Euro Area Balance of Payments
Assumptions (billions of US dollars)
A. Current account balance
B. Capital account balance
C. Financial account balance
D. Net errors and omissions
E. Reserves and related items
What are the three major functions of the foreign exchange
The foreign exchange market performs the following functions:
to effect transfer of purchasing power between countries- transfer function;
to provide credit for foreign trade
Problem 13.1 Ganado's's Cost of Capital
Maria Gonzalez now estimates the risk-free rate to be 3.60%, the company's credit risk premium is 4.40%,
the domestic beta is estimated at 1.05, the international beta at .85, and the company's capital structure is
What is the exchange rate determination?
Asset market approach
Forex as a store of value.
Willingness to hold monetary claims depends on relative real interest rates & on countrys economic
growth & profitability.
Asset approach forward look
Discussion II - Operating Exposure
What is an operating exposure?
Economic (or operating) exposure is caused by the effect of unexpected currency fluctuations on a
companys future cash flows and market value, and is long-term in nature. The impact can be
Textbook Chapters 1,2,3 & 4
Title: Multinational Business Finance
Authors: David K. Eiteman, Arthur I. Stonehill, and Michael H. Moffet
Publisher: Pearson/Prentice Hall
Year/Ed: 2016/14th ed.
Problem 5.9 Forward Premiums on the Dollar/Euro ($/)
Use the following spot and forward bid-ask rates for the U.S. dollar/euro (US$/) exchange rate from December 10, 2010,
to answer the following questions:
Balance of Payments & Subaccounts
The balance of payments (BOP) is an accounting of a country's international transactions for a
particular time period.
Any transaction that causes money to flow into a country is a credit to its BOP account, and any
Determinants of exchange rate: regression model
Exchange rate is the most volatile of all macroeconomic indicators. Aside from factors such
as interest rates and inflation, the exchange rate is one of the most important determinants of a
Problem 1.5 Trade at China's Domestic Price
Chinas domestic price is 10 containers of toys equals 7 cases of wine. Assume China produces 10,000 containers of toys and exports 2,000 containers to France. Assume France produces
7,000 cases of wine and expor
Problem 10.7 Krystal
Krystal is a U.S.-based company which manufactures, sells, and installs water purification equipment. On April 11th the company
sold a system to the City of Nagasaki, Japan, for installation in Nagasakis famous Glover Gardens (where P
Discussion I - Parities
What is the absolute and relative PPP?
Purchasing power parity is the notion that a bundle of goods in one country should cost the same in
another after exchange rates are considered.
1. Absolute Purchasing Power Parity
Forward Premiums on the Dollar/Euro ($/
Use the spot and forward bid-ask rates for the U.S. dollar/eurp (US/) exchange rate from December 10, 2010 below, to answe
Trade at China's Domestic Price
China's domestic price is 10 containers of toys equals 7 cases of wine. Assume China produces 10,000
containers of toys and exports 2,000 containers to France. Assume France produces 7,000 cases of wine and
Mattel is a U.S.-based company whose sales are roughly two-thirds in dollars (Asia and the Americas) and one-third in euros (E
delivers a large shipment of toys (primarily Barbies and Hot Wheels) to a major distributor in Antwerp. The re
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Course Schedule - FIN 584 International Finance
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Tasks for Week
Reading - Textbook: Chs 1, 2, 4 (pp. 4-22, 22-49, and 87-108)
Week 01 Multimedia
Discussion II - Swaps
What is a financial risk?
Financial risk is an umbrella term for multiple types of risk associated with financing, including
financial transactions that include company loans in risk of default.Risk is a term often used to imply
Problem 18.3 Grenouille Properties
Grenouille Properties (U.S.) expects to receive cash dividends from a French joint venture over the coming three years. The first
dividend , to be paid December 31, 2011, is expected to be 720,000. The dividend is then e
1. What is the effect of globalization process on MNEs, on countries' growth, on trade,
Economic globalization is generally accepted to imply the growing interdependence of
locations and economic units across countries and regions.
Discussion I - Transaction Exposure
What is a foreign exchange exposure?
Foreign exchange exposure is the risk associated with activities that involve a global firm in
currencies other than its home currency. Essentially, it is the risk that a foreign cu
Euro Area Balance of Payments
Use the following Euro Area balance of payments data from the IMF to answer questions 20 through 24.
Is the Euro Area experiencing a net capital inflow?
What is the Euro Area's Total for Groups A and B?