NM April-May 2023 assignment help-If the risk free interest rate in the US remains the same, while the interest rate in Great Britain increases by 25 bps, how would the calculations in (a) and (b) change.
NM April-May 2023 assignment help-If the risk free interest rate in the US remains the same, while the interest rate in Great Britain increases by 25 bps, how would the calculations in (a) and (b) change.
Business Economics
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Given that the USD-GBP sport rate is 0.82
Calculate:
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The 90-day forward USD-GBP exchange rate, given that the
90-day risk free interest rate in the United States is 0.25%
90-day risk free interest rate in Great Britain is 0.1%
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The 180-day forward USD-GBP exchange rate, given that the
180-day risk free interest rate in the United States is 0.25%
180-day risk free interest rate in Great Britain is 0.1%
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If the risk free interest rate in the US remains the same, while the interest rate in Great Britain increases by 25 bps, how would the calculations in (a) and (b) change. (10 Marks)
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A representative economy is described by the following parameters.
C = C0 + bYd, T = T0, I = I0
C0 = 85, I0 = 30, T0 = 20, b = 0.75.
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Find the equilibrium output for this economy, assuming it is a closed economy.
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How would this equilibrium output change if the tax structure becomes a proportional tax? New tax rule, T = 20 + 0.2Y
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Find the level of
Consumption
Tax collection (proportional tax) (10 Marks)
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Case Analysis:
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Detroit Inc. is a company working in the area of automobiles in the USA. They are planning to enter the Indian automobile market. They would like to study the market structure before they are going to enter the market in India. They are undertaking this study to understand the pricing power they could have in the Indian automobiles industry. Assuming you are advising them on the same, what technique would you be employing to understand the market structure? Give rationale for your choice of technique. (5 Marks)
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Assuming Indian automobile industry follows an oligopoly market with price leadership, power vested in one dominant firm, how would you advise Detroit Inc. in terms of their product placement and pricing strategy? Give a brief summary of your advice to Detroit Inc.
Hint: Advice should focus on the cooperative or non cooperative model that should be adopted by Auto Inc. based on the existing scenario in Indian automobile industry, and the reasons supporting the choice of the model. (5 Marks)