Identify the factors that can affect the balance of trade between the United States and the country that you targeted for your business.

In each chapter of this text, you have the opportunity to apply the key concepts to your own idea about running an MNC. Many existing MNCs are small firms that focus on exporting a single product to a single country. The exported products could be sold to a single distributor based in a foreign country or could even be sold through the mail based on demand from mail-order ads. Your idea may be an extension of an idea you had for a business within the United States. It should focus on one particular foreign country and one particular foreign currency (the local currency of that country), since many of the questions within this project will allow you to learn more about that country and currency.
Chapter 1 Running Your Own MNC
Developing Your Idea
Create an idea for your own MNC to conduct international business. Your idea should be sim-plified to the degree that you could possibly implement it someday. However, your idea should also be sufficiently creative to be success-ful if done properly. Your idea should focus on one country and one foreign currency, since many MNCs are focused in this manner when they are first created. So that you can recognize the issues regarding exchange rate risk that are discussed throughout this text, you should assume that you will receive foreign currency when selling your product. Your idea should be for a small MNC instead of a large MNC because even most large MNCs began as small firms. The following questions will help you define your MNC idea:
1. What is the product that you plan to sell?
2. What foreign country do you plan to target?
3. How will you sell the product in that country? (i.e., Through a distributor? By mail?)
4. Is there some evidence that consumers in that country would buy this type of product?
5. Do you need to purchase supplies or to hire labor?
6. Will any expenses you incur from producing the product be in dollars or some other currency?
Chapter 2 Running Your Own MNC
Assessing Country Factors That Will Affect the Demand for Your Product
1. Identify the factors that can affect the balance of trade between the United States and the country that you targeted for your business. Explain how each of these factors may affect the demand for your product.
2. Which of these factors is likely to be most important in affecting the demand for your product?
Accessing Trade Data
Determine whether the product you plan to sell is already one of the main exports to that country.
Accessing Import Controls
Review the import controls set by that country’s government. Determine whether your business would be affected by trade regulations.
Chapter 3 Running Your Own MNC
Using the Foreign Exchange Market
1. Explain how you will use the spot market for your business.
2. What bank do you plan to use to exchange the foreign currency received for dollars? What is the bid/ask spread on a recent quotation by that bank? (Call the bank to obtain quotations.)
3. Will you possibly need the forward market? Explain.
Accessing Bid/Ask Rates
Go to http://sonnet-financial.com/rates/full.asp. Determine the prevailing bid and ask exchange rates for the currency that you will use for your business transactions.
Accessing Recent Exchange Rates
Go to http://www.oanda.com. Click on FXTrends. Explain how the main foreign currency for your business has changed over the last month, the last three months, and the last year.
Chapter 4 Running Your Own MNC
Monitoring Movements in the Foreign Currency’s Value
What key factors likely affect the value of the foreign currency of concern over time?
Chapter 5 Running Your Own MNC
Using Currency Futures and Options
1. How can you use currency futures to hedge the exchange rate risk of your MNC?
2. How can you use currency options to hedge the exchange rate risk of your MNC?
Accessing Futures Quotes
Go to http://www.cme.com. Determine the prevailing futures price of the main foreign currency for your business. Go to http://www.oanda.com and determine the prevailing spot rate. What is the discount or premium of the futures price?
Chapter 6 Running Your Own MNC
Monitoring Central Bank Intervention
1. How can your business be affected if the Fed attempts to strengthen the dollar in the for-eign exchange market?
2. If the Fed decides to weaken the dollar, how will your business be affected?
3. How can indirect central bank intervention affect your business even if there is no impact on exchange rates?
Accessing Central Bank Information
Go to http://patriot.net/~bernkopf/. Go to the Web site link for the central bank in your target country. Determine whether this central bank intervenes to control its currency in the foreign exchange market.
Chapter 7 Running Your Own MNC
Assessing Spot and Forward Rates
1. Obtain a quotation for the spot rate of the foreign currency (that you will receive from your business) from the bank where you intend to conduct your foreign exchange transactions. Then, obtain a quotation for the spot rate of the foreign currency from another bank. Does it appear that the spot rates are aligned across locations at a given point in time?
