NIKE, Inc. is an American corporation that is engaged in the design, development, manufacturing, and worldwide marketing and sales high quality of footwear, apparel, equipment, accessories, and services. The major operation of this company is in the US, where the dollar has been strengthening and is expected to continue. The company believe that its ability to grow in the USA becomes limited. The company believes that Egypt-inhabitant of 110 mill citizen- would be the best candidate for its international expansion. Egypts Cotton is one of the highest quality among an. The working force is very cheap, without any restriction on working hours. Nike intends to establish a major subsidiary and factory in Cairo, however many companies have already established a subsidiary in Egypt Adidas, Puma, and others- whose products are deemed to be cheaper than NIKE. Another major concern for the company is the Egyptian pound . Egypt is a country with a major budget deficit; Tourism used to be the major source of income, however, COVID-19, and security problem, cause a great damage to this sector. The foreign exchange reserve is depleting. The central bank is not allowed to interfere in currency market anymore, which causes unprecedented inflation. The company is planning to invest 500 mils $ in the Egyptian market in 3 month time. the current spot rate is 20/$. The 3 months forward rateAccording to the C-Bank of Egypt- is 20.38/$. You are hired as an expert in international finance to give them your opinion and answer the following question

1. Why Nike should go to the international market- like Egypt (6pt)

2. Explain the risk that such decision entail (18 pt)

3. Provide 4 suggestions to the company that would reduce the effect of Exchange rate risk. (12pt)

4 Part II 1. Is there an arbitrage opportunity? If the answer is yes, how would you take advantage of such an opportunity? (6 pt)

2. What would be the company's loss or profit in the currency market?

If the company enters the Egyptian market in 3 months, for the rest of the year. (Hint calculate the forward rate after 12 month and the swap difference- use the calculation of the CB of Egypt in your calculation) (6 pt)

The company decided to enter immediately into an ERA agreement with the CB of Egypt. On the settlement date- 3 months later, we have the following information available: the spot rate was 21/$, the 9-month rate in the US is 2%, while the 9-month rate in Egypt is 20% 1.What would be the new swap point? (6pt) 2. would the company's losses in this market increase or decrease based on their previous estimation? Explain (3pt) 3. Use the ERA agreement to calculate any compensation that the company is entitled to -according to this agreement (6pt) Explain the International Fisher Effect. How would you apply in this case? 3pt-Bonus