TRident bsu401 module 3 case +slp +discussion 2018

Module 3 - Case

INTERNATIONAL FINANCIAL MANAGEMENT

Assignment Overview

Before starting the case, make sure to go through the required reading material carefully. Review the concepts of exchange rates, currency hedging, and other methods of dealing with exchange rate risk. The topic of this module is difficult, so make sure you go carefully through all of the required tutorials and book chapters.

Case Assignment

When you have finished reviewing the background materials, apply your knowledge of the material to answer the following questions in a 4- to 5-page paper:

1. Suppose you are a consultant who travels the world to make predictions about exchange rates for your clients. You have been hired to go to a foreign country to make a prediction about whether the value of the currency in this country will go up or down. When you arrive in this country, the first thing you notice is that everything is very expensive compared to what you are used to in the United States. Some items such as soft drinks or bottled water cost twice as much as what you pay at home. You also find that the economy in this country is starting to shrink a bit, and several foreign-owned businesses are moving out of the country. Would you tell your client that you expect the value of the currency in this country will increase or decrease? Explain your reasoning, and make references to Agarwal (2009) in your answer.
2. Suppose a small manufacturing business purchases 90% of its raw materials and supplies from Japan. It is a very specialized business and has no place other than Japan to purchase its materials. Thus, if the value of the Japanese currency goes up compared to the dollar, profit margins will go down since it will cost the company more to purchase its supplies. What methods do you think would be best to manage this risk under these circumstances? Refer to at least one of the required readings from the background materials in your answer.
3. Consider a large multinational consumer product company with operations in all major advanced and emerging economies. Now suppose the value of the Indian and Brazilian currencies drops dramatically and the value of the Mexican peso increases dramatically. What kind of strategic changes in marketing and/or location of production facilities do you think this company should take given these new exchange rates? Explain your reasoning, and make references to Avadhani (2010) and Shackman (2015) in your answer.

Assignment Expectations

• Answer the assignment questions directly.
• Stay focused on the precise assignment questions. Don’t go off on tangents or devote a lot of space to summarizing general background materials.
• Make sure to use reliable and credible sources as your references. Articles published in established newspapers or business journals/magazines are preferred. If you find articles on the internet, make sure they are from credible sources.
• Reference your sources of information with both a bibliography and in-text citations. See the Student Guide to Writing a High-Quality Academic Paper, including pages 11-14 on in-text citations. Another resource is the “Writing Style Guide,” which is found under “My Resources” in the TLC portal.

 

Module 3 - SLP

INTERNATIONAL FINANCIAL MANAGEMENT

In Modules 1 and 2 you looked at the cultural, legal, and political situation in your chosen country. Continue to do research on the country that you wrote about in Modules 1 and 2, but now do some research on the currency and banking situation in this country.

We normally think of currency and banking risks as being something confined to third world or developing countries. But events in the past few years such as the Euro crisis or the financial crisis in the United States have shown that not even wealthy, developed countries are without risks on the financial side. So it is important for any company doing business in your country to carefully consider the risks that they face.

After you’ve done some research about financial issues in your country, write a 2- to 3-page paper covering the following issues:

1. The currency of your country: Is it stable? Does your country have fixed or floating exchange rates? Does the exchange rate fluctuate a lot?
2. The banking system in your country: How safe is this system? Any recent banking crisis in your country?
3. Overall, does the financial system in your country make it easy or difficult to do business? What kind of steps would you recommend for a company doing business in your country to hedge or minimize its financial risks? Refer to at least one of the required readings from the background materials in your answer.

SLP Assignment Expectations

• Answer the assignment questions directly.
• Stay focused on the precise assignment questions. Don’t go off on tangents or devote a lot of space to summarizing general background materials.
• Make sure to use reliable and credible sources as your references. Articles published in established newspapers or business journals/magazines are preferred. If you find articles on the internet, make sure they are from credible sources.
• Reference your sources of information with both a bibliography and in-text citations. See the Student Guide to Writing a High-Quality Academic Paper, including pages 11-14 on in-text citations. Another resource is the “Writing Style Guide,” which is found under “My Resources” in the TLC portal.

 

 

Discussion

Gambling with Currency

 

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For this discussion try your hand at gambling in the currency exchange market. Take an imaginary $10,000 and “purchase” some foreign currency at today’s exchange rate, then convert back your foreign currency to dollars in a few days and calculate your loss or gain. Those of you who are high rollers can “put all your eggs in one basket” and buy just one foreign currency with your $10,000. Those cautious types can choose to diversify and purchase multiple currencies.

Many webpages have foreign exchange rates and exchange rate calculators. Two of them are xe.com and x-rates.com. If you really want to get fancy, register at forex.com and get the site’s free currency trading software.

Let your classmates know about your experiences, and share the details of your calculations. Give an initial update of how much money you have made or lost in the first week, and post at least one additional update by the end of the module.

Also, make sure to address the following questions regarding your experience with currency trading:

How does it compare to other types of gambling you’ve done?

Would you ever invest in currencies using your own money after reviewing the material in this module and doing some pretend gambling in foreign currencies?