2. Obtain a quotation for the one-year forward rate of the foreign currency from the bank where you intend to conduct your foreign exchange transactions. Then, use a business periodical to determine the prevailing one-year interest rates in the United States and the foreign country of concern. Does it appear that interest rate parity exists?
3. Review the data on forward rates from The Wall Street Journal or another source to determine whether the foreign currency of concern typically exhibits a discount or a premium. Then review data on interest rates to compare the foreign country of concern and the U.S. interest rates. Does it appear that the forward rate of the foreign currency exhibits a premium (discount) when its interest rate is lower (higher) than the U.S. interest rate, as suggested by interest rate parity?
Chapter 8 Running Your Own MNC
Determining Whether IFE Holds
Use The Wall Street Journal or another data source to record the interest rate differential between the interest rate of the foreign country in which you plan to do business and the U.S. rate over the last five or so quarters. Then, review the exchange rate percentage change in the foreign currency of concern over each of those corresponding quarters to determine whether the international Fisher effect (IFE) appears to hold over those quarters for that currency.
Chapter 9 Running Your Own MNC
Monitoring Exchange Rate Trends
Use a business periodical or the Internet to determine how the value of the foreign currency of concern has changed in each of the last five weeks. Does it appear that there is a trend over the last five weeks? What is the mean percent-age change over these weeks? If you believed that the currency’s value would continue following the recent trend, would it appreciate or depreciate in the near future?
Chapter 10 Running Your Own MNC
Recognizing Exposure to Exchange Rate Risk
Recall that when you created your business idea, it was assumed that your receivables would be denominated in the foreign currency of concern upon the sale of your products.
1. Describe your exposure to exchange rate risk. That is, describe the exchange rate conditions affecting the performance of your business.
2. Is your business subject to transaction exposure? economic exposure? translation exposure? Explain why your business is or is not subject to each of these types of exposure.
Chapter 11 Running Your Own MNC
Hedging with Forward Contracts
1. Given your exposure to exchange rate risk, explain how you could use forward contracts to hedge.
2. Explain how you could use currency options to hedge your exposure.
3. Review the currency options quotations for the foreign currency of concern in The Wall Street Journal, or from an Internet source, and determine the premium that would be paid to be able to sell the currency at today’s spot rate. (If the currency option data are not available for the currency of concern, skip this question.)
Using Futures Quotes
Go to http://www.cme.com. Determine the prevailing futures price of the main foreign currency for your business. Go to http://www.oanda.com and determine the prevailing spot rate. Would you hedge any transactions for your business based on the futures price relative to the spot rate.
Chapter 12 Running Your Own MNC
Denominating Receivables in U.S. Dollars
Recall that it was assumed that your receivables would be denominated in the foreign currency of concern. For this question only, assume that you could switch your pricing policy so that the receivables would be denominated in dollars instead of the foreign currency. How would this switch affect the transaction exposure and the economic exposure of your business? Explain the conditions that could still cause the performance of your business to be affected by exchange rate movements.
Chapter 13 Running Your Own MNC
Establishing a Subsidiary in Foreign Country
1. Assuming that your international business is successful, identify reasons why it may be feasible to establish a small subsidiary in the foreign country rather than continue exporting.
2. Identify the disadvantages associated with establishing a small subsidiary in the foreign country of concern.
Chapter 14 Running Your Own MNC
Deriving a Required Rate of Return for an International Project
Consider a possible project that would result in expansion of your international business. Describe how you would derive a required rate of return for this project.
Chapter 15 Running Your Own MNC
Estimating Cash Flows of an International Project
1. If you seriously considered whether to implement your international business idea, you would have to measure the costs and benefits of this idea. Describe how you would estimate the dollar revenue to be received from your business.
2. Describe how you would estimate the expenses associated with your business.
3. Describe how you would estimate the net cash flows (in dollars) of your business.
4. Explain why your estimate of the net cash flows (in dollars) could be overestimated.
Chapter 16 Running Your Own MNC
Assessing Exposure to Country Risk
1. Describe the financial factors that expose your business to country risk.
2. Describe the political factors that expose your business to country risk.
Chapter 17 Running Your Own MNC
Capital Structure Decisions
1. Describe the capital structure that you would use to run your business.
2. Why might the proportion of equity to be used in your business be limited when the business is first created?
Chapter 18 Running Your Own MNC
Long-Term Debt-Denomination Decision
1. If you planned to borrow long-term funds, you could borrow dollars or you could borrow the foreign currency of concern. Using the Internet or other sources of data, compare the U.S. interest rate to the foreign interest rate over the last 8 quarters. Which interest rate is typically higher?
