MGT 474 Study Guide - MGT 474 Study Guide Relative...

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MGT 474 Study GuideRelative Advantage: compare products (down). Absolute country on top, greatest gap equals relative advantage. Relative price : compare in country (across). Russia: 10 cheese/3 wineMidpoint relative price: (Country A price + Country B price)/2 points: however many decimals: Nom=real+inflation or 1+n = (1+r)(1+i) or n=ri-1(100.223 = .001 * the point)Periodic interest rate (k) = (total payments – loan)/loan = interest/principan = (FV-PV)/PV = FV/PV -1 = interest rate/compounding rate APR = (2*n*int)/(PV(N+1) where n = number of pmt/year and N = total pmts and INT = total interest paid1 year < EFF = ((1+k)^m) -1 where m = # of periods in a year1 year > EFF = (1+k)^(1/n))-1, n = # of years of the loanIf Dollar pegged currency (Renminbi) moves from high to low then the Renmimbi has devaluedExchange rate according to the theory of absolute purchasing power parity? Divide the two prices. Pay attention to the denomination.Direct quote % change: ((new-old)/old)*100Indirect quote % change: ((old-new)/new)*100 or (spot-for)/for)*(days/360)Over/undervalued: Direct (quoted – actual)/actual and vise versa for indirectUltimate objective of the manager of a multinational corp? A. to maximize the stock price.For indirect quote the foreign currency is the variable amount (numerator) and the domestic currency is fixed at one unit (denominator). When interested in what happened to the FC, $/FC is the direct quote. Direct quote: domestic currency /foreign currency$/FC goes from high to low then the $ has appreciated by (old-new)/new or the FC has depreciated by (new-old)/old

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