Exchange Rate College Essays Samples For Students

Currency exchange rate is a country’s currency expressed in foreign currency’s terms. This is affected by the forces of demand and supply in the currency market. Currency exchange rates are essential whenever making investment decisions. Investors tend to invest in countries where the exchange rate is high as in so doing their returns will be maximized. The investors also use the exchange rate for speculative purposes when carrying out foreign exchange market transactions. For instance in instances where the exchange rate has been increasing the investor will be able to speculate a future increase in the rate. Various factors ...

Net receipts

When the exchange rate is GBP1 = EUR1.37

Option 1: Forward contract

We subtract the forward points from the spot rates since the bid forward point is greater than ask forward points.
Beck Plc. will have 8.5 million euros hence it will buy British pounds at the ask rate.
Amount receivable = 8,500,0001.4047 = GBP 6,051,114.11
Net amount received = amount receivable – forward contract cost/premium
= 6,051,114.11 – 0
= GBP 6,051,114.11

Option 2: Option hedge

We use a put option since it is a receivable.
The spot rate is more favourable than the exercise rate hence Beck Plc. will not exercise the option.
Amount receivable = ...

Abstract

This study examined the effects of a fixed currency exchange system on China’s economy as well as global growth. The study analyzed the different economic indicators of China and their relation to the fixed currency system. We predicted that this system had an effect on various sectors of the economy and resulted in economic growth which is consistent with recent research on the benefits of a fixed system to the economy. The system has made goods from China cheap hence increased its exports and strengthened its manufacturing industry which has had a positive effect on global economic growth. ...

China

1. COUNTRY

We have chosen China as a country for analysis

2. RECOMMENDATION
We have decided to convert US dollar to Chinese yuan on May 24, 2016. The total cost in dollars according to this option is calculated further in question 9.
3. CHINESE ECONOMY OVERVIEW
China’s role in the international arena has been growing in the recent years. Apart from being the most populous country with over 1.3 billion people and one of the largest countries in the world by territory, it has been experiencing substantial economic development in the past decades (Naughton 3). China is the second largest economy in the world after the USA. ...

Reasons for the severe decline in Chinese Stock market in 2015

Between June 2014 and June 2015, the CSI 300 Index rose by 150%, reaching the peak at 5,166.3 on 12th June 2015. What follows was a severe decline in the stock index. Within just one month, the CSI 300 index had lost 30% to 3,507 on July 8. Several factors caused the fall.

Short selling

In the run-up to the stock market decline, investors were aggressively involved in short selling and margin trading. Short-selling and margin trading allowed investors to purchase shares using borrowed money thereby increasing the demand for stocks. Investors engaged in short-selling sell stocks borrowed from ...

Forward Hedge

Spot rate US$ 0.74
Forward rate US$ 0.76
US $ received = 800,000*0.76 = US$ 608,000.
If Novena Ltd. takes the forward contract they will exchange the Singapore dollars at the agreed forward rate of US$ 0.76 per Singapore dollar. Under the forward hedge Novena Ltd. will receive US$ 608,000.

Money market Hedge

Step I Borrow in foreign currency
800,000/ (1.07) = SGD$ 747,663.55
In the first step Novena Ltd. Should borrow in Singapore dollars. The amount of money borrowed should be the present value of the expected receipt discounted at Singapore borrowing rate. The present value of SGD$ 800, ...

References 6

The Relationship between Interest Rates and Exchange Rates in Australia
1.0 Introduction
In macroeconomics, large scale market-wide factors are considered. Commonly, macroeconomic factors are considered in order to support decision-making, particularly for firms seeking to perform international business (Goodwin, Nelson, Harris, Torras & Roach, 2013). Two of the most important rates influencing decisions of international finance are the interest rate and the exchange rate (Terra, 2015). The interest rate is the percent cost to rent money, and the exchange rate is the value of one form of currency against another. Firms examining options with regard to how to invest money ...

