CASE STUDY: (20 Marks)

(A) Refer to the Graph I & II for the below question:

Can you explain the reason behind the inversion of the Yield Curve and its significance?

Could you describe what an Option Adjusted Spread (OAS) is?

Can you explain what does Bloomberg Global Aggregate, Bloomberg Emerging Markets, and Bloomberg Global High Yield? (10 marks)

B) Can you provide a brief overview of the current market conditions based on the yield curve and spread charts (as of 01/27/2023), and make general comments on the expected performance of various bonds in terms of term (short versus long) and credit (governments, investment grade, high yield, etc.) for Q1 2023? (10 marks)

*Feel free to research online but explain in your own words

Chapman Co. is a privately owned MNC in Canada that plans to engage in an initial public offering (IPO) of stock, so that it can finance its international expansion. At the present time, world stock market conditions are very weak but are expected to improve. The Canadian market tends to be weak in periods when the other stock markets around the world are weak. A financial manager of Chapman Co. recommends that it wait until the world stock markets recover before it issues stock. Another manager believes that Chapman Co. could issue its stock now even if the price would be low, since its stock price should rise later once world stock markets recover. If Chapman is really trying to raise equity funds (cash) who is correct? Explain your answer by stating:

In stock markets, what is an IPO, and, 2 Mark

Why do companies issue IPOs? Explain. 2 Marks

Which international markets are used by the MNCs to raise equity funds? 2 Marks

What does the Canadian company Shopify Inc. do and name one of it competitor? 4 Marks

Foreign Exchange. You live in the USA and just came back from Canada, where the Canadian dollar was worth $0.77. You still have C$300 from your trip and could exchange them for dollars at the airport, but the airport foreign exchange desk will only buy them for $0.70 U.S. Next week, you will be going to Mexico and will need pesos. The airport foreign exchange desk will sell you pesos for $0.07 U.S. per peso. You met a tourist at the airport who is from Mexico and is on his way to Canada. He is willing to buy your C$300 for 2,750 pesos. Should you accept the offer or cash the Canadian dollars in at the airport? Yes, or No? Explain. 5 Marks

What determines Exchange Rates?

a) Explain how the demand and supply causes the value of a currency to change? 5 Marks

Inflation Effects on Exchange Rates. Assume that the U.S. inflation rate becomes high relative to Canadian inflation. Other things being equal, explain how should this affect the:

(a) U.S. demand for Canadian dollars, 2.5 Marks

(b) supply of Canadian dollars for sale, and 2.5 Marks

(c) equilibrium value of the Canadian dollar? 2.5 Marks

(d) What does the PPP Theory state? 2.5 Marks

Cover page with your name and

Assignment No. 1

Subject Name and Number: SIB675, and

The Due Date: February 16, 2023

Be creative use charts/diagrams to explain

NOTE: If your work indicates you copied from another student/website you will get a grade of ZERO!

Please do not use CHAT GPT to any other AI tools to answer the below questions

P.S. I have access to AI tool detector