673 words - 3 pages
Application-Level Requirements List
1. Get user input
2. Enter amount of foreign currency to be converted
3. Select currency type to be converted to U.S dollars
4. Divide amount of currency by foreign currency rate
Canadian dollars (rate: 1 U.S. dollar = 1.4680 Canadian dollars)
Mexican pesos (rate: 1 U.S. dollar = 9.5085 pesos)
English pounds (rate: 1.6433 U.S. dollars = 1 pound)
Japanese yen (rate: 1 U.S. dollar = 104.9200 yen)
French francs (rate: 1 U.S. dollar = 6.2561 francs)
5. Display conversion results
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Topic: Currency Options
Currency option is a contract or an agreement which gives the right to buy or sell currency at a pre-specified exchange rate on a future date. Currency options are derivatives contracts in which foreign currency is the underlying asset. Currency options are also known as forex options or Fx options. The contract is between a buyer and a seller and gives the buyer the right but not the obligation to buy or sell the underlying foreign currency at a specified price on an agreed upon date in the future. There is an expiration date on the contract so there is a time factor. In addition, the option comes at a cost. The fee that the buyer pays for the option is called
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Chinese currency and its devaluation
Chinese money is called Renminbi (RMB) means "The People's Currency". The popular unit of RMB is yuan. 1 yuan equals 10 jiao, 1 jiao equals 10 fen. There are parts of China where the yuan is also known as Kuai and Jiao is known as mao. Chinese currency is issued in the following denominations: one, two, five, ten, twenty, fifty and one hundred yuan; one, two and fivejiao; and one, two and five fen.
The current official exchange rate between U.S. dollar and Renminbi yuan is about 1:6.8 (1 US dollar = 6.8 yuan RMB).
Since the economic reform started in 1979, the Chinese currency (yuan) had been devalued several times until 1994 when the two-tier
1403 words - 6 pages
The euro was established by the provisions in the 1992 Maastricht Treaty. To participate in the currency, member states are meant to meet strict criteria, such as a budget deficit of less than three per cent of their GDP, a debt ratio of less than sixty per cent of GDP (both of which were ultimately widely flouted after introduction), low inflation, and interest rates close to the EU average. In the Maastricht Treaty, the United Kingdom and Denmark were granted exemptions per their request from moving to the stage of monetary union which would result in the introduction of the euro.
The name "euro" was officially adopted in Madrid on 16 December 1995. Belgian Esperantist
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1. What is the currency risk exposure facing Merton? What dimension is more relevant in the case of Merton: transaction exposure, translation exposure, or economic exposure?
Merton Electronics is a company in the United States that imports from both Japanese and Taiwanese suppliers, to then be distributed nationally. Both suppliers invoice in their local currencies (Japanese Yen and Taiwanese Dollars, respectively). The mechanics of payments are as follows: Merton places an order, and the Asian supplier ships within 60 days. Payments are done 30 days from the end of the delivery month, but the spot price on the last day of the month in which the order is placed is used for the invoice
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The Performance of the Euro
â€œLeading nations in Europe wanted to increase their economic ties to promote growth and piece. In 1951 Belgium, France, West Germany, Italy, Luxemburg and The Netherlands signed the Paris Treaty, creating the European Coal and Steel Community. In 1957, the same six countries signed the Treaties of Rome, creating the European Economic Community.â€? (Olmstead&Graves, 2003)
In 1979, the European Monetary System created a currency unit called the ecu to stabilize exchange rates and keep inflation in check. The Single European Act increased Political co-operation between the six EEC countries in 1986. In 1992, the ambitious Maastricht Treaty was signed
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INTERNATIONAL FINANCE ASSIGNMENT 2 _ Answer Key PROBLEM I (30 points) Suppose the quarterly (90-day) interest rate in the US is 2.5% and it is 4% in Canada. If the $/CD spot exchange rate is $0.80/CD and the 90-day forward exchange rate between US and Canadian dollars is $0.79/CD , does the interest rate parity (IRP) hold? Why or why not? If it does not hold, what is the direction of the capital flow?
