Global Financial Strategy - FINANCE 6644 Global Financial...

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Chapter 24 / Exercise 9
Financial Markets & Institutions
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FINANCE 6644: Global Financial StrategyKrishnan DandapaniJanuary 2015Final Exam Review Questions InstructionsAPlease be concise and precise in your answers.BPractice answers for closed book, class room setting.CSuggested length: minimum one page [1.5 spacing]; maximum two pages per question.DYou would answer 3 short essays and 2 Problems in two hours, 30 minutes in final exam.Questions1.Ethical Standardsa.Can a multinational firm adopt varying ethical standards [such as with regard to product safety (Pinto), employee benefits (Nike) and “kickbacks” to win business (HP)] in its global operations? Why or Why Not? Discuss in depth based on the goals of multinational corporations?
b.How do corporate governance and financial management differ for US basedcorporations and global multinational corporations?
2.GlobalPricing StrategyWith the emergence of the Internet as a dominant influence in global markets, many anticipated that the “Law of One Price” for all products would evolve. However that did not materialize.AWhat is “Law of One Price”?. When would that exist globally?
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Financial Markets & Institutions
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Chapter 24 / Exercise 9
Financial Markets & Institutions
Madura
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The law of one price means that in open economies, prices of individual commodities (when compared in the same currency) should be the same in two different countries. LOP assumes there is free trade, no frictions inmoving of goods and services and no transactions costs. BIdentify the major pricing strategies/ methodologies of corporations in pricing products and services.CDiscuss the impact of the Internet on “Global Pricing Strategies” of firms with specific reference to ‘Internet Pricing’ and ‘Brick and Mortar pricing’.(Class notes, and presentation by Professor)3.Problem: Triangular Arbitrage Strategy:The following Quotations are available to you. (You may either buy or sell at the stated rates)Singapore Bank: Singapore dollar quote for Korean Won Won714.00/S$Hong Kong Bank: HK$ quote for Singapore dollarsHK$4.70/S$Korean Bank: Korean won quote for Hong Kong dollarsWon150.00/HK$a.Assume you have an initial HK$1,000,000. Is triangular Arbitrage possible? If so, explain theSteps, and compute your profit? b.What are the implications of trading spreads and commission costs for this profit?

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