2. Explain why you might be able to reduce your exposure to exchange rate risk by borrowing long-term funds denominated in the foreign currency of concern.
Accessing Long-Term Interest Rates
Go to http://www.bloomberg.com and review the yields (rates) of foreign currencies. The long-term interest rates shown here reflect the government cost of borrowing, so an MNC would have to pay a slightly higher interest rate than the rate shown. What is the government’s borrowing rate in your target country? Is the rate higher or lower than the government rate in the U.S.? What rate do you think you would have to pay if you borrowed funds in your target country?
Chapter 19 Running Your Own MNC
Ensuring Payment for Exports
Explain how your business could ensure payment for the products that you are exporting to a foreign country.
Chapter 20 Running Your Own MNC
Financing in Foreign Currency
1. Given that your business has receivables in a foreign currency, you may want to consider financing in that same foreign currency to offset the exposure. Compare the recent interest rate of the foreign currency of concern to the U.S. interest rate: Is the foreign interest rate typically higher or lower than the U.S. interest rate? Would you use financing in that currency to offset receivables? Explain.
2. Explain how you could use foreign financing for your business in a manner that would reduce your exposure to exchange rate risk. Be specific.
Chapter 21 Running Your Own MNC
Managing Cash
Given that you receive periodic payments in foreign currency for your exports, explain how you could effectively use cash management. That is, explain how you would use the funds as they are received. If you had some existing short-term debt, would you prefer to invest the cash in short-term securities or would you pay off the debt?

Hello, As you recall last week we discussed the essentials of our syllabus. Today, I propose to give you a detailed description of the term paper requirements. You will be responsible for a research Term Paper (Run Your Own Multinational Corporation (MNC)), as detailed below:-Think ofan idea for your own MNC to conduct international business. Your idea should be simplified to the degree that you could possibly implement it someday. However, your idea should also be sufficiently creative to be successful if done properly. Your idea should focus on one country and one foreign currency, since many MNCs are focused in this manner when they are first created. So that you can recognize the issues regarding exchange rate risk that are discussed throughout this text, you should assume that you will receive foreign currency when selling your product. Your idea should be for a small MNC instead of a large MNC because even most large MNCs began as small firms.-Every week, you will be asked a set of questions related to the chapter covered in that particular week. You need to research, analyze, and respond to each question. -Responses to these questions should be part of your Term Paper. Your paper must cover all the questions that were raised and you should supplement content with the material that you think will provide more insight and in-depth analysis.-All such responses along with supplemental research should be assembled in one portfolio called, “Run Your Own MNC”. This portfolio will be approximately 15-18 double-spaced pages (with complete references). -Students are expected to submit this portfolio electronically by Saturday (11:59 PM) of Week 13.Late submission will be penalized @10% for each day’s delay.-Your paper will be run through SafeAssign to make sure that it does not have more than 20% content matching other sources.Otherwise, it will be reported to college for violation of our Academic Integrity Policy.Emphasis will be on the understanding of the problems, critical evaluation as well as the ability to clearly communicate proposed solutions. Your final project is your major contribution, where you will exhibit your learning. Now I will explain to you the advantages of using SafeAssign as a learning tool. SafeAssign helps prevent plagiarism by providing both the student and the professor a feedback report that compares any student work submitted through the software with a comprehensive database of books, journals, websites and papers written by other students. Some of the writing assignments in this course will use Blackboard’s SafeAssign software to help students improve their skill at paraphrasing statements contained in research on a topic and to help increase awareness of the proper use of citation when a student writes a paper using ideas or statements taken from a research
source. For any assignment requiring research and/or requiring more than two pages of writing, students will be expected to submit that assignment through SafeAssign in Blackboard, following the submission guidelines given with the assignment instructions. Prior to submittinga final draft of an assignment, students will have the opportunity to submit several drafts of that assignment to SafeAssign in order to get sufficient feedback from SafeAssign reports to help minimize the risk of plagiarism. If the assignment continues to have evidence of plagiarism in the final draft of the assignment, the professor will file a report for submittal to the Department Chair/Dean documenting the use of the paper as an action of academic dishonesty. If a student fails to submit an assignment to SafeAssign, the professor will assign a grade of zero for that assignment. By submitting a paper to SafeAssign, that paper will become source material included in the SafeAssign database.Assignment.In each chapter of this text, you have the opportunity to apply the key concepts to your own idea about running an MNC. Many existing MNCs are small firms that focus on exporting a single product to a single country. The exported products could be sold to a single distributor based in a foreign country or could even be sold through the mail based on demand from mail-order ads. Your idea may be an extension of an idea you had for a business within the United States. It should focus on one particular foreign country and one particular foreign currency (the local currency of that country), since many of the questions within this project will allow you to learn more about that country and currency.