1.025 0.79 1.04 0.80 0.9856 ≠ 0.9875 IRP does not hold. 2.5< (4-1.25=2.75) Therefore, funds flow from US to Canada.
If an arbitrageur can borrow up to $1,000,000 (or CD1,250,000), formulate a covered interest arbitrage. Make sure to explain your steps in detail (just writing out three
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Is it the end of Dollar as world's reserve currency?
What is Reserve Currency?
A currency, held in considerable quantities by different governments, as part of their foreign exchange reserves. It is also used for the products traded in global markets such as oil, gold etc. Reserve currency is also called as ‘Anchor Currency’.
US Dollar as Reserve Currency:
Traditionally, US Dollar has been regarded as the reserve currency and for more than 50 years it has been the currency of choice used by various nations of the world to facilitate trade involving commodities such as petroleum, manufactured products and gold. This stature has had tremendous benefits for the U.S. financial system and
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Overview of the hedging techniques:
In the financial market, almost all of companies need to face the currency risk. In order to manage the currency risk, companies will use different hedging techniques, such as financial and operational hedging techniques. For example, money market, futures contracts, options and forwards contracts are commonly used by firms, as well as operational hedging techniques. All of 4 types of financial hedging techniques are short-term hedge. Money market is a part of financial markets for assets involved in short-term borrowing,lending, buying and selling. Its features are high liquidity, lower risk, such as treasury bills. Futures contracts are
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Today, many people wonder how currency devaluation destroyed the US middle class.People a lot of people think this is ridiculous. However, one reason in my opinion that is, even by the US government's own statistics, the income of the median full-time male worker begins to stagnate at exactly that point, after rising by huge amounts during the 1950s and 1960s.
The median US full-time male income was $47,715 in 2010. In 1969, it was $44,455. The 1969 numbers are of course 'adjusted for inflation,' and you know that the government's inflation adjustments are thoroughly low-balled. With slightly more honest statistics, the trend would not be flat, but instead downward over the past forty
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1) b) 2) Why companies need to hedge currency exposure and critically discuss whether companies should use derivatives. MNEs possess a multitude of cash flows that are sensitive to changes in exchange rates, interest rates, and commodity prices. These three fincncial prices risks are the subject of the growing field of financial risk management. Hedging protects the owner of the existing asset from loss however, it also eliminates any gain from an increase in the value of the asset hedged against. According to ( à¹€à¸¥à¹ˆà¸¡ à¹€à¸«à¸¥à¸·à¸à¸‡ à¹‚à¸¥à¸ à¸«à¸™à¹‰à¸² 201) cite the hedging reasons into 4 majors. Firstly, Reduction in risk in future cash flows imrove the planning
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increasing as consumer confidence, manufacturing and employment show the U.S. is strengthening as Europe struggles to save its currency union and the developed world weakens. U.S. gross domestic product will expand 2.19 percent next year, compared with 1.55 percent for the Group of 10 nations, Bloomberg surveys of economists show.
“The U.S. is our favorite market,” Hiromasa Nakamura, a bond investor in Tokyo at Mizuho Asset Management Co., which oversees the equivalent of about $42 billion, said Dec. 12 in a telephone interview. “The level of debt is high but I think they will deal with it,” he said. “Financial dislocations are continuing and investor money is flowing to the reserve
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Application-Level Requirements List
1. First the program should provide some information including the title, user instructions, and the overall purpose to better acquaint the user.
2. The program display should be easy to use while inputting information.
3. The purpose and instructions for the program must be apparent.
4. Simplicity in the wording and outputs is important to avoid any possible confusion and make the program user friendly.
5. Written in a fashion that allows further expansion by others at a later date.
6. The program must be able to handle multiple conversion of currency at the same time or after one another without restarting the
994 words - 4 pages
Foreign Exchange Markets and Transactions
1) Foreign Exchange Market
In 1971 the US suspended the convertibility of the dollar to gold, and by 1973 the US and other nations had accepted floating exchange rates.
