4) Why are financial markets important to the health of the economy? A financial market is a market where people and organization can trade financial securities and commodities at prices according to the supply and demand. Example of securities are stocks and bonds‚ and commodities include properties or valuable assets. A market holds interested buyers and sellers‚ including households‚ firms‚ and government agencies‚ in one place. Financial markets helps the raising of capital‚ the transfer
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How significant an impact do foreign exchange gains and losses have on corporate performance at XJP? What is your opinion of how they structure and manage their currency exposures? Foreign exchange gains and losses play a very significant role in corporate performance at XJP. XJP face both transactional and operational exposure. Transactional exposure is formed in part because XJP (based in China) source their inventory in Belgium and pay in Euro’s something in which Paul Young felt uncomfortable
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as the world’s second largest economy evaluated using the nominal GDP and Purchasing Power indices closely trailing the United States. China has also been identified as the fastest growing major economy in the world having exhibited constant growth rates of about 10% in the last 3 decades (Barnett‚ 1981). The country also boasts of being the largest industrial manufacturing economy existing‚ a fact largely believed to be attributable to the cheap labor available in the country. Over time‚ as China’s
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2 July 1997‚ the Bank of Thailand (BoT) announces that the Thai baht which was pegged around 25 to the U.S. dollar for more than a decade will be allowed to float‚ due to the lack of foreign currency to support its fixed exchange rate. (Already used $33 billion in foreign exchange). With the economic growth U.S. Dollar begins to rise and Asian pegged currencies moved accordingly. Exports become more expensive around the world‚ sales begin to fall‚ and deficit began to grow. Early 1997‚ investors
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1. What is the Foreign Exchange Risk faced by the LUFTHANSA? Ruhnau expected if the U.S. dollar continued to appreciate‚ it would reach 3.3DM/USD and at the same time he also personally believed that the DM/USD exchange rate would fall from 3.17DM/USD to between 2.45 and 2.40 DM/USD by January 1986. Unfortunately‚ he was not sure when this depreciation would start. If it did not start before January 1986‚ he felt the U.S. dollar could be as high as 3.40 DM/USD in January 1986. 2. What
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comparative advantage when the country creates a certain product at a low price. Comparing the opportunity rates of the different countries‚ he or she can better evaluate the comparative advantage for each country. When he or she can discover the strengths and weaknesses of a country and whether or not he or she are a better suite to do one job or the other in relations of lower opportunity rates‚ in creating a product should focus on that particular produce. Maximization of all countries will occur
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CNY/USD Exchange Rate Period to 1994: Prior to 1994‚ China maintained a dual exchange rate system. This consisted of an official fixed exchange rate system‚ which was used by the government‚ and a relatively market-based exchange rate system that was used by importers and exporters in “swap markets”. The two exchange rates differed significantly. For example‚ the official exchange rate with the dollar in 1993 was 5.77 Yuan versus 8.70 Yuan in the swap markets. The foreign exchange was highly
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What are Diva’s projected profits for the fiscal year ending September 1995? 2. What factors affect a firm’s exposure to exchange-rate risk? 3. "Forward traders quoted forward and futures prices based on the difference between foreign and U.S. interest rates." Explain what this means in your own words and why ? 4. "In addition‚ some of Diva’s foreign exchange risk was reduced by offsetting inflows and outflows in particular markets." Explain what an operational hedge is with examples
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"Prices‚ Interest Rates‚ and Exchange Rates in Equilibrium" (International Parity Conditions) Table of Content Executive Summary 3 1. Introduction .4 2. Literature Review 6 3. Findings and Analysis: 10 a. PPP .. 10 b. FE .. ..12 c. IFE .. .14 4. Conclusion & Recommendations . .. 16 Bibliography .17 Appendix A. Historical
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Effects on Exchange Rates. Assume that the U.S. inflation rate becomes high relative to Canadian inflation. Other things being equal‚ how should this affect the (a) U.S. demand for Canadian dollars‚ (b) supply of Canadian dollars for sale‚ and (c) equilibrium value of the Canadian dollar? ANSWER: Demand for Canadian dollars should increase‚ supply of Canadian dollars for sale should decrease‚ and the Canadian dollar’s value should increase. 3. Interest Rate Effects on Exchange Rates. Assume U
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