Assignment 11.) Explain the logic behind the establishment of the Gold standard. Why did the gold...

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Assignment 11.) Explain the logic behind the establishment of the Gold standard. Why did the gold standard finally come to an end?2.) What is the difference between absolute advantage and comparative advantage when it comes international trade?3.) Assuming that company A pays a fixed rate of 6.25% and a floating rate of LIBOR + 1%. Company B pays a fixed rate of 7.25% and a floating rate of LIBOR + 1.40%. Based upon comparative advantage, develop a solution for this interest rate swap. Assume that the agreed upon rate is 6.00%.4.) Please explain the reasoning behind the establishment of the euro. Why has there been so many issues related to the stability of the euro in recent months?5.) Please explain which entities are more expected to use interest rate swaps and which entities would more likely use currency swaps.6.) How do swap dealers attempt to hedge their residual risk when engaging in swap transactions?7.) International corporate governance has become a major issue in financial markets. Please provide a few examples of differences in corporate governance in various countries.8.) Why would a multinational be willing to issue a bond in a foreign country and what would be the motivation? How can they attempt to minimize their risk is they do issue these bonds?			Document Preview:				Assignment 1   1.)  Explain the logic behind the establishment of the Gold standard.  Why did the gold standard finally come to an end? 2.)  What is the difference between absolute advantage and comparative advantage when it comes international trade? 3.) Assuming that company A pays a fixed rate of 6.25% and a floating rate of LIBOR + 1%.  Company B pays a fixed rate of 7.25% and a floating rate of LIBOR + 1.40%.  Based upon comparative advantage, develop a solution for this interest rate swap.  Assume that the agreed upon rate is 6.00%.   4.) Please explain the reasoning behind the establishment of the euro.  Why has there been so many issues related to the stability of the euro in recent months? 5.) Please explain which entities are more expected to use interest rate swaps and which entities would more likely use currency swaps. 6.) How do swap dealers attempt to hedge their residual risk when engaging in swap transactions? 7.) International corporate governance has become a major issue in financial markets.  Please provide a few examples of differences in corporate governance in various countries. 8.) Why would a multinational be willing to issue a bond in a foreign country and what would be the motivation?  How can they attempt to minimize their risk is they do issue these bonds?

David · Accepted Answer

2) What is the difference between absolute advantage and comparative advantage when it comes international trade?
Answer:
Absolute advantage – A country has an absolute advantage in production of one good relative another good if it can produce the good with low cost or high production. It compares the productivity of the industry across the countries. In Zambia, the country has absolute advantage in the production of copper compared to many countries. It occurs because the country has reserves of copper ore. The country gains from the specialization and trade in the production of goods. When Zambia produces copper and export to other countries that specializes in the production of other goods and services, it gains from the international trade. 
Comparative advantage – A country has comparative advantage in the production of a good that is produced at low opportunity cost compared to the trading partners. Some of the countries have absolute advantages in production of many goods while some have absolute disadvantage. They are not efficient in producing anything compared to the trading partners. According to the theory of comparative advantage, it is better for the country to be inefficient in producing goods or service in specializing the production of good which is least inefficient compared to the production of other goods. 
4.) Please explain the reasoning behind the establishment of the euro.  Why has there been so many issues related to the stability of the euro in recent months?
Answer:
The euro was established to create stability in currency by encouraging the countries in co-coordinating the monetary policies. It created stable exchange rates to improve the trade between European Union member states and helps in development of the market.

Assignment 1 1.) Explain the logic behind the establishment of the Gold standard. Why did the gold standard finally come to an end? 2.) What is the difference between absolute advantage and...

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