Session9 - AFP Learning System: Treasury Session 9 Module...

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v1.1 © 2004 Association for Financial Professionals. All rights reserved. Session 9: Module 5, Chapter 15 - 1 AFP Learning System: Treasury Session 9 Module 5: Global Treasury & Risks and Controls
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v1.1 © 2004 Association for Financial Professionals. All rights reserved. Session 9: Module 5, Chapter 15 - 2 Session 9, Module 5: Global Treasury Chapter 15: Global Treasury Environment Chapter 16: Global Treasury Organization and Liquidity Management
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v1.1 © 2004 Association for Financial Professionals. All rights reserved. Session 9: Module 5, Chapter 15 - 3 Chapter 15: Global Treasury Environment—Outline Objectives of Global Treasury Management Characteristics of International Payment Systems Characteristics of International Banking Systems International Trade Financing Methods Future of the Global Treasury Environment
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v1.1 © 2004 Association for Financial Professionals. All rights reserved. Session 9: Module 5, Chapter 15 - 4 Challenges in International Treasury Management Cash flow complexity Political risk Legal and ethical issues Tax issues Foreign exchange (FX) exposure
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v1.1 © 2004 Association for Financial Professionals. All rights reserved. Session 9: Module 5, Chapter 15 - 5 Sample Foreign Currency Quotation Formats Currency USD Equivalent Currency per USD British pound (£) GBP $1.7907/£ £0.5584/$ Swiss francs (₣) CHF $0.7925/₣ ₣1.2618/$ Euro (€) EUR $1.2165/€ €0.8220/$ Japanese yen (¥) JPY $0.009137/¥ ¥109.45/$ Given USD USD/rate = FC USD × rate = FC Given Foreign Currency (FC) FC × rate = USD FC/rate = USD
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v1.1 © 2004 Association for Financial Professionals. All rights reserved. Session 9: Module 5, Chapter 15 - 6 Foreign Exchange (FX) Rates Example: The quoted rate for the euro is €0.8220/$. How many euros would be required to purchase $2 million? $2,000,000 × 0.8220 = €1,644,000 Example: The quoted rate for the Swiss franc is $0.7925/₣. ₣120,000 would be equivalent to how many USD? ₣120,000 × $0.7925 = $95,100
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v1.1 © 2004 Association for Financial Professionals. All rights reserved. Session 9: Module 5, Chapter 15 - 7 Foreign Exchange (FX) Rates Example: The quoted rate for the Japanese yen is $0.009137/¥. How many yen would $2 million purchase? Example: The quoted rate for the British pound is £0.5584/$. £450,000 would be equivalent to how many USD? $2,000,000 = 218,890,226.56 0.009137 ¥ £450,000 = $805,873.93 0.5584
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v1.1 © 2004 Association for Financial Professionals. All rights reserved. Session 9: Module 5, Chapter 15 - 8 Foreign Exchange (FX) Rates: Bid-Offer Spreads and Dealer Profit Bid rate: Dealer buys currency Offer rate: Dealer sells currency Bid/offer spread or bid/ask spread: Difference between rates (dealer’s profit) Dealer bid-offer quote; e.g., £0.5575/$ - £0.5590/$ Scenario Company Delivers Dealer Buys Dealer Sells Company Receives Company wants to buy Great Britain pounds (GBP) USD USD at bid rate (£0.5575) GBP GBP Company wants to sell GBP for USD GBP GBP USD at offer rate (£0.5590) USD
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v1.1 © 2004 Association for Financial Professionals. All rights reserved. Session 9: Module 5, Chapter 15 - 9 Foreign Exchange (FX) Markets Spot market (spot rate) Forward market (forward rate) Par Discount Premium Interest rate parity
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v1.1 © 2004 Association for Financial Professionals. All rights reserved.
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This note was uploaded on 02/08/2011 for the course FINANCE 430 taught by Professor Richter during the Spring '11 term at Rutgers.

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Session9 - AFP Learning System: Treasury Session 9 Module...

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