Assume that Facebook Inc. can borrow either US$20 million or €20 million. The current spot rate of the euro is US$1.13. In addition to this, Walmart expects the spot rate of the euro to be US$1.10 in 90 days.
The following information is related to U.S. and European annualized interest rates:
What is the expected profit or loss should Walmart engages in this speculating strategy?
You can only select either US$20 million or €20 million as one of your calculation.
The following questions (2) to (4) are related.
Create an idea for your own multi-national corporation (MNC) to conduct international business. Your idea should be simplified to the degree that you could possibly implement it someday. However, your idea should also be sufficiently creative to be successful if done properly. Your idea should focus on one country and one foreign currency, since many MNCs are focused in this manner when they are first created. So that you can recognize the issues regarding exchange rate risk that are discussed throughout this text, you should assume that you will receive foreign currency when selling your product. Your idea should be for a small MNC instead of a large MNC because even most large MNCs began as small firms. The following questions will help you define your MNC idea:
a. What is the product that you plan to sell?
b. What foreign country do you plan to target?
c. How will you sell the product in that country? (i.e., through a distributor? by mail?)
d. Is there some evidence that consumers in that country would buy this type of product?
e. Do you need to purchase supplies or to hire labour?
f. Will any expenses incur from producing the product be in any currency?
Identify three factors that can affect the balance of trade between any other country with which your company is having trade (e.g. United States, Singapore and etc) and the country that you can targeted for your business and explain how each of these factors may affect the demand for your product.
Review three import controls set by that country’s government. Determine whether your business would be affected by trade regulation and why?