring out who is eligible for financial aid to get a good or service, such as welfare payments. In order to establish a person's eligibility for financial assistance, it first considers the means or financial resources, they have available to them to pay for a certain service or item. Means-tested programs only allow participation from people and families whose incomes and/or assets are below a defined cutoff.

The government will calculate your subsidies based on your means when you need care services. It guarantees that patients from lower-income families receive greater financial aid than those from higher-income families.

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One of the reasons for the banking crisis was that banks were pressured by Congress and other groups to make ______ loans. Credit cards.

Answers

Answer:

hope this help

Explanation:

homework

or work

One of the reasons for the banking crisis was that banks were pressured by Congress and other groups to make questionable loans.  

What is a Doubtful Loan?

Doubtful loans exhibit all the traits of poor loans and credit weaknesses, making complete recovery shaky and unlikely. As a result, a questionable loan is: not sufficiently shielded by the debtor's present value or ability to pay. Insufficient supporting documentation.

Additionally, when a loan is labelled as questionable, it is thought that its flaws make full collection exceedingly unlikely or implausible, but not so unlikely as to require the debt to be written off completely. When calculating regulatory capital sufficiency, 50% of loans designated as dubious are subtracted from adjusted bank capital. Even when a loan has been given a dubious rating, a bank may still be able to collect on it in the future.

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Suppose that you are a U.S.-based importer of goods from the United Kingdom. You expect the value of the pound to increase against the U.S. dollar over the next 30 days. You will be making payment on a shipment of imported goods in 30 days and want to hedge your currency exposure. The U.S. risk-free rate is 5.5 percent, and the U.K. risk-free rate is 4.5 percent. These rates are expected to remain unchanged over the next month. The current spot rate is $1.50. a) Indicate whether you should use a long or short forward contract to hedge currency risk. b) Calculate the no-arbitrage price at which you could enter into a forward contract that expires in three months. c) Move forward 10 days. The spot rate is $1.53 dollars per pound. Interest rates are unchanged. Calculate the value of your forward position.

Answers

(a) Hedging the risk can be accomplished by entering into a forward contract to purchase British pounds.

(b) No-arbitrage price is $1.50

(c) Value of forward position is $.029

Define Hedging.

A sophisticated risk management strategy called hedging involves buying or selling securities to potentially help reduce the risk of a position's possible loss.

a) According to the risk, buying more pounds will cost you more US dollars because the value of the pound will rise during the following 30 days. Thus, hedging the risk can be accomplished by entering into a forward contract to purchase British pounds.

b) T= 30/365

S0= $1.5

r = 5.5% or .055

rf = .045

Hence, F(0,T)= $1.5/(1.045)30/365 (1.055)30/365

                      = $1.50

c) T= 30/365

   t= 10/365

  T-t= 30/365 – 10/365 = 20/365

  St= $1.53

  r= 5.5% or .055

  rf = .045

  Vt  (0, T)= $1.53/(1.045)20/365 - $1.50/(1.055)20/365

                = $.029

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