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What is the difference between the immediate and the long-run effect of direct investment by foreigners?
Compute the interest rate risk exposure of a bond position or of a bond portfolio, given a change in interest rates.
Discuss the three arguments to adopt trade restrictions and discuss popular fallacies related to trade restrictions.
Distinguish between commonly used trade-restricting devices, including tariffs, quotas, voluntary export restraints, and exchange-rate controls.
State the conditions under which a nation can gain from international trade in the context of both comparative and absolute advantage.
Explain the effect of inflation on the real rate of return earned by financial securities and by physical assets.
Explain the necessary conditions to achieve the cost-minimizing employment levels for two or more variable resources.
Explain the relationship among the required reserve ratio, the potential deposit expansion multiplier, and deposit expansion multiplier.
Discuss the impact of expansionary and restrictive fiscal policies based on the basic Keynesian model, the crowding-out model and the new classical model.
Explain the importance of the timing of changes in fiscal policy and the difficulties in achieving proper timing.
Discuss inflation's causes, distinguish between anticipated and unanticipated inflation, and discuss the harmful effects of both on economic activity.
Identify components of a compan's executive compensation program that positively or negatively affect shareowners interests.
Explain the implications of a weak corporate code of ethics with regard to related party transactions and personal use of company assets.
Identify characteristics of a board that contribute to the board's independence, and state why each characteristic is important for shareowners interests.
List and explain the major factors that enable a board to exercise its duty to act in the best long-term interests of shareowners.
What is the practical value of calculating modified duration? Does modified duration change result of using duration relationship to estimate price sensitivity?
Estimate the convexity for each of the following three bonds, all of which trade at a yield to maturity of 8 percent and have face values of $1,000.
what are the bond price predictions in each of the four cases using the duration plus convexity relationship? What is the amount of error in these predictions?
What will be the bonds' new prices if market yields change immediately by +/ - 0.10 percent? What will be the new prices if market yields change immediately?
Using your answers to parts (a) and (b), what is the percentage change in the bond's price as a result of the 1 percent increase in interest rates?
What has been the percentage change in price? Repeat parts (a), (b), and (c) for a 16-year bond. What do the respective changes in bond prices indicate?
What changes have occurred in the financial markets that would allow financial institutions to restructure their balance sheets more rapidly?
Identify and discuss three criticisms of using the duration model to immunize the portfolio of a financial institution.
What is the average duration of all the liabilities? What is the leverage adjusted duration gap? What is the interest rate risk exposure?
What is the true market value of the loan investment and the liability after the change in interest rates?