International Finance - 1209 Words

Chapter 4 Practice Problems Percentage Depreciation †¢ Assume the spot rate of the British pound is $1.73. The expected spot rate one year from now is assumed to be $1.66. What percentage depreciation does this reflect? †¢ ($1 66 – $1 73)/$1 73 = –4.05% ($1.66 $1.73)/$1.73 4 05% Expected depreciation of 4.05% percent Inflation Effects on Exchange Rates †¢ Assume that the U.S. inflation rate becomes high relative to Canadian inflation. Other things being equal, how should this affect the (a) U.S. demand for Canadian dollars, (b) supply of Canadian dollars for sale, and (c) equilibrium value of the Canadian dollar? ï  ¶ Demand for Canadian dollars should increase, ï  ¶ Supply of Canadian dollars for sale should decrease, and ï  ¶ The†¦show more content†¦interest rates, while U.S. investors reduce their investments in Canada’s securities. ï  ¶ This places downward pressure on the Canadian dollar’s value. 3 Interaction of Exchange Rates †¢ How might this affect the value of the Canadian dollar against the Japanese yen? ï  ¶ Japanese investors that previously invested in Canada may , p shift to the U.S. Thus, the reduced flow of funds from Japan would place downward pressure on the Canadian dollar against the Japanese yen. Relative Importance of Factors Affecting Exchange Rate Risk †¢ Assume that the level of capital flows between the U.S. and the country of Krendo is negligible and will continue to be. But there is a substantial amount of trade between the U.S. and the country of Krendo. Which affect, high inflation or high interest rates will be seen in the value of the Krendo’s currency? Krendo s †¢ The inflation effect will be stronger than the interest rate effect because inflation affects trade flows. ï  ¶ The high inflation should cause downward pressure on the kren. Speculation †¢ Blue Demon Bank expects that the Mexican peso will depreciate against the dollar from its spot rate of $.15 to $.14 in 10 days. The following interbank lending and borrowing rates exist: U.S. dollar Mexican peso Lending Rate Borrowing Rate 8.0% 8.3% 8.5% 8.7% Assume that Blue Demon Bank has a borrowing capacity of either $10 million or 70 million pesos in the interbank market, depending on which currency it wants to borrow.Show MoreRelatedInternational Finance Exam4417 Words   |  18 PagesInternational finance FIN 412 Exam #2 MC:  Examples of single-currency interest rate swap and cross-currency interest rate swap are:   A.  fixed-for-floating rate interest rate swap, where one counterparty exchanges the interest payments of a floating- rate debt obligations for fixed-rate interest payments of the other counter party B.  fixed-for-fixed rate debt service (currency swap), where one counterparty exchanges the debt service obligations of a bond denominated in one currency forRead MoreSources Of Finance For Synergy International Limited1627 Words   |  7 Pagessources of finance for Synergy International Limited to enable the company to invest in new machinery, at a cost of approximately  £225,000, in order to manufacture mobile phone covers for the Samsung S7 Edge. Also included in this report, are the information needs of the different decision makers. There are long term external sources of finance that Synergy International Limited could access; they could issue preference or ordinary shares although there would be issue costs. Finance, in the wayRead MoreInternational Trade and Finance1501 Words   |  7 PagesLinda Luc Duong International Trade and Finance ECO/372 August 27, 2012 Matthew J. Angner International Trade and Finance When there is a surplus of imports brought into the United States it means that the price of the products will drop. Companies in the United States are competing with the Chinese made products will suffer from price drops on goods. Lower prices on goods will benefit consumers. Large screen Liquid Crystal Display (LCD) and High Definition Television (HDTV) is a good exampleRead MoreInternational finance management7674 Words   |  31 PagesAgency Problems Management Structure of an MNC Why Fimrs Pursue International Business Theory of Comparative Advantage Imperfect Markets Theory Product Cycle Theory How Firms Engage in International Business International Trade Licensing Franchising Joint Ventures Acquisitions of Existing Operations Establishing New Foreign Subsidiaries Summary of Methods Valuation Model for an MNC Domestic Model Valuing International Cash Flows Uncertainty Surrounding an MNCs Cash Flows UncertaintyRead MoreCase: International Trade and Trade Fina nce885 Words   |  4 PagesFITTskills: International Trade Finance Case Study #1: New Modes of Trade Finance Case Study #1: New Modes of Trade Finance Trade finance in the twenty-first century: plug and pay? Palate-Able Delights (PAD) is a niche retailer of high-end food products imported from various parts of the world. Iranian saffron and caviar, French champagnes, Italian truffles and olive oils, vintage balsamic vinegars, fine cheeses, reserve wines from the leading vintners, even limited-availability spring waters†¦ifRead MoreInternational Finance and Economy Essay1225 Words   |  5 Pagesall-time high of 149,713.4 USD Million in November of 2013. The foreign currency reserve for Turkey in December of 2013 was 109,279.75 USD million. Some worry that much of the foreign capital that finances Turkey’s current account deficit is of the flighty sort, which can leave quickly. (International Reserves and Foreign Currency Liquidity – TURKEY) With â€Å"hot money† exiting out of Turkey and their central bank hiking interest rates to try to keep their currency from falling any more, it makes itRead MoreTrade Finance and International Trade1903 Words   |  8 PagesAccording to Branch trade finance has become a strong bargaining point in the conduct of international trade. Negotiating strategy needed to reduce finance risk (Branch, 2005). Trade finance is a topic contained the financial facilities industry. Manufactured goods is sold and distributed to overseas; therefore, it takes longer to get paid. Additional time and energy is required to make sure that buyers are trustworthy and creditworthy. Also, foreign buyers who are just like domestic buyers. TheyRead MoreInternational Trade And Finance ( Bus571 )2452 Words   |  10 PagesNtec Concordia Institute of Business Submitted to: Adrian liew Course: Diploma in Business Management (Level-7) Subject: International trade and finance (BUS571) Submitted By: Amanpreet singh bajaj Student ID:CIB00002YB Assignment: International trade Introduction Quality NZ is a niche supplier of New Zealand’s first quality products and services to the rapidly expanding Indian market, with a specific focus on the food and BeverageRead MoreGlobalization and Its Impact on International Finance6130 Words   |  25 PagesGLOBALIZATION AND ITS IMPACT ON INTERNATIONAL FINANCE CONTENTS 1. Overview†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦...1 2. Introduction to the concept of globalization†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦..2 3. Different areas of effect of globalization†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦..5 4. International finance†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦..9 5. The impact of globalization on international finance i. Relationship between globalization and international finance†¦Ã¢â‚¬ ¦....12 ii. Globalization and its impact on developing countries†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Read MoreEssay on finance case vanguard international growth830 Words   |  4 Pagesï » ¿ Issues 1. Explain why an individual investor might want to invest in an international growth fund? 2. Describe the risk associated with making an investment in an international growth fund. Identify the risks that would be common to domestic an international funds, and those risk that would be unique to an international fund. 3. Discuss how the fact that foreign companies are not subject to the same accounting, auditing, and financial reporting standards and practices as U.S. companies poses