The journey towards the European Union (EU) integration has experienced several turnings. This section of the essay will detail some of the core turning points in the EU integration. Establishment of a Common Agricultural Policy (CAP) was a major turning point in EU integration. The Treaty of Rome defined the specific objectives of the CAP. The CAP was introduced in 1962 (Folmern.p). The establishment of the CAP was enshrined to the state of food shortages after World War II. The aim of the CAP was to build a common European Community market and to cut off tariffs on agricultural ...

In order to define ‘economic development’, I have looked into the literature on the subject to subsidize my answer. I have looked particularly into the works of Acemoglu, Laibson, & List (2016) and Rahnama-Moghadam, Samavati, & Dilts (1995).
Acemoglu, Laibson, & List (2016, p. 205) indicate that the term less developed country (LDC) fosters images of backwardness, poverty, and lower levels of technological sophistication. They claim there is some truth in these images but, nonetheless, there is a broad range of countries that are correctly described as being less developed. One country has not reached the known levels of financial well-being that ...

Fist post

I agree with you that economists and investors should predict the future exchange rate to know when to derive the value of money. The foreign exchange market is purely speculative therefore no model can accurately determine the accurate future exchange rate. Mixed forecasting is the popular method used by traders because it has a wide base i.e. it in cooperates all the other forecasting method. In forecasting, the investor should not only consider the current factors that are affecting the currency value but also the future factors. For example, a country that is politically stable may be facing elections ...

INTRODUCTION

Many countries are faced with unemployment and its subsequent effects on its economy. When the rates of unemployment become high, the governments are pushed to shoulder the cost of many social services since their citizens are incapable of paying for them. More importantly, a high unemployment rate due the lowered demands and high interest can influence the exchange rate. The exchange rate is among the determinants of a country’s economic stability and influences the country’s trade with the global market. As such, unemployment should be lowered through fiscal and monetary policies that can stabilize a lower exchange ...

Introduction

The main objective of entrepreneurs is to achieve profitability and growth of their ventures. Most of the entrepreneurs who have saturated their domestic markets seek to globalize their operations to increase profitability and achieve growth (Vinturella & Erickson, 2013). Globalization of business operations involves various considerations to facilitate the assessment of the viability of business expansion. Primarily, organizations seeking to go international must consider their financial capabilities and the risks involved (Vinturella & Erickson, 2013). Entrepreneurs can expand their businesses by increasing production and exportation or establishment of operating plants in different countries. This paper will answer various questions regarding the ...

The welfare of a country and its position among other world nations is hugely determined by its economic policy. Saudi Arabia is one such country with a consistent and stable economy and is one of the most important international players. It is the largest oil exporter among the OPEC countries, its de facto leader, an influential player among the GCC countries and the most important partner of the USA in dealing with Middle East issues. In this essay, the economic policies and exchange rate policies of Saudi Arabia are discussed in detail. Also the foreign investments and operations of ...

INDICATORS:

Income level: High Income
Population: 35.54 million (“Data” 2014)
GDP at market prices (Current US$): $1.785 trillion (“Data” 2014).

GDP per capita (current US$):

$50,230.8 (“Data” 2014).
GDP growth (annual %): 2.44 (“Data” 2014).
FDI Inflows: $59.6 billion in 2014 (“Trade Policy Review” 5).
FDI Outflows: $58.2 billion in 2014 (“Trade Policy Review” 5).

Balance of Payment:

Current account balance (BoP, current US $): (-) $ 37.47 billion (“Data” 2014).
Current account balance (% of GDP): (-)2.1% (“Data” 2014).
Import of goods and services (BoP, current US$) : $580.7 billion (“Data” 2014).
Exports of goods and services (BoP, current US$) : $564.6 billion (“Data” 2014).
...

