Does the Interest Rate Parity Hold in Each of the Following

question 100

Essay

Does the interest rate parity hold in each of the following cases by using the formula
Rt - Rt = (Ee+1 - Et)/Et ? In case it does not hold, calculate the risk premium.
1. Rt = 5, = 3, Et = 5, = 17
2. Rt = 6, = 4, Et = 5, = 5
3. Rt = 7, = 5, Et = 5, = 8
4. Rt = 8, = 3, Et = 5, = 15
5. Rt = 5, = 4, Et = 6, = 6
6. Rt = 5, = 5, Et = 3, = 10
7. Rt = 5, = 6, Et = 2, = 8
8. Rt = 5, = 3, Et = 0, = 20
9. Rt = 5, = 9, Et = 7, = 3
10. Rt = 5, = 10, Et = 8, = 7

Calculate stock transactions impact on total paid-in capital and stockholders' equity.

Analyze the effects of treasury stock transactions on a company's financial statements.

Journalize stock transactions including issuance, dividend declaration, and treasury stock transactions.

Understand the components of stockholders' equity and the roles of authorized, issued, and outstanding shares.

---

Definitions:

Proceeds

The amount of money brought in from a transaction or sale, before any expenses are deducted.

Compounded Semi-annually

The process of applying interest to both the principal amount and any accumulated interest every six months.

RRSP

A Registered Retirement Savings Plan, which is a retirement savings and investing vehicle for employees and the self-employed in Canada, offering tax benefits.

Maturity Value

The amount of money an investment will grow to over a period of time at a specified interest rate.