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(1) Consider a scenario where, in preparation for Brexit, the UK government announces a plan to implement a new economic program that will strengthen the

  1. (1) Consider a scenario where, in preparation for Brexit, the UK government announces a plan to implement a new economic program that will strengthen the GBP relative to other currencies. If you are an investor and have the option of investing in assets denominated in EUR or GBP, what would be your expectations? [4 marks]

    (2) You are an investor considering two bonds. One is an AA-rated corporate bond yielding 6.75% and currently selling at par. The marginal tax rate is 16%. The other is a municipal bond with a rate of 5.25%. Which bond should you choose? Why? [6 marks]

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