BUSINESS IN EMERGING MARKETS

Introduction
The theory of natural resource curse can be founded back from the 1970s. Resource curse has been an important topic for researchers since two subsequent decades; multiple research efforts have proposed the association between the production of resources, numerous socio-political ills, and, economic underperformance. The role of natural resources in the growth of the economy has been a question of immense debate. If the role of natural resources is considered in common sense, then economic growth theories propose that natural resources are the gift and economies through building their capital can grow economies. However, if the revenue spending ...

We consider in this project India to be the emerging economy so we will discuss how the currency of India i.e. Rupee has been affected against U.S. dollar during five years ending on 2010.

Definition of Exchange arte

First, we will discuss about the exchange rate. It is the rate between two currencies where one currency is exchanged against another currency.An exchange rate can be either floating or fixed. The floating exchange rate is determined by market forces but the fixed exchange rate is fixed at a specific rate by the government (Dornbush,503)

Effect on Indian Rupee

Since, Indian rupee went through a lot of pressures ...

Introduction

Brazil is one of the fascinating developing economies, which economic and social progress over the period of 2003-2014 lifted over 29 million people from extreme poverty. Based on the World Bank (2015) statistics, the inequality rate in the country fell by 11% with the income level of the poorest 40% of the population rose by as much as 7.1% over the same period. At the same time, global financial crisis and political instability in the country over the past few years have had its negative impact on the economy as a whole, reflecting stagnation in inequality reduction and deterioration ...

Impact of dollarization in Ecuador, El Salvador, Panama, and Argentina

Introduction
In the middle of the 90’s, different countries faced the financial crises. Some of these crises were severe and of vital importance. These crises majorly include “Tequila crisis”, East Asian crisis, the Brazilian crisis and the Mexican crisis and these hit the whole world leaving a devastating impact on the emerging markets of the world. These crises not only had an adverse effects on the related countries by which these are associated, but they also had affected the growing economy of the other countries. The emerging economies have suffered a serious setback as a result of the ...

Introduction

A global supply chain is composed of processes, interrelated entities, and resources that make and deliver products and services to customers across many countries (Drake, 2012). Due to globalization and increase in international trade, companies are operating and sourcing products and services in many countries. There has been a rise in multinational companies with plants or stores in different countries. This underscores the need for global supply chains to enhance the operations of these companies. Some companies use global supply chains to source for products.

Benefits of global supply chains

Global supply chains enable a company to compete all over the world. A company ...

Introduction

Our countries are globally connected and the change in one country affects the other. The stock and the bond market form an integral part of the country' wealth and development. Though there are benefits in investing in international market but there are also high risk in these transactions. To have better idea whether to invest in international market or not we will discuss about the advantages and disadvantages of investing in the international market.

Advantages of Investing in International Market

When a country invests in the international market it increases  the holding of foreign stocks other than domestic ones. The portfolio becomes more diverse and ...

International Risk Management

Introduction
Despite majority of the participants in global business arena associate German economy with efficiency and high quality, yet if the U.S. companies consider operating in this particular marketplace, they must be well-informed of different business risks. Therefore, this research paper is aimed at highlighted different business and operational risks which a U.S. based company might face while operating in Germany.

Exchange Rate Risk
The very first risk that the U.S. based company has to face in Germany pertains to the fluctuations in foreign exchange rate against the domestic currency. In case, the U.S. dollar appreciates against Euro, the ...

Currency Hedge

Over the few decades, the financial markets have seen explosion in the derivative markets. Even though notable investors such as Warren Buffet has called derivatives as the weapon of Mass Destruction’’, still, derivatives accounts for a market worth trillions of dollars as companies around the world use these instruments to hedge their risk exposures. Below we have discussed three traditional derivative instruments and how they are used by the companies to hedge their foreign exchange exposure:

Currency Forwards:

Currency Forwards are the derivative contracts as part of which, one party agrees to buy a predetermined amount of one currency for a ...

