...ECO 202 M4 Assignment 2 Exchange Rates https://homeworklance.com/downloads/eco-202-m4-assignment-2-exchange-rates/ You own and operate a chain of electronic stores in Texas and you are considering expanding your inventory to include tablet work stations for small businesses. There is only one supplier of the brand of tablets you would like to stock in your store, and that firm is located in Mexico. You have researched the current spot and forward rates between the U.S. and Mexico, as indicated in Table-1: TABLE-1 Spot Rate 30-Day Forward 90-Day Forward 180-Day Forward U.S. Dollar/Peso 1.7851 1.7052 1.8051 1.7555 Peso/U.S. Dollar ? ? ? ? Questions: 1. Complete the Peso/ U.S. Dollar row in Table-1 and explain your methodology. 2. If you agree to pay 2-million pesos for 100,000 tablets at today’s spot rate, how much would you pay in U.S. dollars? 3. If you agree to pay 2-million pesos but wait 180 days and end up paying the 180-Day forward rate, how much would you be paying for the 100,000 tablets, in U.S. Dollars? 4. Your competitors sell the tablet for $41.20 and you must mark you product up from cost by at least 20% to earn a minimal profit, should you buy the tablets today? Explain your answer. 5. Should you wait to buy the tablets in 30 days at the current 30-day forward rate? Explain your...
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...regulations with respect to hygiene and safety standards for manufacturers which may impact the operations of RIM like faces pressure from the usage of toxic contents, energy usage and recycling ECONOMIC is fairly elastic and it is mostly based on consumer income but the recent economic down turn has had an impact as people are not willing to spend on a product unless the price is right and it offers the promised values but the smart phone industry is expected to grow at fairly steady pace and the developing economies of India, China,Latin America provides a platform for RIM (according to economic times 2009). Since the sales of blackberry are made all around the word , the fluctuation in exchange rates can suddenly make blackberry competitive The exchange rate fluctuation can have a profound impact on blackberry especially in price sensitive markets like India and China. Social in a country like USA sales of blackberry seems to be fairly high during the period of November to December, the holiday season another huge socio cultural factor which have an impact on RIM is the ever increasing usage of blackberry by antisocial elements which will have an impact on the brand image of the company and its product because the consumer markets in religiously...
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...Trade and Finance Speech ECO 372 Trade and Finance Speech Welcome, as the Speaker of the House it is my duty and honor to inform you of the current state of our country’s macro-economy. The proceeding will cover when there is a surplus of imports brought into the U.S. and its impact is has on the U.S. businesses and consumers involved. How government choices regarding tariffs and quotas affect international relations and trade. Foreign exchange rates, and how are they determined. Finally, import policy and procedure. When there is a surplus of imports brought into the United States the local economy suffers because the price of imports are lower and compete with the local brand. For example, the Chinese auto part industry has received heavy subsidies for doing business in the United States; as a result have increased their imports to our country. The heavy surplus has caused a major offset in the price of imports in comparison to domestic parts. As a result, American dollars are still going overseas instead of remaining on domestic soil. The automobile business is on an upswing but still cannot recoup the 400,000 jobs lost as a result of this recession. Instead it only has recouped approximately 60,000 out of the 29.1 percent sales increase. The local economy suffers and takes longer to stabilize because of the amount of money leaving the country (Economic Policy Institute, 2012.) The GDP is the formula for gross domestic product is the total market value of...
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...ECO/561 Week Six Learning Team Deliverable In week six our learning team reviewed course material for improving business decisions, economic concepts, and strategic planning. Our team gathered information to learn how to project the effect of credit markets on the economy, and the effect of global economic conditions regarding trade and specialized business decisions. We discussed the influence of growth on the economy and how important it is for a country to sustain growth. We learned about the basics of currency trading with the exchange rate and the two basic types. The spot exchange rate where the current rate is at the moment, and the forward exchange rate projected for a specific time in the future, for instance 30, 90, or 120 days from now. This is beneficial to know when comparing the exchange of currency one to another. The exchange rate of one currency cannot go too high or too low from other currency as it will affect import and export trade value too drastically. Our team learned there are basic macroeconomic relationships to consider in economics. The Income-Consumption and Income-Saving relationships show income that is disposable in a household and income saved. The economy depends on the flow of income consumption spent, and income saving are non-income determinants, which also consists of wealth and borrowing money. Interest-Rate-Investments relationships show the marginal benefit for the rate of return or profit and the cost of the interest rates...