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Term Paper:You will be responsible for a research Term Paper(Run Your Own MNC), as detailed below:-Term Project: Run Your Own MNC: Create an idea for your own MNC to conduct international business. Your idea should be simplified to the degree that you could possibly implement it someday. However, your idea should also be sufficiently creative to be successful if done properly. Your idea should focus on one country and one foreign currency, since many MNCs are focused in this manner when they are first created. So that you can recognize the issues regarding exchange rate risk that are discussed throughout this text, you should assume that you will receive foreign currency when selling your product. Your idea should be for a small MNC instead of a large MNC because even most large MNCs began as small firms.-Every week, you will be asked a set of questions related to the chapter covered in that particular week. You need to research, analyze, and respond to each question. -Responses to these questions should be part of your Term Paper. Your paper must cover all the questions that were raised and you should supplement content with the material that you think will provide more insight and in-depth analysis.-All such responses along with supplemental research should be assembled in one portfolio called, “Run Your Own MNC”. This portfolio will be approximately 15-18 double-spaced pages (with complete references). -Students are expected to submit this portfolio electronically by Saturday(11:59 PM) of Week 13.Latesubmission will be penalized @10% for each day’s delay.-Your paper will be run through Turnitinto make sure that it does not have more than 20% content matching other sources. Otherwise, it will be reported to college for violation of our Academic Integrity Policy.In each chapter of this text, you have the opportunity to apply the key concepts to your own idea about running an MNC. Many existing MNCs are small firms that focus on exporting a single product to a single country. The exported products could be sold to a single distributor based in a foreign country or could even be sold through the mail based on demand from mail-order ads. Your idea may be an extension of an idea you had for a business within the United States. It should focus on one particular foreign country and one particular foreign currency (the local non-dollar currency of that country),since many of the questions within this project will allow you to learn more about that country and currency.Chapter 1 Running Your Own MNCDeveloping Your IdeaCreate an idea for your own MNC to conduct international business. Your idea should be sim-plified to the degree that you could possibly implement it someday. However, your idea should also be sufficiently creative to be success-ful if done properly. Your idea should focus on one country and one foreign currency, since many MNCs are focused in this manner when they are first created. So that you can recognize the issues regarding exchange rate risk that are discussed throughout this text, you should assume that you will receive foreign
currency when selling your product. Your idea should be for a small MNC instead of a large MNC because even most large MNCs began as small firms. The following questions will help youdefine your MNC idea: 1.What is the product that you plan to sell? 2.What foreign country do you plan to target? 3.How will you sell the product in that country? (i.e., Through a distributor? By mail?) 4.Is there some evidence that consumers in that country would buy this type of product? 5.Do you need to purchase supplies or to hire labor? 6.Will any expenses you incur from producing the product be in dollars or some other currency? Chapter 2 Running Your Own MNCAssessing Country Factors That Will Affect theDemand for Your Product1.Identify the factors that can affect the balance of trade between the United States and the country that you targeted for your business. Explain how each of these factors may affect the demand for your product. 2.Which of these factors is likely to be most important in affecting the demand for your product?Accessing Trade DataDetermine whether the product you plan to sell is already one of the main exports to that country. Accessing Import ControlsReview the import controls set by that country’s government. Determine whether your business would be affected by trade regulations. Chapter 3 Running Your Own MNCUsing the Foreign Exchange Market1.Explain how you will use the spot market for your business. 2.What bank do you plan to use to exchange the foreign currency received for dollars? What is the bid/ask spread on a recent quotation by that bank? (Call the bank to obtain quotations.) 3.Will you possibly need the forward market? Explain.Accessing Bid/Ask RatesGo to http://sonnet-financial.com/rates/full.asp. Determine the prevailing bid and ask exchange rates for the currency that you will use for your business transactions.Accessing Recent Exchange Rates