Recently, China has recorded a remarkable growth in its economy of nearly 10% per year. The bulk of this growth comes from the banking sector characterized by poor asset quality, low capitalization, and massive state intervention. For this reason, the government introduced sweeping changes to the financial sector to boost its stability. These changes included transforming the banking sector from a policy-driven, state-owned, non-performing system to a profit-driven, multi-ownership, competitive system. Although the sector has recorded marked improvements in its operation and efficiency, additional efforts is needed to deal with problems revolving around non-performing loans and shadow banking. The ...

Coca Cola most recent financial statements for the year the fiscal year ended 31st December 2015, addresses foreign currency exchange risk in Item 7A. Quantitative and Qualitative Disclosers about Market Risk (Coca Cola, 72). The company faces significant foreign exchange risk because it operates in 72 currencies and earns $23.934 billion from operations outside the United States (Coca Cola, 72). Coca Cola operates in over 200 countries and faces three types of foreign exchange risk, transaction risk, translation risk, and economic risk. The company manages its foreign exchange rate risk on a consolidated basis.
The transaction risk is the ...

Thesis statement

The IMF plays a critical role in ensuring financial stability globally. It has been instrumental in resolving various economic crises such as the 2008 financial crisis and the debt crises in Greece and Portugal.

The role of IMF

The fund plays a crucial role in providing advice and technical assistance to member countries to foster good governance. It promotes public sector accountability and transparency (O'Brien and Williams). Its technical assistance helps member states in enhancing the management of their economies by correcting macroeconomic imbalances, implementing economic reforms relating to international trade, exchange rate policies, among other reforms.
The IMF also offer loans to ...

In the 2000s, Argentina’s financial system fell into a serious recession. For this reason, the leaders in Argentina took financial loans from International Monetary Funds (IMF) and other agencies. However, the country was not able to pay its debt installments on time due to which Argentina failed to pay around US$93.2 billion of its external debt. In the year 2001, the country defaulted on a total of around $81 billion in bonds.
The issues faced by the financial system of Argentina made the trading sector suffer as well. The foreign investment fled from Argentina and multinational companies ...

Abstract

When an organization has cash inflows and outflows of foreign nature, the cash forecast for every currency will help during the identification of the currency exposures. The format of the estimation should allow the users to determine the balance for every currency and whether there is a growing shortage or extra money over time based on reasonable cash flows. The increasing gaps between the cash inflows and outflows may need hedging, and the cash flows that offset over time represents the issue of timing effectively. The management of foreign exchange transaction can be achieved through the offsetting transactions to ...

Introduction

Exports can be seen as a mechanism for economic growth of a country. Increased exportation of products can provide output growth directly as part of aggregate output. An increase of foreign demand of products can result in a country’s growth through employment and additional income for exporters. Another significant contribution of exports is that it can impact economic growth by way of “efficient resource allocation,” including more economies of scale and technological change as a result of “foreign market competition” (Helpman & Krugman, 198; Ben-David & Loewy, 1998 as cited in Awokuse, 2008, p. 593).
One of the drivers for ...

Essay one (China’s financial system)

Introduction and Thesis Statement
The restoration of an economy from a depression requires a careful adoption of strategies. Various measures that governments use to promote the growth of key sectors as wells the entire economy have severe outcomes which must be considered before they are put in practice. Fundamentally, governments implement different fiscal and monetary strategies to solve economic problems, which may be successful or not. Thus, the analysis of the strategy to be deployed becomes essential to achieve the desired objectives. The financial sector in an economy is of central importance. As such, public policies that impact on ...

International FinanceName of the StudentCourseProfessorUniversityDate

International Finance
INTRODUCTION

British Airways is one of the leading airlines in the United Kingdom primarily dealing with vacations and flights internationally. They have several subsidiaries and have increased their fleet to 262 planes. British Airways now has flights to 169 destinations.

Company B: Volkswagen

Volkswagen, Europe’s leading carmaker and one of the most successful global companies, reported a 95 drop in 2003 fourth quarter profits which collapsed from €1.05 billion to a plain €50 million. For all of 2003, Volkswagen’s operating profit fell by 50 percent from the record levels attained in 2002. Although the profit crash had more ...

