1. Short-Run Exchange Rate Risk Assume you have a trade receivable denominated in a foreign currency of your choice that is payable to you by your customer in 6 months. At the current spot rate the trade receivable is worth the equivalent of US$5,000,000. To find the current spot rate for the chosen currency pair Enter 5,000,000 in the Convert box, United States dollar in the From: box, and your chosen currency in the To: box. Click on Go for the spot rate, which will be expressed in European terms, that is, units of foreign currency per one US dollar. Enter the name of the chosen currency, the date the site is accessed, and the spot rate in European terms in the table below. To find a 180 day forward rate for the currency pair, go to For Amount you can just enter 1 and enter US dollars in the Buy box and the foreign currency in the Sell box. For Value Date enter 6 Months and click Go for the forward rate. (Clicking on the Inverse box will switch the rate from European to American terms.) Enter the one-year forward rate in the table below. Make sure the forward rate is expressed in the same way as the forward rate, that is, in European terms. Foreign Currency Date Current Spot Rate in European terms: FX per 1 US dollar Six -Month Forward Rate in European terms: FX per 1 US dollar EUR 3/26/21 2. Long-Run Exchange Rate Risk Assume you have undertaken a 3-year investment abroad with expected cash flows denominated in your chosen currency. At the current spot rate those cash flows are expected to provide a positive net present value (NPV) in US dollar terms. Based on relative purchasing power parity you are asked to estimate future spot rates over the next three years based on comparative inflation data. With that data complete the table below. S0 = Current Spot Rate in European Terms (Foreign currency per US dollar) E(St) = Expected Exchange Rate Spot Rate in t Years in European Terms (Foreign currency per US dollar) hUS= Annual Inflation Rate in the United States hFC = Annual Foreign Country Inflation Rate 3. The United Kingdom (UK) has separated from the European Union (EU) in a variety of economic, fiscal, and policy decisions. i) Summarize what the separation is. ii) Summarize what has happened to the currency of the UK as well as the Euro over the last 3 years since the announcement. (a) How much of this currency fluctuation is from the announcement. (b) Select at least one multinational company that has had financial impact due to the separation and provide detailed explanation of this. 4. COVID-19 virus outbreak is across the globe has spread around the world. Provide at least 4 specific business examples of how this outbreak will impact global trade and exchange rates if it is not contained and becomes a substantial pandemic that lasts over a year.