Go to http://www.oanda.com. Click on FXTrends. Explain how the main foreign currency for your business has changed over the last month, the last three months, and the last year. Chapter 4 Running Your Own MNCMonitoring Movements in the Foreign Currency’s ValueWhat key factors likely affect the value of the foreign currency of concern over time? Chapter 5 Running Your Own MNCUsing Currency Futures and Options1.How can you use currency futures to hedge the exchange rate risk of your MNC? 2.How can you use currency options to hedge the exchange rate risk of your MNC?Accessing Futures Quotes Go to http://www.cme.com. Determine the prevailing futures price of the main foreign currency for your business. Go to http://www.oanda.comand determine the prevailing spot rate. What is the discount or premium of the futures price?Chapter 6 Running Your Own MNCMonitoring Central Bank Intervention1.How can your business be affected if the Fed attempts to strengthen the dollar in the for-eign exchange market? 2.If the Fed decides to weaken the dollar, how will your business be affected? 3.How can indirect central bank intervention affect your business even if there is no impact on exchange rates? Accessing Central Bank Information Go to http://patriot.net/~bernkopf/. Go to the Web site link for the central bank in your target country. Determine whether this central bank intervenes to control its currency in the foreign exchange market.Chapter 7 Running Your Own MNCAssessing Spot and Forward Rates1.Obtain a quotation for the spot rate of the foreign currency (that you will receive from your business) from the bank where you intend to conduct your foreign exchange transactions. Then, obtain a quotation for the spot rate of the foreign currency from another bank. Does it appear that the spot rates are aligned across locations at a given point in time? 2.Obtain a quotation for the one-year forward rate of the foreign currency from the bank where you intend to conduct your foreign exchange transactions. Then, use a
business periodical to determine the prevailing one-year interest rates in the United States and the foreign country of concern. Does it appear that interest rate parity exists? 3.Review the data on forward rates from The Wall Street Journalor another source to determine whether the foreign currency of concern typically exhibits a discount or a premium. Then review data on interest rates to compare the foreign country of concern and the U.S. interest rates. Does it appear that the forward rate of the foreign currency exhibits a premium (discount) when its interest rate is lower (higher) than the U.S. interest rate, as suggested by interest rate parity? Chapter 8 Running Your Own MNCDetermining Whether IFE HoldsUse The Wall Street Journalor another data source to record the interest rate differential between the interest rate of the foreign country in which you plan to do business and the U.S. rate over the last five or so quarters. Then, review the exchange rate percentage change in the foreign currency of concern over each of those corresponding quarters to determine whether the international Fisher effect (IFE) appears to hold over those quarters for that currency.Chapter 9 Running Your Own MNCMonitoring Exchange Rate TrendsUse a business periodical or the Internet to determine how the value of the foreign currency of concern has changed in each of the last five weeks. Does it appear that there is a trend over the last five weeks? What is the mean percent-age change over these weeks? If you believed that the currency’s value would continue following the recent trend, would it appreciate or depreciate in the near future? Chapter 10 Running Your Own MNCRecognizing Exposure to Exchange Rate RiskRecall that when you created your business idea, it was assumed that your receivables would be denominated in the foreign currency of concern upon the sale of your products. 1.Describe your exposure to exchange rate risk. That is, describe the exchange rate conditions affecting the performance of your business. 2.Is your business subject to transaction exposure? economic exposure? translation exposure? Explain why your business is or is not subject to each of these types of exposure. Chapter 11 Running Your Own MNCHedging with Forward Contracts1.Given your exposure to exchange rate risk, explain how you could use forward contracts to hedge.
