Leveraging my treasury expertise at Ecobank Ghana, where I’ve structured derivatives under BoG guidelines, these concepts integrate risk management and policy.

a) Using Interest Rate Swap for Exchange Rate Risk (9 Marks): An interest rate swap (IRS) exchanges fixed for floating rates, but for exchange rate risk (currency fluctuations), it’s often combined with currency swaps. A company borrows in foreign currency (e.g., USD at floating LIBOR) and swaps to fixed cedi payments. Explanation: Counterparty agreement hedges volatility; net effect converts exposure. In Ghana, BoG regulates via Forex Bureau Guidelines; example: Exporters like cocoa firms swap USD revenues to cedi fixed rates, mitigating depreciation (e.g., 2022 cedi fall). Benefits: Cost-effective, no principal exchange; risks: Counterparty default, managed via collateral under ISDA agreements adapted for Ghana.

b) Reasons for Leasing Popularity (4 Marks):

• Off-balance sheet financing preserves debt capacity, improving ratios under IFRS 16 (but now capitalized).
• Tax advantages: Deductible payments, per Income Tax Act 896.
• Flexibility: Short-term access to assets without ownership risks.
• Cash flow management: Fixed payments aid budgeting; example: Ghanaian miners lease equipment post-DDEP to conserve cash.

c) Intermediate Target Variables of Economic Policy (5 Marks):

• Money Supply (e.g., M2): Aggregate currency and deposits; BoG targets to control inflation.
• Interest Rates (e.g., policy rate): Cost of borrowing; adjusted for growth/stability.
• Exchange Rates: Currency value; managed for trade balance.
• Credit Growth: Bank lending volume; curbs overheating.
• Inflation Expectations: Forward-looking metric; influences behavior.

d) Redemption Yield (2 Marks): Also yield to maturity, it’s the total return on a bond if held to redemption, including interest and capital gain/loss, discounted to present value. Formula: Solves for r in PV = Σ(C/(1+r)^t) + FV/(1+r)^n. Practical: Guides investment in Ghana T-bonds.

These tools enhance corporate resilience, compliant with BoG’s risk directives.