The Bank of Canada has recently announced that it will start to wind down its bond buying program. See the article on next page entitled “Bank of Canada set to pull back from bond-buying” from the National Post. Use international economic and financial theory to evaluate the anticipated impacts of the Bank’s policy on the following variables:
a. Equilibrium interest rates in Canada.
b. Equilibrium bond prices in Canada.
c. Weighted average cost of capital of Canadian resident corporations.
d. Size of net inflows on the financial account of Canada’s balance of payments.
e. Nominal CAD/USD exchange rate.
Answer each part a., b., c., d., and e. separately using appropriate models. This requires qualitative answers, not quantitative.
f. Do you think the Bank of Canada is justified in winding down bond buying at this time? Why or why not? Again, use economic and financial theory to answer.
. The Bank of Canada has recently announced that it will start to wind down its bond buying program. See the article on next page entitled “Bank of Canada set to pull back from bond-buying” from the National Post. Use international economic and financial theory to evaluate the anticipated impacts of the Bank’s policy on the following variables: a. Equilibrium interest rates in Canada. b. Equilibrium bond prices in Canada. c. Weighted average cost of capital of Canadian resident corporations. d. Size of net inflows on the financial account of Canada’s balance of payments. e. Nominal CAD/USD exchange rate. Answer each part a., b., c., d., and e. separately using appropriate models. This requires qualitative answers, not quantitative. f. Do you think the Bank of Canada is justified in winding down bond buying at this time? Why or why not? Again, use economic and financial theory to answer. . The Bank of Canada has recently announced that it will start to wind down its bond buying program. See the article on next page entitled “Bank of Canada set to pull back from bond-buying” from the National Post. Use international economic and financial theory to evaluate the anticipated impacts of the Bank’s policy on the following variables: a. Equilibrium interest rates in Canada. b. Equilibrium bond prices in Canada. c. Weighted average cost of capital of Canadian resident corporations. d. Size of net inflows on the financial account of Canada’s balance of payments. e. Nominal CAD/USD exchange rate. Answer each part a., b., c., d., and e. separately using appropriate models. This requires qualitative answers, not quantitative. f. Do you think the Bank of Canada is justified in winding down bond buying at this time? Why or why not? Again, use economic and financial theory to answer. . Coca-Cola Corporation has indicated that it plans to sell a portion of Coca-Cola Beverages Africa bottling business via an initial public offering. See the article on next page entitled “Coca-Cola revenue and sales bubble up” from the National Post. Use international economic and financial theory to answer the following questions: a. What is the company’s justification for the separate stock market listing? What are the potential advantages (there are several) of the separate listing for the company? b. What responsibilities and costs come with the separate listing? c. Identify and explain the new political risks that come with the separate listing. d. In your opinion, is the company justified in spinning off its African unit? Why or why not?