2.Explain how you could use currency options to hedge your exposure. 3.Review the currency options quotations for the foreign currency of concern in The Wall Street Journal, or from an Internet source, and determine the premium that would be paid to be able to sell the currency at today’s spot rate. (If the currency option data are not available for the currency of concern, skip this question.) Using Futures Quotes Go to http://www.cme.com. Determine the prevailing futures price of the main foreign currency for your business. Go to http://www.oanda.comand determine the prevailing spot rate. Would you hedge any transactions for your business based on the futures price relative to the spot rate. Chapter 12 Running Your Own MNCDenominating Receivables in U.S. DollarsRecall that it was assumed that your receivables would be denominated in the foreign currency of concern. For this question only, assume that you could switch your pricing policy so that the receivables would be denominated in dollars instead of the foreign currency. How would this switch affect the transaction exposure and the economic exposure of your business? Explain the conditions that could still cause the performance of your business to be affected by exchange rate movements. Chapter 13 Running Your Own MNCEstablishing a Subsidiary in Foreign Country1.Assuming that your international business is successful, identify reasons why it may be feasible to establish a small subsidiary in the foreign country rather than continue exporting. 2.Identify the disadvantages associated with establishing a small subsidiary in the foreign country of concern. Chapter 14 Running Your Own MNCDeriving a Required Rate of Return for an International Project Consider a possible project that would result in expansion of your international business. Describe how you would derive a required rate of return for this project.Chapter 15 Running Your Own MNCEstimating Cash Flows of an International Project1.If you seriously considered whether to implement your international business idea, you would have to measure the costs and benefits of this idea. Describe how you would estimate the dollar revenue to be received from your business. 2.Describe how you would estimate the expenses associated with your business. 3.Describe how you would estimate the net cash flows (in dollars) of your business.
4.Explain why your estimate of the net cash flows (in dollars) could be overestimated. Chapter 16 Running Your Own MNCAssessing Exposure to Country Risk1.Describe the financial factors that expose your business to country risk. 2.Describe the political factors that expose your business to country risk. TERM PAPER QUESTIONS FOR EACH WEEK THAT WERE POSTED UNDER THE WEEKLY ANNOUNCEMNTSWEEK2:RunningYourOwnMNCTerm Project:CreateanideaforyourownMNCtoconductinternationalbusiness.Yourideashouldbesimplifiedtothedegreethatyoucouldpossiblyimplementitsomeday.However,yourideashouldalsobesufficientlycreativetobesuccessfulifdoneproperly.Yourideashouldfocusononecountryandoneforeigncurrency,sincemanyMNCsarefocusedinthismannerwhentheyarefirstcreated.Sothatyoucanrecognizetheissuesregardingexchangerateriskthatarediscussedthroughoutthistext,youshouldassumethatyouwillreceiveforeigncurrencywhensellingyourproduct.YourideashouldbeforasmallMNCinsteadofalargeMNCbecauseevenmostlargeMNCsbeganassmallfirmsWEEK3:Chapter3RunningYourOwnMNCUsingtheForeignExchangeMarket1.Explainhowyouwillusethespotmarketforyourbusiness.2.Whatbankdoyouplantousetoexchangetheforeigncurrencyreceivedfordollars?Whatisthebid/askspreadonarecentquotationbythatbank?(Callthebanktoobtainquotations.)3.Willyoupossiblyneedtheforwardmarket?Explain.AccessingBid/AskRatesGotohttp://sonnet-financial.com/rates/full.asp.Determinetheprevailingbidandaskexchangeratesforthecurrencythatyouwilluseforyourbusinesstransactions.WEEK4:Chapter4RunningYourOwnMNCMonitoringMovementsintheForeignCurrency’sValueWhatkeyfactorslikelyaffectthevalueoftheforeigncurrencyofconcernovertime?WEEK5:Chapter5RunningYourOwnMNCUsingCurrencyFuturesandOptions1.HowcanyouusecurrencyfuturestohedgetheexchangerateriskofyourMNC?2.HowcanyouusecurrencyoptionstohedgetheexchangerateriskofyourMNC?AccessingFuturesQuotes
