Managerial Finance

The MNC is a retail apparel store (shits, pants, dress) in BRAZIL exporting US apparel brands

International Financial Management BOOK is: Madura, J. (2015). International financial management (12th ed.). Cengage Learning

Using Currency Futures and Options

•How can you use currency futures to hedge the exchange rate risk of your MNC?

•How can you use currency options to hedge the exchange rate risk of your MNC?

Accessing Futures Quotes

•Go to the CME Group’s website. Determine the prevailing futures price of the main foreign currency for your business.

•Go to the Oanda Corporation’s website and determine the prevailing spot rate.

•What is the discount or premium of the futures price?

Determining Whether IFE Holds

•Use The Wall Street Journal or another data source to record the interest rate differential between the interest rate of the foreign country in which you plan to do business and the U.S. rate over the last five or so quarters.

•Then, review the exchange rate percentage change in the foreign currency of concern over each of those corresponding quarters to determine whether the international Fisher effect (IFE) appears to hold over those quarters for that currency.

Monitoring Exchange Rate Trends

•Use a business periodical or the Internet to determine how the value of the foreign currency of concern has changed in each of the last five weeks.

•Does it appear that there is a trend over the last five weeks?

•What is the mean percent-age change over these weeks?

•If you believed that the currency’s value would continue following the recent trend, would it appreciate or depreciate in the near future?

Writing Requirements (APA format)

•4-6 pages (approx. 300 words per page), not including title page or references page

 

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