If you were the CEO of a US bank, would you consider establishing a foreign branch? What might be a concern related to doing so? Finance Assignment

Do you think the U.S. dollars are a free-floating or dirty-floating currency? Your answer is supported by what characteristics?
Is this direct central bank intervention on the currency market? This example is from the last fifty years.
Imagine that Canada is suddenly hit with high inflation. What effect might high inflation have on the Canadian dollar’s value according to purchasing power parity theory (PPP).
Australia’s central banks decides that the Australian dollar will be worth more than the Japanese yen. What could it do with direct intervention?
Consider the following: 1. Mexican one-year rate = 15% ii. U.S. interest rate for one year = 11 percent. Is there interest rate parity? If so, how much would be the forward premium/discount on the Mexican peso’s forward rate rate? Are covered interest arbitrages more profitable for U.S. Investors than home-investing? Explain.
A balance sheet of a bank showing the main assets and liabilities of a typical bank is created.
Repurchase agreements have been increasingly favoured by the Federal Reserve as part of open market operations. These agreements are briefly described and the reasons why banks or the Fed prefer them.
As part of their business, banks engage in proprietary trading. Briefly, speculate why banks now have to adhere to stricter trading activities as a consequence of the 2008/09 financial crisis.
Briefly explain two activities that are off-balance sheet and the reasons banks favour their use.
Would you think about opening a branch in a foreign country if you were the bank’s CEO? Is there anything you might worry about?

 

 

Finance Assignment

 

Answer

Question 1

It was possible to hold the currency’s values steady, or at least within the limits of the monetary policies. In a free-floating system, there would not have been any government intervention in the currency market. Instead, they would have been determined solely by market forces. Governments would allow currencies to fluctuate as per supply and need, but would take action when needed.

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