(2011-S2) - FINS3616 - Tutorial Slides - Week 08 (presentation week)

(2011-S2) - FINS3616 - Tutorial Slides - Week 08 (presentation week)

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TERNATIONAL BUSINESS FINANCE INTERNATIONAL BUSINESS FINANCE FINS3616 torial Tutorial Week 9
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HAPTER 11 ROBLEM CHAPTER 11 — PROBLEM 1 Why is operating exposure to currency risk more difficult to manage than transaction exposure? Operating exposure to currency risk is more difficult to measure than transaction exposure because the values of exposed real assets do not vary one-for-one with exchange rate changes as exposed monetary assets and liabilities do. Weak relations (i.e. low r-squares) between asset and currency values make financial market hedges of operating exposures less than perfect. Operating hedges might be more effective, but they are also more difficult to implement. 2 FINS3616 — Peter Kjeld Andersen
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HAPTER 11 ROBLEM CHAPTER 11 — PROBLEM 2 Sterling & Company is a silverware manufacturer based in the town of Sevenoaks in the U.K. Although Sterling exports to companies around the world, its iggest customers are in the U.S. biggest customers are in the U.S. Accounts that are denominated in dollars are indicated in parentheses in the following balance sheet. The exchange rate is currently $1.50/£ 3 FINS3616 — Peter Kjeld Andersen
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HAPTER 11 ROBLEM CHAPTER 11 — PROBLEM 2 A. What is the value of monetary assets and liabilities that are exposed to e dollar? What is the value of net monetary assets with a dollar the dollar? What is the value of net monetary assets with a dollar exposure? erling & Co has exposed monetary assets of $30 000 and exposed Sterling & Co. has exposed monetary assets of $30,000 and exposed monetary liabilities of $45,000+$90,000 = $135,000.
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(2011-S2) - FINS3616 - Tutorial Slides - Week 08 (presentation week)

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