Module 2 – Case
INTERNATIONAL FINANCIAL MANAGEMENT
Assignment Instructions
Before starting the case, make sure to go through the
required reading material carefully. Review the concepts of exchange rates,
currency hedging, and other methods of dealing with exchange rate risk. The
topic of this module is difficult, so make sure you go carefully through all of
the required tutorials and book chapters. When you have finished reviewing the
background materials, apply your knowledge of the material to answer the
following questions in a four to five page paper:
Suppose you are running a very small business that exports
all of its products to Europe, and 100% of your revenue comes from Euros. You
have a family to support and a drop in the value of the Euro could be
devastating to your personal financial situation. What methods do you think
would be best to manage this risk under your circumstances? Refer to at least
one of the required readings from the background materials in your answer.
Consider a large multinational consumer product company with
operations in all major advanced and emerging economies. Now suppose the value
of Indonesian and South African currencies drops dramatically and the value of
the Chinese RMB increases dramatically. What kind of strategic changes in
marketing and/or location of production facilities do you think this company
should take given these new exchange rates? Explain your reasoning, and make
references to Avadhani (2010) and Shackman (2015) in your answer.
Suppose you are a financial manager stationed in a foreign
country, and your boss at headquarters in New York asks you to make a prediction
about the future exchange rates in the country you are currently in. You see
that the economy in the country you are in has started to grow more rapidly
with a lot of new foreign investment. You also see that prices are much lower
in this country than they are back in the U.S. For example, you see that the
price of a Big Mac at McDonalds is half of what it costs you at home. Would you
tell your boss that you expect the value of the currency in this country will
increase or decrease? Explain your reasoning, and make references to Agarwal
(2009) in your answer.
Assignment Expectations
Answer the assignment questions directly.
Stay focused on the precise assignment questions; don’t go
off on tangents or devote a lot of space to summarizing background materials.
Make sure to use reliable and credible sources as your
references. Articles published in established newspapers or business
journals/magazines are preferred. If you find articles on the Internet, make
sure they are from a credible source.
Reference your sources of information with both a
bibliography and in-text citations. See the Student Guide to Writing a
High-Quality Academic Paper, including pages 13 and 14 on in-text citations.
Another resource is the “Writing Style Guide,” which is found under “My
Resources” in the TLC Portal.
Module 2 – SLP
INTERNATIONAL FINANCIAL MANAGEMENT
SLP Assignment Instructions
For your final SLP, do some research on the currency and
banking situation in your country.
We normally think of currency and banking risks as being
something confined to third world or developing countries. But events in the
last few years such as the Euro crisis or the financial crisis in the U.S. have
shown that not even the wealthy, developed countries are without risks on the
financial side. So it is important for any company doing business in your
country to carefully consider these risks that they face.
After you’ve done some research about financial issues in
your country, write a two to three page paper covering the following issues:
The currency of your country. Is it stable? Does your
country have fixed or floating exchange rates? Does the exchange rate fluctuate
a lot?
The banking system in your country. How safe is this system?
Any recent banking crisis in your country?
Overall does the financial system in your country make it
easy or difficult to do business? What kind of steps would you recommend for a
company doing business in your country to hedge or minimize their financial
risks? Refer to at least one of the required readings from the background
materials in your answer.
SLP Assignment Expectations
Answer the assignment questions directly.
Stay focused on the precise assignment questions; don’t go
off on tangents or devote a lot of space to summarizing background materials.
Make sure to use reliable and credible sources as your
references. Articles published in established newspapers or business
journals/magazines are preferred. If you find articles on the Internet, make
sure they are from a credible source.
Reference your sources of information with both a
bibliography and in-text citations. See the Student Guide to Writing a
High-Quality Academic Paper, including pages 13 and 14 on in-text citations.
Another resource is the “Writing Style Guide,” which is found under “My
Resources” in the TLC Portal.
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