Today the exchange market is the largest market in the world. The market is an elaborate network of trading desks, banks, cooperations and individuals who buy and sell currencies all over the world.
2) What is an Exchange Rate?
An Exchange rate is the price of a currency. The rates are available from many print and electronic sources.
Direct quotes = Exchange rates that are listed in the form of “US $ Equivalent”
Indirect quotes = Rates listed in the form of
1113 words - 5 pages
Hard and soft currencies
January 10, 2012
University Of Phoenix
Hard and soft currencies
Global financing and exchange rates are major topics when considering a venturing business abroad. In the proceeding I will explain in detail what hard and soft currencies are. I will explain the reasoning for the fluctuating currencies. Lastly, I will explain hard and soft currencies importance in managing risks.
Hard currency is usually from a highly industrialized country that is widely accepted around the world as a form of payment for goods and services. A hard currency is expected to remain relatively stable through a short period of time, and to be
596 words - 3 pages
SUBJECT: Determining the Functional Currency of Sparkle Company
Sparkle Company is a Nigerian diamond mining company. Sparkle is a joint venture, 50 percent owned by Shine and 50 percent owned by Brighten. Both Shine and Brighten are U.S.-based companies with their functional currency being the American dollar. Sparkle Companies functional currency is that of Nigeria, being the Naira. During 2009, Sparkle had several transactions with its joint venture owners and outside parties. The details of Sparkle’s transactions are three loans, three expenditures, and one revenue stream. The loans the company took out were $1 million from Brighten, $1 million from Shine, and 300 million Naira from a
1211 words - 5 pages
Hedging Strategies: McDonald’s Vs. Nodal’s Logistics
Name: Mohssen Owlad
Lecturer: Professor Mar Paronich
Most companies around the world, which are dependent on any facility or transaction outside of the country of the origin, would encounter global market risks. Companies might be impacted by some global market risk, including foreign currency fluctuation and changes in interest rates. Therefore, when a company investment goes abroad and involves a foreign currency, global market risks are expected. All the companies employ several financial instruments and hedging activities to protect their investments. Different companies prefer various hedging
604 words - 3 pages
The Currency Exchange
The currency exchange market fluctuates similar to that of stocks and bonds. When a company wants to purchase or invest into a foreign market it is first determined what one unit of the investors currency is equal to in one unit of the foreign currency. A market’s currency value is influenced by high or low activity, supply and demand and other economic influences (University of Phoenix, 2007). Seeing a gain in the foreign market does not necessarily mean that the gain will be realized in the home currency if the foreign currency has depreciated against the home currency(University of Phoenix, 2007).
The currency exchange rate is of concern
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HI5014 International Business Across Borders
Foreign currency & exchange influences
* The conversion of one currency into another currency and foreign currency also refers the global market where currencies are traded.
* Exchange rate plays a vital role in trade. Exchange rate is the one of most important element for economic health of countries such as interest rate and inflation.
* Exchange rate also affects one nation’s trading relationship with other nations.
* If a country has high currency then that country exports more expensive but imports cheaper in foreign markets. And if a country has low currency then that country exports cheaper but imports more
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London, New York, Tokyo, and Singapore are the world’s major foreign exchange markets in the world. Having different countries as part of the major foreign exchange market it allows money to go around the world. It is clear that a nation’s currency must be accepted by international banks, and business in order for any nation to be part in international commerce and exchange.
To have a better understanding it is said that foreign exchange market is the market where currencies are trade. This is considered the world’s largest market because in consist of approximately a trillion in daily volume. This is also the most liquid, differentiating from other markets. The foreign exchange market
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try to re-grow our production capability in the US?
No. I will buy what I want and if it is not the price that I want, I can go without. This is what will happen with me, and many other people. If prices are not low enough, I will not be a consumer. Bring the prices at a more seemingly affordable level, then I might reconsider the option.
