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business
international business
Questions and Answers of
International business
=+3. Reread the Country Focus on the search for capital in the Czech Republic.
=+ what can be done to stop global financial contagion in the future?
=+2. In 2008–2009, the world economy retrenched in the wake of a global financial crisis. Did the globalization of capital market contribute to this crisis?
=+Do you think this growth will continue throughout the next decade? Why?
=+1. Why has the global capital market grown so rapidly in recent decades?
=+LO5 Understand how foreign exchange risks impacts upon the cost of capital.
=+LO4 Appreciate the benefits and risks associated with the eurocurrency market, the global bond market, and the global equity market.
=+LO3 Be familiar with the risks associated with the globalization of capital markets.
=+LO2 Understand why the global capital market has grown so rapidly.
=+LO1 Articulate the benefits of the global capital market.
=+ Let the yuan float, maintain the peg, or change the peg in some way?
=+6. What do you think the Chinese government should do?
=+5. Do you think the U.S. government should push the Chinese to let the yuan float freely? Why?
=+ What might the global implications of this be?
=+4. Under what circumstances might a decision to let the yuan float freely destabilize the Chinese economy?
=+3. How might a decision to let the yuan float freely affect future foreign direct investment flows into China?
=+yuan is allowed to float freely against the U.S. dollar on the foreign exchange markets and appreciates in value, how might this affect the fortunes of those enterprises?
=+2. Over the last decade, many foreign firms have invested in China and used their Chinese factories to produce goods for export. If the
=+What were the benefits of doing this for China? What were the costs?
=+1. Why do you think the Chinese government originally pegged the value of the yuan against the U.S. dollar?
=+What are the key takeaways from your chosen report?
=+Find a Megatopics report for analysis. Is the report on an established or emerging economy?
=+ A German colleague told you yesterday that Deutsche Bank Research’s Megatopics are an effective way to stay informed on important topics in international finance.
=+Exercise 2 An important part of understanding the international monetary system is keeping updated on current growth trends worldwide.
=+ The report aims to provide a regular assessment of global financial markets. Locate and download the latest information to prepare a summary of the top three countries that export and import
=+life in specific markets. The Global Financial Stability Report is a semiannual report published by the International Capital Markets division of the International Monetary Fund (IMF).
=+Exercise 1 A country’s financial and fiscal policies sometimes impact the quality of
=+ What would be the consequence for the United States economy?
=+What would happen to the value of the dollar if China and oilproducing nations all shifted out of dollar-denominated assets at the same time?
=+4. In addition to oil producers, China is also accumulating a large stock of dollars, currently estimated to total $1.4 trillion.
=+nondollar assets, such as euro-denominated stocks and bonds?
=+3. What will happen to the value of the U.S. dollar if OPEC members decide to invest more of their petrodollars towards
=+ What might lead them to direct more funds towards non–dollar-denominated assets?
=+2. What factors determine the relative attractiveness of dollar-, euro-, and yen-denominated assets to oil producers flush with petrodollars?
=+1. What will happen to the value of the U.S. dollar if oil producers decide to invest most of their earnings from oil sales in domestic infrastructure projects?
=+6. Reread the Country Focus on the U.S. dollar, oil prices, and recycling petrodollars, then answer the following questions:
=+the flow of trade and investment among the three countries?
=+5. Imagine that Canada, the United States, and Mexico decide to adopt a fixed exchange rate system. What would be the likely consequences of such a system for (a) international businesses and (b)
=+Which system is the more desirable for an international business?
=+what are the most important criteria in a choice between the systems?
=+4. Debate the relative merits of fixed and floating exchange rate regimes. From the perspective of an international business,
=+How might the IMF change its approach? What would the implications be for international businesses?
=+3. Do you think the standard IMF policy prescriptions of tight monetary policy and reduced government spending are always appropriate for developing nations experiencing a currency crisis?
=+ What threats might they create?
=+2. What opportunities might current IMF lending policies to developing nations create for international businesses?
=+Is there a case for returning to some type of gold standard? What is it?
=+1. Why did the gold standard collapse?
=+LO6 Appreciate the implications of the global monetary system for currency management and business strategy.
=+LO5 Understand the debate surrounding the role of the IMF in the management of financial crises.
=+and why counties adopt different exchange rate regimes.
=+LO4 Know what exchange rate regimes are used in the world today
=+LO3 Be familiar with the differences between a fixed and floating exchange rate system.
=+LO2 Discuss the role played by the World Bank and the IMF in the international monetary system.
=+LO1 Be familiar with the historical development of the modern global monetary system.
=+How does this explain the relative strength of car sales from Hyundai and Kia in the U.S. market during early 2009?
