Question 5 You are an US investor currently looking overseas market for possible investment in EURO. The spot rate of EURO quoted as EUR/US 1:105099 Explain bid and ask price for this quotation. IF you want to buy EURO50,000, how much would this cost you in USD to have EURO. What is percentage of spread the dealer is making? Question 6 a) Discuss at least two reasons for the popularity of international money markets b) A US company issues 180 Euro-commercial paper with a face value of $1,000,000, yielding at 5.75\%P.a. Calculate the price of this security. c) Describe and list at least 2 reasons why investors and borrowers often preferred off-shore currencies markets? Question 11 Describe and discuss at least three international Financial Markets with example (please refer to international financial market notes - Foreign exchange Market - International Money Markets - International bond markets - International stock Markets Question 12 List at least 3 international money market securities - EUROdollars time deposit, Eurocommercial Paper Market, EURO notes Question 13 What is the Underwriting process in the international Bond markets? Eurobonds are underwritten by a multinational syndicate of investment and simultaneously placed in many countries proving a wide spectrum of funds source to tap. Question 14 Describe and discuss about Eurocurrency market. - The international money market has as its core the euro-currency deposit market, also called the offshore currency market. - A Eurocurrency is a freely convertible currency deposited in a bank outside its country of origin. - For example, Eurodollars are U.5. dollar-denominated time deposits in banks located outside of the United States. Question 15 What is an American Depository receipt (ADRs)? Non-US corporations or government that need large amount of funds sometimes issue shares in the US (Yankee stock offering) Non-US firs also obtain equity financing by using ADP5, which are certificates representing bundle of shares. ADR shares can be traded just like shares, the price of an ADR changes each day in response to demand and supply conditions. Price of PAD= Conv Pfs 5 - Conv= number of foreign shares that can be obtained for 1 ADR - Pfs = price of the foreign shares measured in foreign currency - S is the spot rate for the foreign currency units: $1 Question 15 Show how a rise in demand and supply affect currency value with a proper diagram A rise in the demand for sterling (caused by a rise in exports or an increase in the speculative demand for sterling) leads to an appreciation in the value of the pound. Changes in currency supply also have an effect. In the diagram above there is an increase in currency supply (51-52) which puts downward pressure on the market value of the exchange rate
