Topic: International Finance

B. A Korean firm importing goods from a Chinese manufacturer. The Korean firm has a strong opinion that Yuan rate () will fall next month. The payment of 150,000 is due in one month's time. Current exchange rate is W1 = 0.0058 and next month's rate is expected to be at W1 = 0.007 Required: i. Describe the strategy of payment that should be undertaken by a Korean firm. (2 marks) ii. Based on the strategy in (i) above, calculate the total saving or loss the Korean firm will receive if Yuan fall. (3 marks) C. Price of a cup of Starbuck coffee in United States (US) is $USD3.59. The inflation rate in US is reported at 2% whilst Malaysia has reported an inflation rate of 1%. Assuming that the US dollar and Malaysian Ringgit are at Purchasing Power Parity, and the current spot rate is $USD1.00 for every MYR4.20 (spot rate quoted in US Dollar): Required: Calculate the price of a Starbuck coffee in Malaysia in future spot rate