the dollars to Yuan and as a result via their banks they sell the dollars to the Chinese Central Bank which is known as the People’s Bank of China. Given that the U.S trade with China does not balance‚ the result will be a shortage of the Yuan and a surplus of the U.S dollar in the People’s Bank of China or Central Bank. In those circumstances‚ according to the rules of international trade the People’s Bank of China should sell the dollar on global currency market and buy the Yuan in exchange which
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Strategies at GM − Competitive Exposures 1. Why is GM worried about the yen? GM’s concern about fluctuations in the Yen is due not only to the impact on GM’s costs‚ but the fact that Japanese competitors face reduced costs when the Yen is depreciating. Also‚ with increasing profit margins‚ end-price to consumer can be lowered and lead to gain in market share for Japanese competitors. Research had shown that a 10 Yen appreciation to the dollar reduces operating profit by $4 billion 2. How
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and security for store inventory. This new agreement exposes Tiffany to the fluctuation in the yen-dollar exchange rate. Therefore‚ they are considering two basic hedging alternatives to reduce exchange-rate risk on their yen cash flows. The first alternative was to sell yen for dollars at a predetermined price in the future using a forward contract. The second alternative was to purchase a yen put option allowing them to exercise their option only if it was more profitable in the future at
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The Balance of Payments‚ Exchange Rates‚ and Trade Deficits REVIEW QUESTIONS 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)
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10‚000 Canadian dollars‚ (b) 2 million yen‚ and (c) 50‚000 Swiss francs to businesses abroad. What are the dollar payments to the respective countries? (a) Canadian dollars: U.S dollar payment = 10‚000 Canadian $ x .8437 = $8‚437 In order to buy 10‚000 Canadian dollars‚ the American business needs $8‚299‚ given that the exchange rate is $0.8437 (b) Japanese yen: U.S. dollar payment = 2‚000‚000 yen x .004684 = $9‚368 In order to buy 2 million yen‚ the American business needs $9‚368‚ given
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to invest in foreign securities? A. This expectations of a strong dollar would discourage U.S. investors from investing abroad‚ The other way‚ There has been an increased tendency that Japan investors invest in foreign securities due to strong Yen. 2-13-a: Explain why a stronger dollar could enlarge the U.S. balance of trade deficit. Explain why a weaker dollar could affect the U.S. balance of trade deficit. A. A stronger dollar makes U.S. goods less attractive to foreign importers due
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Question 1 - Why is GM worried about the evolution of the JPY? * The Japanese automakers were one of the main competitors of General Motors because their main advantage came from having large portions of their cost structure denominated in Yen‚ which meant that they were liable to achieve significantly reduced costs in the face of currency depreciation. This reduced cost would comprise of lower cost of productions‚ thus leading to a rise in the Product demand due to lower prices and finally
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what ways and to what extent was China modernized during the Republican period (1912-49)? After the fall of Qing Dynasty in 1911‚ the unprecedented‚ new form of government emerged in China immediately. Whereafter the betrayal of the Republic of Yuan Shikai (1913-1916) and the turmoil of Warlordism (1916-27)‚ China was in a relative stable situation till the Nationalist Government was established in Nanjing in 1928‚ a period first possible for any modernization effort. That is‚ most of the modernization
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CHAPTER 17 MULTINATIONAL FINANCIAL MANAGEMENT (Difficulty Levels: Easy‚ Easy/Medium‚ Medium‚ Medium/Hard‚ and Hard) Please see the preface for information on the AACSB letter indicators (F‚ M‚ etc.) on the subject lines. Multiple Choice: True/False (17-2) Multinational fin. mgmt. F T Answer: a EASY [i]. Multinational financial management requires that financial analysts consider the effects of changing currency values. a. True b. False (17-2) Multinational
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billion yen. Toyota is exposed to the fluctuation in foreign currency exchange as it operates mainly in America‚ Continental Europe and Britain. It is therefore affected by the fluctuation in the value of the US dollar‚ the Euro and to a lesser extent the British pound. Toyota ’s consolidated financial statements‚ which are presented in the Japanese yen‚ are affected by the foreign exchange fluctuation‚ as all the amounts in the various countries ’ currencies have to be translated into yen. Toyota
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