Throughout years the United States government has created regulations of market and conduct when it comes to importation. There were antitrust laws created to ensure that the public was protected against abuses and inefficiencies resulting from any monopoly or concentration of economic power (Salvatore, 2015). How does this relate to foreign exchange risk? Not only are they enforcing certain regulations, but they are ensuring there is no price collusion.
Adding to this we are ensuring the regulation of international trade by ensuring tariffs, quotas, antidumping duties and other regulations are being followed. The foreign exchange risk is similar to currency risk and exchange rate-risk. An exporter faces a foreign-exchange risk because their investments may be denominated due to its foreign currency and can potentially lose value based upon unfavorable exchange rate fluctuations. This is because the investor's foreign currency and the investment holder's domestic currency do not match.
The exporter can hedge its foreign exchange risk by selling in foreign exchange currencies or opening a foreign bank account. This helps because when the exchange rate is favorable, send the money over for deposit and it would be change into the current local currency.
Example Foreign Exchange Risk
Company A is a Canadian company and pays interest and principal on a $2,000 bond with a 10% coupon rate in Canadian dollars. Let's say the exchange rate at the time of purchase is $1 CAD: $1 USD, that means that the 10% coupon payment would be $200 Canadian, and because of the exchange rate, it is also equal to US$200.
Interest on payday loans too high or, just right?
Payday loans are short-term cash loans that are based on the borrower's personal check held for future deposit. "Payday loans often help those borrowers manage acute financial pressures and thereby avoid serious adverse consequences" (Shapiro, 2011, p. 1). However, the interest for these loans is too high. Individuals are often paying more on the interest rate than on the actual loan. Payday loans could range from $100 to $1,000. Why? Because each state has a legal maximum. The average payday loan is about two weeks or less. "A fee of $18 per $100 borrowed for two weeks is equivalent to an annual interest rate of 468 percent" (Shapiro, 2011, p. 3). However, when it comes to shorter term loans there can be a potential for an even higher interest rate.
Should Christians charge poor people interest on loans?
In my opinion, being a good Christians means that you will help each other out. In this occasion, we should not charge interest on loans if individual friends are making them. On the other hand, we cannot control interest rates that come from companies trying to make profits. The Bible specifically states, "You shall not charge interest on loans to your brother, interest on money, interest on food, interest on anything that is lent for interest" (Deuteronomy 23:19, ESV). Now, should we consider what these companies doing immoral and against our beliefs as Christians?