2. Assume that Stephanie Wong, portfolio manager for Fourth Street Global Investors based in New York City, buys a 10-year, 4% coupon bond issued by the British Government for GBP 10,000,000. The bond is issued at par on April 4, 2018 when the spot rate is 1.40 USD/GBP. One year risk-free interest rates are 2% for USD and 4% for GBP and covered interest parity holds. Coupons on the bond are paid on an annual basis. a. Suppose after one year, on April 4, 2019 long-term GBP interest rates have increased to 4.14% and Stephanie’s bond is now worth only 9,900,000. The spot currency rate on April 4, 2019 is now 1.41 USD/GBP. 1) Calculate the return on Stephanie’s bond in USD terms assuming she did not currency hedge the bond. 2) Calculate the return on Stephanie’s bond in USD terms assuming she used a naïve currency hedge, i. e. she assumed that GBP interest rates would not change.

Part two of threewhich accurately describes a cause for inflation? the federal reserve requires banks to keep more money on reserve. the federal reserve raises interest rates and slows economic activity. the government places too much money into circulation. the government places too little money into circulation. what are consequences of rapid inflation? (select all that apply.) savings accounts become less desirable because interest earned is lower than inflation individual purchasing power increases, which results in an increase in demand. individual purchasing power decreases, which results in a decrease in demand. people postpone purchasing expensive items, such as homes, until prices drop.how does the federal reserve stabilize and safeguard the nation’s economy? (select all that apply.) it distributes currency and oversees fiscal conditions. it implements american monetary policy. it regulates banks and defends consumer credit rights. it regulates and oversees the nasdaq stock exchange. what are functions of the federal reserve? (select all that apply.) it offers financial services within the government. it creates us coins. it prints us dollars. it enters us currency into circulation.how does the federal reserve bank fit into the balance of power among the three branches of the federal government established by the constitution? the chair of the federal reserve is appointed by the president and approved by the senate. the chair of the federal reserve is elected by popular vote. the chair of the federal reserve is appointed by congress and approved by the supreme court. the chair of the federal reserve is appointed in a secret meeting.who appoints the board of governors of the federal reserve system? the us president the us supreme court the us house of representatives the us senatewhy is federal oversight crucial to the operation of the federal reserve bank? the federal reserve is the nation’s central banking system. the federal reserve controls the nomination of legislators to committees. the federal reserve funds mandatory government expenditures. the federal reserve sets rules and regulations for the new york stock exchange.what is the government accountability office (gao)? an independent agency that answers to congress and audits the federal reserve an internal review agency of the federal reserve used to promote its mission a government agency that answers to congress and audits the united states mint a private agency that advises the dent about fiscal policyhow does the law of comparable advantage lead to international trade? countries that do not engage in trade are in a stronger position economically than countries that do trade. countries that cannot produce products efficiently have to trade for the goods and services that other countries have. countries that have more resources are able to trade for a wider variety of items that can be offered for sale. countries make products they can produce efficiently and are able to get the rest of what they need through trade.when might a country produce a product even though it cannot do so efficiently? (select all that apply.) to ensure national security to minimize the sale of exports to ensure a trade deficit to increase the balance of trade