Question
BFRC Auditing (BFRC-Partners) Company, originated in Germany, would like to assess the country risk of Turkey. BFRC-Partners has identified various political and financial risk factors
BFRC Auditing (BFRC-Partners) Company, originated in Germany, would like to assess the country risk of Turkey. BFRC-Partners has identified various political and financial risk factors after Covid-19, as shown below. BFRC-Partners has assigned an overall rating of 80 percent to political risk factors and of 20 percent to financial risk factors. BFRC-Partners is not willing to consider Turkey for investment if the country risk rating is below 4.0. Should BFRC-Partners consider Turkey for investment?
| POLITICAL RISK FACTORS | ASSIGNED RATING | ASSIGNED WEIGHT |
| Factor 1 | 5 | 40 % |
| Factor 2 | 3 | 60 % |
| FINANCIAL RISK FACTORS | ASSIGNED RATING | ASSIGNED WEIGHT |
| Factor 1 | 1 | 10% |
| Factor 2 | 4 | 20% |
| Factor 3 | 5 | 30% |
| Factor 4 | 4 | 20% |
| Factor 5 | 5 | 20% |
- Calculate the country risk of Turkey and decide whether to invest or not to this country.
- Explain why foreign exchange rates are important for investment? Please explain it.
- Why companies need to forecast Exchange rates? Is it easy to estimate the Exchange rate?
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