Most of the world has floating exchange rates, which means the rate is determined constantly based on the demand and supply for one currency vs. another. The countries of the European Union have chosen to share a common and therefore fixed currency among the members. China pegs their currency to the dollar so it floats against other currencies as the
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standard that will shield their economies from the future speculative attacks. So that initial step towards finding solutions to the existing problem was done by the prime minister of Malaysia Mahatir Mohammad after the financial crisis that heavily hit countries in the South East Asia. The plan was to start using the Islamic gold dinar aimed to prevent another currency crisis of the scale happened once in 1997-98. In addition, the implementation of new currency will reduce the dependency from US dollar, and lead to unity and cooperation among Muslim countries as the result of trade and economic cooperation. It will also lead to the establishment of a united Islamic market, as Euro market. Apart
725 words - 3 pages
Carrefour S.A. Case Write-up
In order to finance its ongoing expansion, Carrefour decided to issue EUR750 million 10-year bond through the eurobond market. Investment banks, like Morgan Stanley and UBS-Warburg had suggested that instead of issuing the bond with EUR, Carrefour could borrow British sterling pounds this time by taking the advantage of a temporary borrowing opportunity in the currency. Carrefour also faced three other alternatives of issuance: the bond could be issued at a coupon rate of 5.25% in euro, 3.625% in Swiss francs, or 5.5% in USD.
There are several considerations that Carrefour should take when it evaluated which currency it should issue the EUR debt. According to
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Eiteman et al., Chapter 10
Accounting exposure, also called translation exposure, results from the need to restate foreign subsidiaries’ ﬁnancial statements, usually stated in foreign currency, into the parent’s reporting currency when preparing the consolidated ﬁnancial statements. Restating ﬁnancial statements may lead to changes in the parent’s net worth or net income.
When converting ﬁnancial statement items (transactions) denominated in currencies other than the parent currency, two choices of exchange rate are possible: • The historical rate, the exchange rate prevailing at the time of the
723 words - 3 pages
Many companies make annual reports available on their corporate Internet home page. Annual
reports also can be accessed through the SEC's EDGAR system at www.sec.gov (under Filing
Type, search for 10-K). Access the most recent annual report for International Flavors and
1. Identify the location(s) in the annual report where IFF provides disclosures related
to its management of foreign exchange risk.
Through the most recent form 10-K of IFF (2015), three locations where foreign exchange risk is
disclosed were found:
a. Part I, Item 1A. Risk Factors: “The impact of currency fluctuation or devaluation in the
international markets” (Page 15)
b. Part II, Item 7A
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. This agency is known as the Commission of Foreign Exchange Administration (Cadivi, after the Spanish initials of Comision de Administracion de Divisas). Cadivi has the authority to issue general regulations on the requirements for purchasing foreign currency. If there are individuals or companies who desire to purchase foreign currency from the Central Bank of Venezuela, they first have to register with Cadivi at the Registry for Users of the Foreign Exchange Administration System (RUSAD) to get approval. All foreign exchange dealings with Cadivi have to be made through an authorized foreign exchange operator such as a bank. The Cadivi had strict regulations in place regarding the foreign
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currencies are traded. Currency Trading is the world’s largest market consisting of almost trillion
in daily volume and as investors learn more and become more interested, the market continues to
rapidly grow. Not only is the forex market the largest market in the world, but it is also the most
liquid, differentiating it from the other markets. In addition, there is no central marketplace for
the exchange of currency, but instead the trading is conducted over-the-counter. Unlike the stock
market, this decentralization of the market allows traders to choose from a number of different
dealers to make trades with and allows for comparison of prices. Typically, the larger a
4090 words - 17 pages
Rupee Depreciation: Probable Causes and Outlook
