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Midterm Guide Fall 2010

Midterm Guide Fall 2010 - International Corporate Financial...

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Unformatted text preview: International Corporate Financial Management Mid-Term Exam Review Hedging Exchange Rates Given spot rates at different banks, would you see if there were any arbitrage opportunities? Use a forward rate contract to hedge a transaction Use a futures contract to hedge a transaction PWP!‘ Use an option contract to hedge a transaction What happens when FX rates change? 1. What impact does it have on prices? 2. What is impact on imports and exports? 3. What do we mean when a currency ”strengthens” or ”weakens” against another currency? Balance of Payments 1. Definitions—be clear about what each factor is measuring a. ”Trade Deficit” or surplus b. Direct Investment c. Portfolio Investment d. Income e. ”Other” financial items Eurodollars 1. What are they? 2. How are they created? 3. Why are they important? Exchange Rate Forecasting 1. Using forward rate (interest rate parity) 2. Impact of other factors a. Inflation b. Economic growth c. Balance of payment data d. Safety and security e. Intervention (buying, selling currency) f. Debt problems ...
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