=+4. In 2008 the Korean won depreciated 28 percent against the United States dollar. Does this imply that Hyundai and Kia were wrong to invest in the United States?
=+against the U.S. dollar over the next decade, should it still expand its presence in the United States?
=+3. If Hyundai expects the value of the won to strengthen appreciably
=+ What are the drawbacks of such a strategy?
=+What other reasons might these companies have for investing in the United States?
=+ How does this hedge against adverse currency movements?
=+2. Hyundai and Kia are both expanding their presence in the United States.
=+1. Explain how the rise in the value of the Korean currency, the won, against the dollar impacts upon the competitiveness of Hyundai and Kia’s exports to the United States?
=+with the lowest purchasing-power parity according to this classification.Which currencies, if any, are overvalued?
=+countries based on the price of a Big Mac. Locate the latest edition of this index that is accessible. Identify the five countries (and their currencies)
=+Exercise 2 Sometimes, analysts use the price of specific products in different locations to compare currency valuation and purchasing power. For example, the Big Mac Index compares the
=+Considering that your company possesses only U.S. dollars, identify the spot and forward exchange rates. What are the factors that influence your decision to use each? Which one would you choose?
=+currency market. As such, you are assigned the duty of ensuring the availability of 100,000 yen for a payment scheduled for next month.
=+Exercise 1 One component of learning about another country or region is to understand the relationship of its currency with others on the world
=+the United States. One of your analysts told you that the Mexican peso is expected to depreciate by 30 percent against the dollar on the foreign exchange markets over the next year. What actions,
=+5. You are the CFO of a U.S. firm whose wholly owned subsidiary in Mexico manufactures component parts for your U.S. assembly operations. The subsidiary has been financed by bank borrowings in
=+¥130 to $1 = ¥100 by December. You can borrow yen at 6 percent a year. What should you do?
=+4. You manufacture wine goblets. In mid-June you receive an order for 10,000 goblets from Japan. Payment of ¥400,000 is due in midDecember. You expect the yen to rise from its present rate of $1 =
=+what else can Volkswagen do to reduce its exposure to future declines in the value of the U.S. dollar against the euro?
=+3. Apart from hedging through the foreign exchange market,
=+2. Why do you think the value of the U.S. dollar declined against that of the euro in 2003?
=+What would have happened if they had hedged 70 percent of their exposure?
=+1. Why do you think management at Volkswagen decided to hedge only 30 percent of their foreign currency exposure in 2003?
=+3. Reread the Management Focus feature on Volkswagen in this chapter, then answer the following questions:
=+3. Given your answers to parts a andb, and given that the current interest rate in the United States is 10 percent, what would you expect the current interest rate to be in Britain?
=+2. Suppose the price of beef is expected to rise to $3.10 in the United States and to £4.65 in Britain. What should the one-year forward dollar/pound exchange rate be?
=+1. According to PPP theory, what should the dollar/pound spot exchange rate be?
=+2. Two countries, Great Britain and the United States, produce just one good: beef. Suppose the price of beef in the United States is $2.80 per pound and in Britain it is £3.70 per pound.
=+securities with one-year maturity is 7 percent, and the expected rate of inflation is 5 percent. The current spot exchange rate for Korean won is $1 = W1,200. Forecast the spot exchange rate one
=+1. The interest rate on South Korean government securities with oneyear maturity is 4 percent, and the expected inflation rate for the coming year is 2 percent. The interest rate on U.S. government
=+LO6 Understand the differences between translation, transaction and economic exposure, and what managers can do to manage each type of exposure.
=+LO5 Be familiar with the merits of different approaches towards exchange rate forecasting.
=+LO4 Understand the different theories explaining how currency exchange rates are determined and their relative merits.
=+LO3 Appreciate the role that forward exchange rates play in insuring against foreign exchange risk.
=+LO2 Understand what is meant by spot exchange rates.
=+LO1 Be conversant with the functions of the foreign exchange market.
=+4. Which theory of FDI best explains the international expansion strategy adopted by Starbucks?
=+occasion, Starbucks has chosen a wholly owned subsidiary to control its foreign expansion (e.g., in Britain and Thailand). Why?
=+Starbucks over entering through wholly owned subsidiaries? On
=+3. What are the advantages of a joint-venture entry mode for
=+2. Why do you think Starbucks has now elected to expand internationally primarily through local joint ventures, to whom it licenses its format, as opposed using to a pure licensing strategy?
=+1. Initially Starbucks expanded internationally by licensing its format to foreign operators. It soon became disenchanted with this strategy.Why?
=+10. Now that the dispute has gone to the World Trade Organization, what do you think would be a fair and equitable outcome?
=+ Are they reasonable?
=+What about the EU’s countercharges?
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