Question
To select foreign currencies that you believe are important to the NVIDIA corporation, you may check the companys website and/or annual report first. (2) To
To select foreign currencies that you believe are important to the NVIDIA corporation, you may check the companys website and/or annual report first. (2) To make foreign currencies forecasts, you may use the notions of International Fisher Effect and Purchase Power Parity. Here, you need to explain what these are and discuss the accuracy of these techniques in forecasting exchange rate. (a) In making one-year currency forecasts, for the IFE use the current spot exchange rates and the interest rates, and for the PPP use the current spot exchange rates and the inflation rate forecasts for 2020. For the IFE, if you cannot find the bond yield of government bill/note/bond rates for a relevant period, you may use the yield of a bond with a maturity date closest to 1 year from now. (3) For the foreign currency exposure, you may Obtain foreign exchange rates of the selected currencies against USD (in the notation of foreign currency/USD) from Jan/2010 to Jan/2020 in a monthly basis (if the selected company only has a shorter data period, then only use the available period). Obtain the stock price of the selected company for the same period in the same basis. Compute monthly percentage change of those market data. Then, (a) prepare graphs having the monthly percentage change in the stock price and the currency rate, and rationalise the results. (b) conduct a regression using the monthly percentage change in the stock price as a dependent variable and the monthly percentage change in the foreign exchange rates as the independent variables. Explain the results. (c) Discuss why or why not your initial hypotheses regarding the importance of the selected currencies are supported by the above analyses.
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