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Presentation/PPT
27/08/2022
QUESTION DEC 07, 2017 BFF2341 International Financial Management Group Assignment Tri C 2017 Due Date: 8 th December by 5pm Q. 1 Royal Blue Company expects to receive 5… BFF2341 International Financial Management Group Assignment Tri C 2017 Due Date: 8 th December by 5pm Q. 1 Royal Blue Company expects to receive 5 million euros in one year from exports. It can use any one of the following strategies to deal with the exchange rate risk. Estimate the dollar cash flows received as a result of using the following strategies: a. U nhedged strategy b. M oney market hedge c. O ption hedge d. F orward hedge The spot rate of the euro as of today is $1.10. Interest rate parity exists. Royal Blue Company uses the forward rate as a predictor of the future spot rate. The annual interest rate in the U.S. is 8% versus an annual interest rate of 5% in the eurozone. Put options on euros are available with an exercise price of $1.11, an expiration date of one year from today, and a premium of $.06 per unit. Similarly, call options on euros are available with an exercise price of $1.14, an expiration date of one year from today, and a premium of $.05 per unit. Estimate the dollar cash flows it will receive as a result of using each strategy. Which hedge is optimal? Show your calculation for situation. (1 0 Marks) Q. 2 The following questions are related to Brexit . Y ou should consider relevant articles/ data/ analysis (available from internet/ other sources) while answering these questions. I encourage to use graphs/ charts where applicable. Suggested link: (just as an example) http://www.bbc.com/news/uk – politics – 32810887 Required: a. Offer your opinion: ” How Brexit will affect the valuation British Pound ?” b. Discuss the potential e ffect s of Brexit on UK’s export, import and FDI sector (consider outward and inward FDI). Which sectors will be highly effected ? ( 1 0 Marks) Q. 3 ” In 2013, AUD was above parity with USD, however, the situation swapped from 2015 ” . Explain how this change in valuation affected Australian economy and it’s various sector . (Use relevant graphs/ charts to reflect data and support your opinion. You need to quote your reference sources) (10 Marks) Q. 4 Globalization of the car industry has proceeded rapidly over the past decade or so, and today, most major players operate, either directly or through alliances, in the major markets of North America, Europe, Asia and beyond. Among Japan’s industries, too, the automotive sector has been at the vanguard of internationaliz ation, both through exports and overseas production. Yet, Japan’s car industry remains much less globalized than its counterparts in Europe and the United States. Not only is there now holly – foreign carmaker manufacturing vehicles in Japan. If the Nissan c ase is representative, Japanese companies, although operating internationally, have also been slow to adopt an integrated global business perspective. At least to some extent, this has begun to change in recent years. Foreign companies have been able to m ake inroads, entering equity participations or joint ventures with Japanese companies. In the process, they have introduced advanced managementtechniques (such as in Nissan’s financial operations) and Western – style employmentpractices (such as performance based promotion and remuneration). They have alsocontributed to a shift in the management objective of Japanese companies from marketshare to profitability. But probably the most important area in which foreign companieshave been a catalyst for change is i n industry structure. The dissolution of the Nissan keiretsu has meant that, on the one hand, about half of thecompany’s traditional suppliers have lost (one of) their main customer(s). On the otherhand, the reorganization of parts procurements at Nissan has helped some traditional suppliers, such as Calsonic Kansei , to expand, and has opened the door to new, often foreign suppliers. But consolidation in the supplier industry has not been confined to Nissan keiretsu members, as a growing number of foreign companies have acquired stakes in other Japanese counterparts or entered joint ventures. This not only has made the composition of the car industry in Japan more international but has also helped Japanese suppliers to strengthen their global capabilities to serve customers worldwide. Required: a. Offer your views on Japanese FDI trend. b. What challenges Japan had to encounter with regard to FDI? c. Discuss the future possibilities for Japan in the context of FDI. (For more detailed overview, you can read the relevant article “The Impact of Foreign Direct Investment in Japan: Case Studies of the Automobile, Finance, and Health Care Industries”, Page 2 – 10. This article is uploaded in the moodle) (1 0 Marks)
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