The Indian Rupee has depreciated significantly against the US Dollar marking a new risk for Indian economy. Till the beginning of the financial year (Apr 11-Mar 12) very few had expected Rupee to depreciate with most hinting towards either appreciation or status quo in the rupee levels. Those few who had even anticipated may not have imagined the scale of depreciation with rupee touching a new low of around Rs 54 to the US Dollar. What is even more interesting to note is that when other countries are trying to play currency wars and trying to keep their currencies devalued, India is trying to prevent depreciation of the currency. (Read our
759 words - 4 pages
The history of the euro all began in Madrid, Spain back in 1995 when the newly formed European Council introduced the idea of a common currency that all of the member counties would use. The European Central Bank (ECB) was established in June of 1998. It is based in Frankfurt, Germany and aims to maintain price stability and to conduct a single monetary policy across the euro area. In January of 1999 the exchange rates of the participating currencies were set and the member countries began implementing a common monetary policy. The euro was introduced as the legal currency and the local currencies of the participating states became subdivisions of the euro. At this time it was only an
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A New Option
There is one, directly monetary, measure that the United States should contemplate taking against China: direct purchases of renminbi to counter China’s direct purchases of dollars. It is absurd, especially from a US national perspective but also from the standpoint of global financial stability, that other countries set the exchange rate of the dollar. This is a consequence of the international role of the dollar, one of several of which lead me to question whether that role remains in the national interest of the United States.
In principle there could be little objection to such “countervailing currency intervention” against manipulation by another country that was keeping
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The exchange rate
An exchange rate is the rate at which one currency is exchanged on another one. This rate differs from country to country and depends on many economical variables, the main of which are the general balance and disbalance of economy, monetary and fiscal policy, the state of the budget, international policy, the condition and development of the country’s economy compared to the world situation and dominating countries, purchasing power of the currency, and other internal and external factors.
The history of world exchange rate systems shows us that the world community (in its majority) has in fact shifted from the system of fixed exchange rates to floating exchange
5283 words - 22 pages
with a purpose to give a strategic advice to 3M’s current CFO D.W. Meline how to manage 3M’s future exposure of the foreign exchange rate risk. In doing so, the overall profile of the company is discussed; the current foreign exchange risk management instruments are described; and conclusions are drawn, followed by recommendations.
International Risk Management:
An Analysis of 3M’s Foreign Risk Management
International Risk Management:
An Analysis of 3M’s Foreign Risk Management
Executive Summary 3
1. Description Historical Exchange Rates 6
2. Foreign Currency Exchange Rate Risk 10
2.1. Current Strategy to Manage Exchange Rate Risk
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Carrefour S.A. is a large multinational corporation that aims to issue EUR 750 million worth of debt. Consequently, Carrefour must decide the market in which it wants to place its bonds. The company had historically financed growth using securities denominated in the currency of its business operations.
However, Carrefour’s investment banks, Morgan Stanley and UBS-Warburg, recently recommended borrowing in British pounds sterling to take advantage of a borrowing opportunity in that currency. This recommendation seems counter-intuitive prima facie, given that the British coupon rate is higher than those in all the other currencies, particularly the Swiss franc.
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The main risks facing private toll road projects include pre-construction, construction, traffic and revenue, currency, force majeure, tort liability, political, and financial. (Table 7).
None (roads already in existence)
None (toll roads already in existence)
These are defined as risks associated with insufficient traffic levels and toll rates too low to generate expected revenues. Toll road are not exclusive routes. There are mainly used by commercial entities and tourists (sensitive to economic factors)
Mitigation: Risk must be shared between private and public sector. A quality traffic forecast must be done by an
621 words - 3 pages
Joshua Schwennesen 22259937 05047700
235 Wayside Dr.
Waco, TX 76705 (Economics 1, BUS 121)
The following paper tracks the Israeli New Shekel against the United States Dollar from January 2006 through January 2011 and is designed to highlight the underlying causes of the currency fluctuations during this period of time.
ILS per 1 USD
The above chart shows the relative exchange rate between the Israeli New Shekel and the US Dollar.
