Price Will Rise to Eliminate a Shortage

question 55

True/False

Price will rise to eliminate a shortage.

Explain the International Fisher Effect and its relevance to real and nominal interest rates across countries.

Describe the mechanics and purposes of various international financial agreements and instruments such as Eurobonds and Note Issuance Facilities.

Understand the process and implications of covered interest arbitrage.

Realize the role of international corporations like Export Development Canada in facilitating international trade.

---

Definitions:

Real Interest Rate

The interest rate that has been adjusted to remove the effects of inflation, reflecting the real cost of funds to the borrower and the real yield to the lender or investor.

Nominal Net Cash Flow

The total amount of cash that flows into and out of a business, not adjusted for inflation.

Inflation Rate

The percentage increase in the general level of prices for goods and services in an economy over a period of time.

NPV

Net Present Value; a financial calculation used to determine the value of a series of future cash flows by discounting them to the present using a specific rate.