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...International Trade and Finance ECO/372 July 30, 2012 Alexander Heil International Trade and Finance When the US has a surplus of imports it affects the companies in the US that make the same product. A study sponsored by the solar power industry has concluded that the United States ran a trade surplus of $1.88 billion in solar technologies in 2010, as exports of raw material and factory equipment for the solar sector outpaced imports of finished solar panels. China has a rapid rise in solar panel manufactures, which now represent 58 percent of the world’s solar panel manufacturing. While American solar panel producers are struggling and filing for bankruptcy (Bradsher, K. (2011). The following examples will show a sequence of events to describe the impact of trade on the GDP; US demand for imports increase, this increases US demand for pesos, with increased US demand for pesos they increase the value of the peso. Americans purchasing more imports will cause the GDP and employment to decrease. The change in the exchange rate will correct the situation. When the US exports to Mexico it will reverse the affects and US demand will increase (Infoplease.com (2012). Tariffs are taxes of imported goods; this increases the cost of the good in the domestic market. Domestic producers benefit from tariffs because they receive higher prices for their goods and the government benefits by collecting tax revenues. Less of the good is produced, and consumers pay higher...
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...understanding on the forces driving exchange rate changes as these would affect investment and financing opportunities. This report analyzes the movements of three currencies, Australian Dollar (AUD), Icelandic Krona (ISK), and Indian Rupee (INR) against US dollar, and suggests events that may cause the violations of three chosen currencies. Analysis shows that factors including but not limited to inflation rates, interest rate differences, foreign investment as well as demand and supply of domestic currency are highly correlated with exchange rate changes in chosen currencies. Based on the analysis, Purchasing Power Parity is used to forecast spot exchange rates of those chosen currencies in one-year and three-year time. Rationales and limitations of PPP are also given to analyze the forecasts of three currencies. Table of Content 1.0 Introduction 1 2.0 Question 1 1 2.1 AUD/USD 1 3.0 Question 2 4 3.1 ISK/USD 4 3.2 INR/USD 6 3.3 Common Events that May Have Influenced the Exchange Rate Changes 8 4.0 Question 3 9 4.1 Forecast of Currencies 9 4.2 Forecast of AUD 10 4.3 Forecast of ISK 11 4.3 Forecast of INR 11 4.3 Comments on the Forecasts 12 References 13 Figures & Tables Figure 1 Exchange Rate of AUD/USD Over Five Years 1 Figure 2 Percentage Change of AUD/USD Exchange Rate 2 Figure 3 Trends of AUD/USD and Gold Price 2 Figure 4 AUD/USD Exchange Rate and Interest Rate over Five Years 3 Figure 5 Exchange Rate (ISK/USD) 4 Figure 6 Percentage...
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...American University of Science &Technology Faculty of Business and Economics Department of Finance Course Syllabus (FIN 460) - International Finance – M.W. Fall 2014-2015 Course Description The subject matter of international finance is concerned with the monetary and macro-economic relations between countries. International finance is a constantly evolving subject that deals very much with real world issues such as balance of payments problems and policy, the causes of exchange-rate movements and the implications of macro-economic linkages between countries. Credit : 3 hours Prerequisites By course :Fin 350- Financial Markets & Institutions Eco 202- Macroeconomics Textbook : Fundamentals of Multinational Finance, 4th edition, 2012. Moffet/Stonehill/Eitman, Pearson, Prentice Hall. Supportive text : International Financial Management, Bekaert,Hodrick International Money and Finance: 7th edition by Michael Melvin Instructor : George El Kazzi, MMB Office Hours : M.W.F. from 6-7 pm E-mail : gkazzy@aust.edu.lb kazzifinance@yahoo.com Business Division e-mail: business.div@aust.edu.lb ________________________________________________________________________ Course Objectives To study the role that international trade and investment, currency movements...