On January 1st, 2006 the exchange rate between the Shekel and Dollar was 4.61687 Shekels to $1. At this time, the US equities market and economy (and consequently the US Dollar) was in its 4th year of a bull market. This bull market
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Essay Four (Exchange Rates): Topic 2 – Australia in the global Economy
Outline the causes of a decrease in demand for the Australian dollar, and discuss the impacts on the Australian economy of a sustained depreciation of the Australian currency.
The exchange rate is a measure of the value of a currency relative to another and is influenced by the demand and supply of the Australian Dollar (AUD). Changes in any of the factors that affect supply and demand causes the AUD to rise or fall. The demand for the AUD is derived from the demand of Australia’s goods, services and assets, which is impacted by domestic and international economic conditions. Therefore, factors such as decreased
793 words - 4 pages
Sherie Dover, Jason Godwin, Jonathan Haus, John Strange, and Edgardo Zavala
University of Phoenix
ECO 360, Economics for Business I
July 17, 2007
Recent Dollar Trend
The United States dollar began to fall in world currency markets in 2006. Many economists predict that the United States dollar will decline at an even greater rate in 2007. Economists believe that the United States dollar could lose as much as 30% of its value. The debate that a recession may be around the corner is backed by international trade and Federal budget deficits that are anything but under control (Dissidentnews/Worldpress, 2007).
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, the product is domestically manufactured using local materials and input costs by local bottling firms within Coca-Cola’s worldwide network. This means that the selling price in each country market is independent with the exchange rate as the product possesses substantial elements of domestic costs and prices to provide an effective measure of relative purchasing power. Details of the Cola Index are described in the below table:
The ColaCurrency Menu - the CocaCola Standard |
Countries | 330ml Bottle of Coca Cola prices | Implied PPP of the Dollar | Actual Exchange Rate | Under (-)/Over(+) Valuation against Dollar |
| In Local Currency | In Dollars* | | | |
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Mexican government was forced to end its regime of fixed exchange rates. On August 31, 1976, Mexico announced that it was switching to a managed floating exchange rate regime and devalued the peso by 45%. However, under this new arrangement, the Mexican authorities were still committed to intervening when necessary to maintain orderly conditions within a preset trading band for their currency.
Difficulties continued for Mexico into the early 1980s. In the late 1970s, Mexico had borrowed billions of U.S. dollars at extremely high interest rates in anticipation of increased oil revenues. When the oil prices dropped sharply in the early 1980s, Mexico’s oil revenues, and U.S. dollar revenues
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, frequently involving trial-and-error decision-making. This process is often even more complex in international marketing.
Prices may be quoted in the company’s currency or in the currency of the foreign buyer. Here we encounter problems of foreign exchange and conversion of currencies. As a general rule, a firm engaged in foreign trade whether it is exporting or importing-prefers to have the price quoted in its own national currency. If the company deals in a foreign currency and that currency declines in value between the signing of a contract and the receipt of the foreign currency, the seller incurs a loss. Similarly, a buyer dealing in a foreign currency would lose money if the
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, one would benefit from this union because it allows everyone within these countries to work and move freely within the countries and use a single form of currency, the euro, which saves the company from transactions costs. It will allow the company to expand its market.
The advantages of expanding into the EU are the single form of currency, saving transaction fees, and the expansion of the company's market. The disadvantages of expanding into the EU are the different cultures, customs, and languages of each country will vary, causing some people to become unaware when they are conducting business what is being said, what should be done, and how to conduct themselves. The best way to
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MULTINATIONAL FINANCIAL MANAGEMENT
ASPEN TECHNOLOGY INC.: Currency Hedging Review
1) What are Aspen Technology’s main exchange rate exposures? How does Aspen Tech’s business strategy give rise to these exposures as well as to the firm’s financing need?
The main exchange rates exposures are: British pounds, Deutsch Mark, Japanese Yen and Belgian Francs.
