bonds

You are a fixed income fund manager based in euroland. Expected return of the EUR bond market is 4.4% and risk 5%, expected hedged return of the UK bond market 5.5% and risk 5.5%. Correlation of the two markets is 0.7. Demonstrate the benefits of international diversification by investing 70% of your portfolio in EUR bonds, 30% in UK bonds.

Brazil financing

As a seller of information to customers in Brazil, you are an exporter and you periodically purchase advertising space on Brazilian Web sites to advertise your service; therefore are an importer of a service. If you could not afford to pay for the advertising space in advance, you might finance your purchases of Brazilian advertising services in a manner that reduces your exchange rate risk. With an established office in Brazil describe the conditions under which you may need local short-term financing. Review the prevailing level of interest rates in Brazil, using the Web site http://www.latin-focus.com. Based on the prevailing interest rate level, do you think the cost of this short-... click for more

Challenge: New Markets

As the VP of International Sales, you are responsible not only for sales but also for sales strategy. Prepare a preliminary report to the CEO identifying which three countries you think would most likely be interested in Our Company's mobility product and state why you think these would be good target countries. Describe the opportunities and risks in each of the target countries. Then discuss the cultural (including religion, ethical business behavior, social responsibility, language, etc.), political, economic, legal and technology issues you, as Vice-President of International Sales will face when selling into these countries. In addition, explain any other differences between selling the... click for more

International Monetary Relations

I was asked: suppose that the interest rate in Irish banks is 5% for a one year CD. In the USA, the rate is 2% for a one year CD. If you left your winnings in Ireland, how many Euros would you have in a year? If you had taken your winnings back to the USA, how many dollars would you have? Also, when you cashed in your CD in Ireland a year from now, the exchange rate had changed from US$1 to 1.25 Euro, to US$1 to 1.30 Euro. How much would your Irish bank account be worth in US$ at that point? Would I do better by leaving my winnings in Ireland or bringing them home to the USA?

Multinational companies foreign operations and pricing

IBM in terms of currency denomination, how does the firm prices its revenues and costs. Also, I am not clear on this, for MNE's with multiple foreign operations, consider any one of those operations and the contribution it is making to the parent firm's profits. What do you think would be the effect of increases/decreases in the dollar's exchange value on the firm's profitability? Please explain this to me.