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...report- Foreign exchange rate Group 4- Team 5 Bui Ai Phuong- s3445871 Nguyen Ha Phuong- s3445955 Nguyen Thi Minh Tam- s3360710 Bui Khac Xuan- s3342375 Table of contents Introduction 3 Market past performance 3 USD/VND exchange rate 3 AUD/USD exchange rate 4 Analysis of historical macro factors 4 GDP 4 Interest rate 6 Inflation rate 7 Government Intervention 8 Commodity Price 9 Market view and forecasting 10 GDP 10 Interest Rate 10 Inflation Rate 11 Commodity Price 12 Trading strategy 12 Risk anticipation 13 Conclusion 13 References 13 Introduction Vietnam bank for industry and trade- Vietinbank was established in 1988, after the separate from the State Bank of Vietnam. Over more than 20 years of development and growth, Vietinbank is one of the largest commercial bank, holding key role in the current market in Vietnam. As a foreign exchange dealing team working for Vietinbank, in this report, we will first explain the behavior of two currency pair: AUD/USD and USD/VND from 2013 to 2014 by analyzing some historical macro factors that affect the foreign exchange rate during the period. And then we will explain the behavior of these exchange rates over the next six months, after that undertake foreign exchange trading strategies to achieve maximum profit for Vietinbank. Market past performance USD/VND exchange rate According to the graph, in the first three quarter of the year 2013, USD/VND rate flutuated significantly...
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...have limited options to control their respective currency. This same was experienced by many developing Asian countries in the recent financial rout. Determination of Exchange Rate and its Fluctuations Like other prices, exchange rate also changes with the changes in the state of market. Just as other prices depend on supply and demand, exchange rate also depends on the configuration of forces of supply and demand. However, two important facets have to be noted: (i) Unlike goods and services, foreign exchange has no direct cost of production. It has only opportunity cost (Walras.1874). Import bills have to be paid through export earnings. So cost of production of exportable surpluses may be taken to constitute the direct production cost of exports and indirect cost of imports (Aggarwal, R. (1981)). Opportunity cost is accounted by with drawl of exportable surplus from domestic consumption. Fluctuations are a natural characteristic of foreign exchange rate market, provided that the exchange rate is not an administered price. If exchange rate is an administered price, it is determined administratively by the central bank of the country. Administered foreign exchange rate is generally endowed with stability as both demand for and supply of foreign currency is under the control of central bank. Exchange rate, on the whole, fluctuates like other prices, which generally varies with change in demand and/or supply. Imports, foreign aid, investment in other countries and remittance...
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...1.0 Introduction Airlines industry faces substantial strategic, financial, operational and hazard risks due to the nature of the operating environment. Financial risks create uncertainties about future cash flows due to changes in economic conditions as well as changes in revenues, operating expenditure and financing costs. Firms are urged to minimise these risks to have higher predictability on future cash flows in order to meet various obligations, for instance shareholders’ required rate of return and debt repayment. This report looks into Air New Zealand in particular to study two of the risks that are significant for an airline company, namely foreign currency risk and fuel price risk. Section 2 of this report gives an overview of the relationships between the operation of Air New Zealand with both the risks. Besides, discussions and suggestions on Air New Zealand risk management approaches are presented in Section 3. Finally, a brief summary and conclusion is included in the last section. 2.0 Risks Description 2.1 Fuel Price Risk The Nature of Fuel Price Risk Fuel price risk is the risk of fluctuations in fuel prices which could adversely affect the financial performance of Air New Zealand as jet fuel is a critical input factor for airlines. Fuel prices are affected by the supply and demand, oil price futures and the downside or upside movement in the US dollar against NZ dollar. In particular, the increase in jet fuel prices adds a significant amount to Air...
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...In a private placement, securities are sold to private (individual) investors rather than to institutions. (b) Private placements occur most frequently with stocks, but bonds can also be sold in a private placement. (c) Private placements are convenient for issuers, but the convenience is offset by higher flotation costs. (d) The SEC requires that all private placements be handled by a registered investment banker. (e) Private placements can generally bring in funds faster than is the case with public offerings. (Points: 20) 3. (TCO E) Dakota Trucking Company (DTC) is evaluating a potential lease for a truck with a 4-year life that costs $40,000 and falls into the MACRS 3-year class. If the firm borrows and buys the truck, the loan rate would be 10%, and the loan would be amortized over the truck's 4-year life. The loan payments would be made at the end of each year. The truck will be used for 4 years, at the end of which time it will be sold at an estimated residual value of $10,000. If DTC buys the truck, its after tax cash flows would be the following: (Year 1) - 6,339; (Year 2) -4,764; (Year 3)-9,943; (Year 4) -5,640; all occurring at the end of...
