Question

Please answer all questions

Differentiate between the following:

a. stocks and bonds

b. international equity markets and euro currency markets

c. currency hedging and currency speculation

d. fixed exchanged rate and flexible exchange rate

Answer 1

A) Stocks and bonds

stocks	bonds
1)stocks are the financial instruments 2)it carries ownership interest issued by companies. 3)They are issued by companies. 4)The return is dividended. 5)The return is not guaranteed. 6)The risk is high	1)bonds are the debt instrument 2)they raise capital with a promise to pay back the amount with interest after some time . 3)they are issued by financial institutions , government institutions. 4)The return is in interest. 5)guaranteed returns 6)the risk is low comparatively to stocks

b) international equity markets and euro currency markets.

International equity markets	euro currency markets
1)international equity market is the tool for global intergration of economis. 2) it allows MNC to list there shares on the stock exchange of different countries. 3) it helps expand the investor base for any company. 4) it allows diversification and helps reduce regulation.	1)euro currency market is a market for money deposited outside the country where the money is printed or is the legal tender. 2)it is mostly used to circumvent heavy taxes in the market. 3) mostly influenced by regulatory environment of the offshore location. 4)it has nothing to do with euro(the currency of european nations)

c) currency hedging and currency speculation.

currency hedging	currency speclation
1)hedging is the act which prevents an investment against unforeseen. 2)it is there to control price risk. 3)there operations are risk averse 4)it involves the protection against the price changes.	1)in this process investors are involve in the trading of financial asset. 2)it relies upon the risk factors. in the terms of getting returns. 3)there operations are risk lovers. 4)they incurre risk to make profits.

d) fixed exchanged rate and flexible exchange rate.

fixed exchanged rate	flexible exchanged rate
1)it is the rate which is set by government and maintains the same level. 2)it is determined by central bank or government. 3)it changes the currency price (revaluation and devaluation). 4)speculation takes place when there is rumor about the policy changes(government).	1)it is the rate which varries upon the markets , variate according to the market forces. 2)it determined by supply forces and demands. 3)it changes the price ( appreciation and depreciation). 4)speculation very common.