This assignment focuses on Multinational Finance and Investment. There is also a description of  Capital Asset Pricing Model. So, decompose the return into two components attributable to moving to maturity and the increase in the credit spread.

Multinational Finance and Investment : The Capital Asset Pricing Model

Multinational Finance and Investment Assessment: Individual Coursework INSTRUCTIONS TO CANDIDATES •Only a single Microsoft Word documentis accepted for submission. The permissible formats are limited to the following file extensions: .doc, .docx. COURSEWORK BRIEF The individual coursework requires you to answer three questions.So,you should complete the coursework independently. There is no (upper/lower) limit on the number of words for this coursework. Also, Guidance on how to write mathematical equations in Microsoft Wordis provided below: Math equation examples Descriptions How to write in Microsoft Word 2 + 2 = 4 Two plus two equals four 2 + 2 = 4 2 -2 = 4 Two minus two equals zero 2 -2 = 0 2 ×2 = 4 Two times two equals four 2*2 = 4

Multinational Finance and Investment : The Capital Asset Pricing Model

2÷2 = 1 OR =1Two divided by two equals one 2/2 = 1 2! =4Two to the power of two equals four 2^2 = 4 √4= 2 Square root of four equals two sqrt(4) = 2 OR 4^(0.5) = 2 ((2+2)!/4=2sqrt((2+2)^2/4) = 2

c) Decompose the return into two components attributable to moving to maturity and the increase in the credit spread. (10 marks)

Multinational Finance and Investment : The Capital Asset Pricing Model

Question 2: (Total 35 marks) Answer the following independentquestions: a)Explain why international stock might have high volatility but low betas. (5 marks) b)Do you agree withthe following statement? And explain why. (5 marks) “The Capital Asset Pricing Model [CAPM] assumes that the stock market is dominated by well diversified investors who are concerned with specific risk. “ c) Illustrate how to synthesize a forward hedging strategy by using only the money markets, in order to hedge against the foreign exchange risk. (5 marks) d) Use a numerical example to illustrate that when there is a large change in the interest rate. So, the approximation error by using the duration and convexity rule is smaller than the approximation error by using the duration rule only.

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