1 Should financial managers aim to raise the stock value by any means? Please explain it clearly 2  Can investors earn profit without taking any risk if there is deviation in the forward exchange rate premium estimated from the notion of the interest rate parity and the actual forward exchange rate premium on the market? If this is possible, what would happen to the market forward exchange rate premium as a result of investors exploiting such arbitrage profit? Explain why

1 No, financial managers should not increase stock value by any means. They should resort to only ethical and sustainable measures to increase the stock value.

It may be possible to increase the short term profits by adopting unethical accounting practices, by postponing essential current expenditure and so on. But, such inflated/made up results cannot be sustained, as in the long run it would be counterproductive or not maintainable.

Instead financial managers should focus on the real goal of financial management of "maximization of shareholders' wealth", which, is of course the maximizing of present worth of decisions.

2 

Yes, investor can make arbitrage profit in such scenario when there will be the variation in forward exchange rate premium, which will be reflecting the difference between the spot rate and the forward rate and interest rate parity which will be reflecting the equivalence of interest rates between the two countries by taking a position which will be arbitraging the differences between rates of both the countries and these theoretical principles are based upon the theory that there are no fundamental transaction cost involved but there will be transaction cost involved in such processes and investor will be exposed to a chance of making profits by arbitraging at looking at various difference rates in different nations and he will be trying to arbitrage those discrepancy and make a profit for himself.

This process will be known as COVERED INTEREST ARBITRAGE in which the investor will be trying to utilise the discrepancy of interest rates in relation to forward exchange premium between different nations and he will be trying to capitalise upon the degree of discrepancy . the rate of return on such covered interest arbitrage will be lower with lower risk

when the investors will be exploiting such situations than the forward premium on exchange rates are going to go up because forward premium will be representative of difference between spot rate and forward rate and when investors will be trying to buy in forward markets by arbitrsu through different markets & it will be helpful in increasing the forward premium as buying will be leading to increase in the price in forward markets.