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...PREFACE During the last two decades, there has been a turmoil in the field of international money market resulting in various changes in the international subject of foreign exchange in a rather difficult one for it is highly technical and strictly governed by regulation which changes frequently. After a successful completion of internship program on Dhaka Bank, Khatungonj Branch over the topic of “Foreign Exchange Dealings”, I have attempted to produce a report over the mentioned topic. FOCUS OF THE REPORT This report highlights the theoretical as well as practical background of foreign exchange. As the DBL Ktg Branch deals with Import Business as well Export Business, this report will focus on import & export business mechanisms of foreign exchange. Initially this report will make a brief highlight on the overall Dhaka Bank Limited (DBL) & its Khatungonj (Ktg) Branch. Then it will discuss the basics of foreign exchange, means and methods for settlement of International trade, Import procedures, Details of documenting credit, exchange rate determination and financial statistics on foreign exchange business. In the end, the report will enclose an appendix, which will show the various financial results’ summary of the DBL Ktg Branch. I hope the report will achieve its ultimate objective. SAIDUL ALAM ACKNOWLEDGEMENT I have the pleasure to express my gratitude to the Almighty Allah (SWT) for giving me opportunity to complete my BBA course, internship Program...
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...Chapter Exchange Rate Determination and Forecasting QUESTIONS 1. What is the difference between the ex ante and the ex post real interest rate? 10 Answer: The ex post interest rate corrects the nominal interest rate with the realized or ex post rate of inflation; whereas the ex-ante (or expected) real interest rate corrects the nominal interest rate for expected inflation. As a lender, you care about the real return on your investment, which is the return that measures your increase in purchasing power between two periods of time. If you invest $1, you sacrifice $1 1+i real goods now, where P(t) is the price level. In 1 year, you get back , where i is the P(t) P(t+1) nominal rate of interest. We calculate the real return by dividing the real amount you get back by the real amount that you invest. Thus, if rep is the ex post real rate of return and ex post real interest rate, we have 1 + r ep ⎛ 1+i ⎞ ⎜ P(t+1) ⎟ ⎠ = (1 + i ) = ⎝ ⎛ 1 ⎞ ⎛ P(t+1) ⎞ ⎜ P(t) ⎟ ⎜ P(t) ⎟ ⎝ ⎠ ⎝ ⎠ Notice that the real rate of interest depends on the realization of the rate of inflation because P(t + 1)/P(t) = 1 + π(t + 1), where π(t + 1) is the rate of inflation between time t and t + 1. For simplicity, we drop the time notation and simply write 1 + r ep = If we subtract 1 from each side, we have (1 + i) (1 + π) r ep = which is often approximated as (1 + i) (1 + π) i-π = (1 + π) (1 + π) (1 + π) rep = i – π The approximation involves ignoring the term (1 + π) in the denominator...
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...1.1 Introduction: Rate at which one currency may be converted into another. The exchange rate is used when simply converting one currency to another currency or for engaging in speculation or trading in the foreign exchange market. There are a wide variety of factors which influence the exchange rate, such as interest rates, inflation, and the state of politics and the economy in each country it also called rate of exchange or foreign exchange rate or currency exchange rate. 1.2 Objective of the Report: The primary objective of this report is to know the over functions of government in foreign exchange market. But the objective behind this study is something broader. Objectives of the study are summarized in the following manner: • To describe the exchange rate systems used by various government. • To explain how government can use direct and indirect intervention influence exchange rates. • To study existing government control over exchange rate system. • To know how government can affect economic conditions. • To have some theoretical exposures that will be helpful for our future career. 1.3 Methodology: For preparing this report, we have undergone group discussion, collected data from internet. We also studied different circulars and reference books on this topic. We hope these criteria will be enough to find out different picture of government influence on exchange rate system. 1.4 Limitations of the Study: 1. The time, 1(One) week...
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...The purpose of this paper is to highlight and examine the key strategic risks for Koch Industries as they look to expand their market share to the Philippines. Furthermore, this paper will also outline a financial strategy for implementing this expansion by identifying the associated risks of foreign currency exposure, as well as addressing the major dimensions on international finance, evaluate the basic functions of the international banking system and financial market, and finally recommendations on the best way ahead for Koch Industries entering the Philippine market. To begin, this paper will first examine the possible risks of foreign currency exposure for Koch Industries in the Philippines. As financial markets have become more global and fast moving, foreign currency exposure can have an enormous and rapid impact on profitability can be potentially catastrophic to even the most entrenched and successful companies. Managing exposure and mitigating risk is large and involved process, and has been shown that companies in western industrial economies are quite refined and cultured in currency hedging and conduct business with a modest amount of risk. However, while there is a plethora of evidence supporting the actions of western industries much less is available regarding companies in the rapidly emerging Asia-Pacific region. The results of a 13-year study conducted by Professor David Parsley, of the Owen Vanderbilt Graduate School of Management, found that “the basic...
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