Question 1

Assuming today was 1 st January 2019. You are the chief financial officer of a US-based company which manufactures and distributes office supplies. As the competition in local market was getting stiffer despite the companys strong customer base, the Board of Directors (the Board) is considering for the company to expand its international business by penetrating to either the Canadian market or Mexican market through exporting. The company anticipates strong demand for office supplies in these two markets.

d) Analyse how the exchange rate risk may affect your decision in choosing either to establish subsidiary in one country or to establish subsidiary in both country. (Hint: relate your argument with diversification concept, calculate standard deviation based on the recent movement of exchange rates of the two countries, clarify the data that you use including source of data and period of analyses (i.e daily, monthly or quarterly), and reflect your decision with goal of the firm)