Currency Essays

Lufthansa Case

In January 1985, a German company that uses Deutschmarks made a large purchase from a U.S. company that uses U.S. dollars, and needed to evaluate the best hedging alternatives to secure the least possible cost. The Chairman of Lufthansa, Herr Heinz Ruhnau, purchased twenty 737 jets from Boeing. The total purchase price was $500,000,000, which was payable in U.S. dollars on delivery of the aircrafts in one year. Chairman Ruhnau chose a partial cover by hedging 50% of the exposure…

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Abolish the Penny

How many times have you walked past a penny on the ground or carelessly dropped it on the floor and not picked it up, thinking that a penny is not worth your time. The Canadian mint produces nearly one billion pennies a year and sets them off for circulation where most of them will spend their time on the streets or collected in jars. The Royal Canadian Mint says it costs only 0.7 cents to make a penny but if…

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The Balance of Payments

1. Do all international financial transactions necessarily involve exchanging one nation’s distinct currency for another? Explain. Could a nation that neither imports goods and services nor exports goods and services still engage in international financial transactions? Answer: The answer is almost certainly a yes. Only in rare cases would you find barter exchanges (goods and services for other goods and services). Yes, they could engage in financial transactions (the exchange of assets across countries). 2. Explain: “U.S. exports earn supplies…

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The Shifts in the World Economy Over the Past 30 Years

1. Describe the shifts in the world economy over the past 30 years. What are the implications of these shifts for international business based in Great Britain? North America? Hong Kong? Answer: The world economy has shifted dramatically over the past 30 years. We have been moving away from a world in which national economies were relatively self- contained entities, isolated from each other by barriers to cross- border trade and investments; by distance, time zones, and language; and by…

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Critically Analyse How the Government Debt Problems

Introduction Since the Greece’s debt crisis happened, the Euro zone has to confront with a huge sovereign debt crisis, like governments’ debt increased, bond yield spreads widened, Euro exchange rate fell as well, which caused that the whole international financial markets gradually lost the confidence. The purpose of this essay is to discuss the impact of this crisis both on foreign exchange and derivative markets. And the rest words is to analyse several possible reasons why this small economy could…

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prospective Capital Flows and Currency Movements_ U.s. Dollar Vs. Euro

This case revolves around fictional foreign-exchange strategist named Luke Anthony, as he attempts to predict the likely future path of the dollar/euro rate. In order to come to this hypothesis, the reader is presented a slew of financial information, ranging from detailed capital flows, interest rate differentials, and recent central bank press releases. This data in turn must be must be analyzed and synthesized in order to develop a proper thesis on future exchange rate pricing. To compound matters further,…

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How Inflation Affects the Functions of Money_

Inflation alludes to a sustained general rise in the prices of goods and services. In other words, it means a rise in the level of cost of living. Money is anything that is generally acceptable by the society for the exchange of goods and services. There are different functions of money such as: To act as a medium of exchange –Money is used to trade in goods and services both internally and externally. In this way money eases the exchange…

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Economic Time Series Exam

1. The variation in an economic time-series which is caused by major expansions or contractions usually of greater than a year in duration is known as: 2. Time-series forecasting models: 3. If two alternative economic models are offered, other things equal, we would 4. Smoothing techniques are a form of ____ techniques which assume that there is an underlying pattern to be found in the historical values of a variable that is being forecast. 5. The forecasting technique which attempts…

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Hedging Currency Risks at Aifs

The American Institute for Foreign Study (AIFS) is offering cultural exchange programs for American students and High School pupils throughout the world. Their customers have the possibility to go abroad while the AIFS organises the whole trip for them. Due to their business model the revenues of the company are denominated only in USD, since the offer is for American students who pay in USD. Meanwhile the costs of the company is mostly denominated in foreign currency because AIFS has…

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China’s Renminbi_ _our Currency, Your Problem_

Our Currency, Your Problem is a case involving the issue of exchange rate regimes and the impact currency manipulation has on economies and trade. The United States and Europe argued that the Renminbi (RMB) was undervalued and claimed that the People’s Bank of China (PBoC) deliberately manipulated the exchange rate to lower the prices of exports, which caused the US and Europe to run huge trade deficits with China. The US and Europe felt that the RMB was undervalued for…

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Tiffany & Co. Business Case

1.In what way(s) is Tiffany exposed to exchange-rate risk subsequent to its new distribution agreement with Mitsukoshi? How serious are these risks? 2.Should Tiffany actively manage its yen-dollar exchange rate risk? Why or why not? 3.If Tiffany were to manage exchange rate risk activity, what should be the objectives of such a program? Specifically, what exposures should be actively managed? How much of these exposures should be covered, and for how long? 4.As instruments for risk management, what are the…

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Interest Rate Parity

One can trade for immediate delivery of the currency, when we shall be trading at a spot rate of exchange. Alternatively one can buy or sell the currency under a forward contract. Here delivery will take place on some specified date in the future but the exchange rate at which the transaction is effected is set now. In theory were the nominal interest rates the same, in the countries of currencies, the spot and forward rates would be the same….

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Is the Foreign Debt Problem for Bangladesh

Is Foreign Debt a Problem for Bangladesh? Part-A Foreign debt in Bangladesh Introduction: External debt is one of the sources of financing capital formation in any economy. Developing countries like Bangladesh are characterized by inadequate internal capital formation due to the vicious circle of low productivity, low income, and low savings. Therefore, this situation calls for technical, managerial, and financial support from Western countries to bridge the resource gap. On the other hand, external debt acts as a major constraint…

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North American Free Trade Agreement (nafta)

I. Brief Overview: NAFTA, The North American Free Trade Agreement, came into existence on January 1, 1994. NAFTA is basically a free-trade agreement between the three North American countries of the Unites States, Canada, and Mexico. The main idea behind this treaty was to provide the people and the businesses of the North American countries many incentives to trade amongst each other. The duties on U.S goods shipped to Mexico were reduced by 50 percent, and other restrictions were to be…

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The Pest Analysis of Uk Food Producing Industry

1. Introduction This report focuses on PEST analysis of UK’s food producing industry and giving some particularly essential ratios of some food producing companies. With the diversification of economic and geography environment, food producing companies, especially multinationals need to consider more about what situation they will be in and what barriers they will meet. The main work of this report is to identify what will influence the businesses, profits, and strategies of food producing industry throughout deeply analyzing these important…

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