According to IMF (2016), the Special Drawing Rights (SDR) is an international reserve asset created in 1969 by the IMF. Its aim was to supplement member nation’s official reserves. In the beginning, the SDR operated in the context of the Bretton Woods fixed exchange rate system. In this regards, countries that participated in the system needed to hold their national reserve either by the central bank or government in the form of gold or any other broadly acceptable foreign currency. The currency or gold was used to purchase the country's domestic currency in the foreign exchange market to ...

Question 1.

The European Integration has undergone several changes to be what it is now. Several incidents and treaties marked the turning points for the EU in its infancy years to create a more stable and unified European cooperation. The Marshall Plan formed in 1948 consolidated democracy in Europe after the German defeat in the WW2 (Dinan 1122). The United States proposed the plan to speed up economic development in the transatlantic region. The plan saw the creation of the OEEC (Organization for European Economic Cooperation) liberalize trade and the Coal and Steel Community to oversee the extraction of coal in ...

Introduction

The pricing strategy of a commodity is one of the crucial aspects of the marketing mix for an international organization. Pricing is the only marketing mix element that generates revenue for a company. An organization’s pricing model is fundamental to its expansion strategies in the international market (Theodosiou & Constantine, p.2). This essay examines factors that affect global pricing strategy of a product by a firm.

Factors affecting global pricing

With the example of iPad Air 2, different markets around the world have different prices for the model. The iPad Air (16 GB) model retails at $ 499 in the US market. However, price ...

Gupta and Goldfajin defined a tight monetary as “a case in which real interest rates in the aftermath of the crises are higher than the average real interest rate during the 24 months preceding the crises”(Goldfajn and Gupta, 1999, p.4). The primary objective of ensuring that the monetary policy is tightened is to make sure that the supply of money in the economy is reduced and also to ensure a conducive environment for businesses. For a commercial bank to lend money, there are a lot of factors that it considers. Some of the factors include the volume of ...

Risk Management at Old Mutual Group

Old Mutual risk management strategies are shaped by the potential impacts on the company's reputation, earnings, liquidity and future sustainability. They are strategic, and the companies closely monitor them. Owing to various strategic changes that the company underwent in the period under review, strategic execution risk is the principal risk facing Old Mutual. The company is faced with other principal risks including, economic situations in the country of operation, shifting credit risk across the group and currency devaluations. There are also other inherent potential risks owing to the changing customer needs, market exposures, liability insurance risks, and interest volatility. ...

Issues of Economic Crisis

The recent recession and the financial crisis have paved the way to uncommon and hostile actions by policymakers of fiscal and monetary policies. Secular stagnation is for ensuring achievement of full employment, for lowering and stabilizing inflation rate, and for maintaining financial stability. Current macroeconomics failed to analyze financial crisis because of its incapability of envisaging current issues prevailing in the economy. Analysis of these topics is essential because they help in determining and then solving the problems of economy by taking adequate measures in a timely manner.
There are several causes of recent Great recession. Major causes include ...

Resource Curse of the Dutch Disease

A country full of mineral wealth is known to be rich in natural resources. It is assumed that this type of country will be having better economic growth by exporting the minerals to other countries. But the mineral rich countries are having less economic growth. This is termed as "Resource Curse"(ECON3056, 143)
A country rich in minerals exports to other countries. Higher exports leads to higher exchange rate and the other sectors of the exporting country become less competitive in the world market due to the appreciation of their currency and incur losses. This ultimately leads to slow ...

Inflation on the Sterling Pound and Its Impact on Tesco

Recently, the term inflation has become very common in economics as almost every country and society in the world was hit by an increase in the general prices of goods and services over the last four years. Inflation is the term used to refer to this general rise in the cost of living over a given period, which is usually a shorter time than expected in an ideal economy (Boyes, W. J., and Melvin, 2010). In addition, inflation implies that the currency at that particular time will absolutely decrease in its value, as each unit of money will buy lesser quantities ...