Aspen faces foreign currency risks due to sales and expenses in those foreign currencies. Expenses include R&D costs (20% of overall R&D are in UK), headquarters, sell force etc. and represent 52% of Aspen expenses.
If Aspen sells its products in local currency, it’s because its clients need to
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free market forever, this condition means there were false scarcity, monopoly and goverment control, for gold and silver mines controlled by government.
THE LACK OF AN INTERNATIONAL MONETARY SYSTEM
Before 1971, international monetary system was linked to gold, such as US dollar, anchored to gold and then other currencies should each stabilize their currencies to the anchored dollar. As a result, this gold standard system created an interdependence of the currency system, fixed exchange rates, and stabilized inflation. But after 1971, the gold standard broke down and international monetary system was scrapped for flexible exchange rates, where the external value of a currency more or less
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Kirt C. Butler, Solutions for Multinational Finance, 4th edition
Chapter 6 Currency Options and Options Markets
Answers to Conceptual Questions
What is the difference between a call option and a put option?
A call option is an option to buy the underlying asset at a predetermined exercise price. A put
option is an option to sell the underlying asset at the exercise price.
What are the differences between exchange-traded and over-the-counter currency options?
Exchange-traded currency options are standardized as to currencies, maturity, exercise prices, and
settlement procedures. Over-the-counter options traded by commercial and investment banks can be
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Summarize and evaluate the arguments presented in the (A) case for and against the revaluation of the Renminbi. Provide your own assessment of the projected future direction of the RMB/USD exchange rate (using info provided in the case). China’s decision to release its currency from the decade long peg (approx. 8.28 Yuan per USD) raised multiple concerns within the global economic community. Many economists welcomed the decision while still others questioned it. Below is a brief description of the various arguments presented on the topic. Political: With the value of the Dollar decreasing over the recent years, the western governments are less pleased with China maintaining its currency at
1174 words - 5 pages
Checkpoint: Foreign Exchange Market
August 6, 2012
Instructor: Anthony Brooks
Axia College of University of Phoenix
Gold has started many wars between friends and countries since it was first discovered. Gold has been a form a currency that has been recognized by all people and countries. The price of gold has continue to go up since from A.D. 1200. Gold has other uses than as a form of currencies like making jewelry and in dentistry. In India it is part of a dowry at a wedding where about $500 worth is given.
To begin we have to be able to understand the role of the foreign exchange markets in international business. The foreign exchange market is all so
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“You might have noticed that it’s pretty hard to find any cash printed much earlier than the 1990s in circulation.” (Indiviglio) Money is always being created and destroyed, whether it is being physically printed or transferred electronically from the Federal Reserve. Let’s first talk about the history of the United States currency. The original currency of the United States was produced in 1690 and was able to be converted directly to gold or silver. Later, the Continental Congress of the United States chose the dollar over other suggested types of currency and this selection was formalized in the Coinage Act of 1792. The first dollar was issued on September 8, 1789
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British Pound (GBP)
A nation’s currency can be affected in many ways including economic, political, social and cultural events related to particular country. The exchange rate will move positively or negatively dependent on how adversely each of these factors cause change to the currency’s spot rate. Throughout our evaluation of the Great British Pound, we were able to track and measure how each of the factors caused change in the currency’s value.
Over the past four months we have seen a significant decrease in the value of the British Pound. As will be explained in this paper, many different factors caused downward pressure to be placed on the currency
792 words - 4 pages
How does the cross currency swap effectively hedge the three primary exposures McDonalds has relative to its British Subsidiary.
1. Cross currency swap is a designed contract that allows people to swap the currencies of debt obligations. As the article alludes to McDonalds must swap the pound fixed interest rate and adopt floating interest rate from the US. This swap completely depends on the expected floating rate. For example, if a company expects a future floating rate to decrease then it’s in the companies best interest to swap fixed interest rate for floating interest rate, if the floating rate is not expected to do this then it would not be in the companies best interest to do the