Gotohttp://www.cme.com.Determinetheprevailingfuturespriceofthemainforeigncurrencyforyourbusiness.Gotohttp://www.oanda.comanddeterminetheprevailingspotrate.Whatisthediscountorpremiumofthefuturesprice?WEEK6Chapter6RunningYourOwnMNCMonitoringCentralBankIntervention1.HowcanyourbusinessbeaffectediftheFedattemptstostrengthenthedollarinthefor-eignexchangemarket?2.IftheFeddecidestoweakenthedollar,howwillyourbusinessbeaffected?3.Howcanindirectcentralbankinterventionaffectyourbusinessevenifthereisnoimpactonexchangerates?AccessingCentralBankInformationGotohttp://patriot.net/~bernkopf/.GototheWebsitelinkforthecentralbankinyourtargetcountry.Determinewhetherthiscentralbankintervenestocontrolitscurrencyintheforeignexchangemarket.WEEK7:CHAPTER7AssessingSpotandForwardRates1.Obtainaquotationforthespotrateoftheforeigncurrency(thatyouwillreceivefromyourbusiness)fromthebankwhereyouintendtoconductyourforeignexchangetransactions.Then,obtainaquotationforthespotrateoftheforeigncurrencyfromanotherbank.Doesitappearthatthespotratesarealignedacrosslocationsatagivenpointintime?2.Obtainaquotationfortheone-yearforwardrateoftheforeigncurrencyfromthebankwhereyouintendtoconductyourforeignexchangetransactions.Then,useabusinessperiodicaltodeterminetheprevailingone-yearinterestratesintheUnitedStatesandtheforeigncountryofconcern.Doesitappearthatinterestrateparityexists?3.ReviewthedataonforwardratesfromTheWallStreetJournaloranothersourcetodeterminewhethertheforeigncurrencyofconcerntypicallyexhibitsadiscountorapremium.ThenreviewdataoninterestratestocomparetheforeigncountryofconcernandtheU.S.interestrates.Doesitappearthattheforwardrateoftheforeigncurrencyexhibitsapremium(discount)whenitsinterestrateislower(higher)thantheU.S.interestrate,assuggestedbyinterestrateparity?WEEK9:Chapter8RunningYourOwnMNCDeterminingWhetherIFEHoldsUseTheWallStreetJournaloranotherdatasourcetorecordtheinterestratedifferentialbetweentheinterestrateoftheforeigncountryinwhichyouplantodobusinessandtheU.S.rateoverthelastfiveorsoquarters.Then,reviewtheexchangeratepercentagechangeintheforeigncurrencyofconcernovereachofthosecorrespondingquarterstodeterminewhethertheinternationalFishereffect(IFE)appearstoholdoverthosequartersforthatcurrency.WEEEK10:Chapter9RunningYourOwnMNCMonitoringExchangeRateTrendsUseabusinessperiodicalortheInternettodeterminehowthevalueoftheforeigncurrencyofconcernhaschangedineachofthelastfiveweeks.Doesitappearthatthereisatrendoverthelastfiveweeks?Whatisthemeanpercent-agechangeovertheseweeks?Ifyoubelievedthatthecurrency’svaluewouldcontinuefollowingtherecenttrend,woulditappreciateordepreciateinthenearfuture?
WEEK11:Chapter10RunningYourOwnMNCRecognizingExposuretoExchangeRateRiskRecallthatwhenyoucreatedyourbusinessidea,itwasassumedthatyourreceivableswouldbedenominatedintheforeigncurrencyofconcernuponthesaleofyourproducts.1.Describeyourexposuretoexchangeraterisk.Thatis,describetheexchangerateconditionsaffectingtheperformanceofyourbusiness.2.Isyourbusinesssubjecttotransactionexposure?economicexposure?translationexposure?Explainwhyyourbusinessisorisnotsubjecttoeachofthesetypesofexposure.WEEK12:Chapter10RunningYourOwnMNCDenominatingReceivablesinU.S.DollarsRecallthatitwasassumedthatyourreceivableswouldbedenominatedintheforeigncurrencyofconcern.Forthisquestiononly,assumethatyoucouldswitchyourpricingpolicysothatthereceivableswouldbedenominatedindollarsinsteadoftheforeigncurrency.Howwouldthisswitchaffectthetransactionexposureandtheeconomicexposureofyourbusiness?Explaintheconditionsthatcouldstillcausetheperformanceofyourbusinesstobeaffectedbyexchangeratemovements

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