Interest rate parity

Importance Our aim is to find out if there is Interest Rate Parity (IRP) between the USA and China, over an annualised period of 10 years (April 2005-April 2015). We think that this is an important topic as the US are the current global economic superpower, and China is an up and coming power. Also, as there is a lot of trade between the two countries, and we know that china is highly dependant on their exports for GDP growth. A higher Yuan causes exports to slow ( 1% decline for every 10% increase in Yuan), leading to slower economic growth. As economic growth slows, their economy becomes more risky, which adds a risk premium to their interest rates in order to compensate investors for a riskier investment in their economy, as…

The main thought of the interest rate parity is that hedged returns resulting from investing in different currencies should, within reason pertaining to the level of the interest rates, should be the same. This thought is separated into what we know as covered and uncovered interest rate parity. In covered interest rate parity, the forward exchange rates should incorporate the different in interest rates between the two countries. There is no interest rate advantage regardless of the interest…

appearance, in December. Convulsions in financial markets, it seems, could restrain economic growth. “Financial conditions in the United States have recently become less supportive of growth,” she told the House Financial Services Committee. “These developments, if they prove persistent, could weigh on the outlook for economic activity.” Continue reading the main story RELATED COVERAGE News Analysis: Conflicting Economic Indicators Challenge Fed’s Policy MakersFEB. 5, 2016 What Happens When…

In the past few years, Brazil had gotten their hyperinflation under control and it was estimated to be 8% in the future. Brazil was the second largest trading partner with the US and the nation’s economy was going to be the sixth largest in the world by 2015. For Wiley and the automobile industry Brazil’s 3-4% growth rate in the next few years presented a great opportunity given its influence in the Latin American economies. Other advantage and disadvantages of locating its operations in Brazil…

policy as the process of setting the interest rate on overnight loans in the money market. This is known as the “cash rate”. RBA further explains that the cash rate influences other interest rates in the economy (including the money-market rates and the key rates of banks and financial intermediaries such as mortgage and business loan rates), and this affects the behaviour of borrowers and lenders, economic activity, and ultimately, the rate of inflation. As mentioned, monetary policy sets the…

The global financial market has actively changed since the 1990s after experiencing two financial crises in 1997 and 2008, and consequently, the central bank’s features such as structure and functions have altered too, especially its position with the government. To date, central bank’s independence, accountability, and transparency have been seen as three essential pillars of this change. Padayachee (2004) and Crowe & Meade (2008) comment that this is a real revolution in the central bank’s…

Ticket scalping has been around for many years and is defined as ‘an unsanctioned ticket investor who purchases tickets to an event and resells them at raised prices.’ The action to ‘scalp’ has been referenced as early as 1869 in American English to theater tickets but mostly to that of the 19th century referencing railway tickets. A scalper was a common utterance for “con man or cheater” in the late 19th century. (Scalper) The second-hand market grew exponentially as opportunists realized they…

This is relevant because setting market rates and targets for inflation is a key finance principle used by the government. Market interest rates help drive or control the level of inflation. In this article it is pointed out that rates have been low for an extremely long period of time and even at close to full employment, inflation remains near 1% (Ip, 2016). The situation here is what to do with rates. Inflation and interest rates are linked. Typically when rates rise, the economy slows…

Reserve were mandated to report deposits from the public and had a regulated interest rate, which placed them at a huge disadvantage due to the fact that the public was opting towards mutual funds in order to increase savings. As mentioned in the World Public Library (2016), the approval of this Act allowed for all the banks in the nation to report deposits, to charge any interest for loans and increased the deposit insurance from $40,000 to $100,000.…

Determining Financial Viability Managing finances within a health care organization can be seen as a daunting task. There is a lot of work that goes into the success of a health care organization. Finances and accounting are two areas of health care that manage and plan the spending of an organization. Together they create the means for a successful financial plan and bring in profits. This essay will examine the relationship between finance and accounting following with how they determine…