assignment one 3 to 5 pages
Mr. Swanson has expressed confusion about how foreign exchange rates will affect Content Cow Dairy if it expands to international markets. You tell Mr. Swanson that he has raised a good question and that you will draft and send him a report with information on this topic.
In your report, include the following:
- Compare/contrast the risks and benefits of pricing goods in U.S. dollars or pricing goods in local currency when selling in a foreign market.
- Explain rate parity theory and how it is used to predict future exchange rates.
- Calculate the current Forward Exchange Rate for the United States and Egypt. (Show your calculations).
- Explain the relationship between monetary policy, interest rates, and exchange rates.
- Briefly introduce other factors that influence exchange rate fluctuations. Address whether any of these are a factor when looking at the future exchange rate between the United States and Egypt.
- Cite all resources using APA format.
- (Optional: You may choose to insert graphics, tables, or images if you think they will help convey the information to Mr. Swanson).
Assignment 2 needs to be 4 to 5 pages but under 12 percent plagarism
A leader in your firm has been studying the foreign exchange market for a number of years and believes that she can predict several of the foreign currency exchange rates relative to the U.S. dollar. The firm has $500,000 to invest in the spot, forward, or options markets. Assume that the spot rate is $1.3435 to the euro and that the forward rate for 12 months is $1.3705 to the euro. However, this leader is sure that the exchange rate in 12 months will be $1.41 to the euro.
In a Word document, include the following:
- Explain how this leader in your firm can speculate on the belief that the euro will be $1.41 in 12 months.
- Calculate the amount of profit (ignoring exchange rate fees) that can be earned and the percentage return achieved.
- Recommend whether this speculative investment or another investment with similar or higher returns at lower risk should be selected. Explain your reasoning.
- Be sure to consider how the inflation rate would affect the return.