Han Qing-Jao is exporting from Taiwan to the United States for the first time and she is concerned about currency risk. Given this, which of the following is a legitimate strategy for reducing her currency risk? [OBJ. 7.4] O Monitor the U. S inflation rate O Make a forward location transaction O Use a PPP strategy O Use a currency hedging strategy O Engage in quantitative easing
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- Explain the International Fisher effect and Interest Rate Parity theories. If these theories exist, explain MNCs' justification to invest excess cash in foreign country. Present a situation in which investment in the foreign money market would provide a higher rate of return than the one offered at the home market.Explain the International Fisher effect and Interest Rate Parity. If these parity exists, explain the justification for MNCs to invest excess cash in foreign country. Provide examples in which situation the excess cash investment would gain higher rate of return that the one offered at the home market.An e-commerce company based in the United Kingdom is planning to launch a new market in Australia and is concerned about potential volatility in the Australian dollar. Which hedging strategy(s) would be suitable to manage the currency risk in this scenario? Choose all that apply. Purchasing a call option on the Australian dollar Selling Australian dollars forward against the British pound Purchasing a put option on the Australian dollar
- 1.) Assume your U.S. firm currently has a profit center in Malaysia, receiving a significant number of Malaysian Ringgit (MYR) every year. This is the only direct exchange rate exposure you currently have You want to borrow money to operations in Malaysia and would like to do it in a way that will help minimize your exchange rate risk (transaction risk). Which currency should you borrow: USD; MYR; JPY (Japanese Yen)? Explain how that helps minimize your transaction risk.Please help with a discussion on question #2. The base country is Nevis and the countries trading to is Australia, Columbia and Germany. Explain why would it be more profitable to trade in USD rather than XCD and how can the MNC benifit from the trading countries currencies. Use an echange rate table or chart to help strenghten your point You are asked to simulate your own multinational corporation (MNC).You are required to justify the form of their own MNC, based in the Caribbean, which tradeswith three countries outside of the North America region. Students will then examine issues relatedto foreign exchange management within their multinational corporation.This group assignment should address the following:1. The type of MNC, is the exportation of a product soldthrough a distributor2. The main foreign currencies that will be used in the business.3. The foreign exchange exposure of the company and how the company plans to managethis exposure.4. Any current financial issues that…Assume the United Kingdom (home) and the United States (foreign) have a fixed exchange rate regime. (i) A supply shock in the Foreign Exchange Market leads to an appreciation of the $/£ exchange rate. Explain how the Bank of England will intervene to defend the fixed exchange rate. Use graphs to support your answer. Label all axes. (ii) Discuss the effects on the domestic economy of this intervention. Which additional measures could the Bank of England take to offset these effects
- d. Discuss whether Galina Works should avoid exchange rate risk by invoicing foreign customers in dollars. e. Explain to Galina Works how, in respect of foreign sales, discounting and factoring can be used as hedging tools to manage foreign currency risk.Which of the following statement is incorrect? O Currency crisis is more likely happen under the fixed exchange rate system. O Capital flight is more likely occur under the fixed exchange rate system. Fixed exchange rate regime relied on the ability of central banks to intervene in the currency market. O China is taking free floating exchange rate system.Suppose the current exchange rate between the US dollar (USD) and the euro (EUR) is 1 USD = 0.85 EUR. Additionally, assume that the expected rate of return on US assets is 8% and the purchasing price of a US asset is $ 100. Calculate the expected rate of return on this US asset in terms of euros. [5] How does the ability of international investors to quickly and easily switch between domestic and foreign assets impact the relationship between exchange rates and asset prices, particularly in terms of expected rates of return?
- It is an ongoing issue in exchange rate manipulation. The United States has been protesting for many years that renminbi or yuan (CNY), the currency in China, is being undervalued. You would like to apply the concept of Purchasing Power Parity (PPP) to find out if such accusation is correct. Following are data you have collected from July 2016 Big Mac Index. Location United States China Hong Kong Big Mac prices in local currency July 2016 USD exchange rate USD4.5567 CNY 16.00 HKD17.00 6.1341 7.7567 (a) Analyse whether the accusation by the United States regarding undervaluation of the renminbi at that time was valid. Find out the percentage of undervalue/overvalue of the renminbi against the US dollar to support your view. (b) Some countries encourage manipulation in their exchange rate relative to those of some other countries as a means of relieving foreign trade imbalances. Evaluate each of the following scenarios regarding its impact that would have on the Hong Kong importers and…Consider the strategies used by your government, in the country your currently reside and currentmanagement of the exchange rate.Now record, in your journal, your response to the following questions, in 700 words or less: How is the exchange rate policy in your own jurisdiction managed by government? What, in your opinion, are the strengths and weaknesses of your government’s policies? Identify one MNC that may, or may not, benefit from the operation of your nationalexchange rate policy and justify your position.Foreign exchange risk may be best defined as:a. the chance of value change in foreign exchange ratesb. the chance that the demand for your currency will dropc. the chance that exchange rates will be fixedd. the political risk posed by foreign governments