Please check the E activity at the bottom to help answer the questions.
Forecasting Exchange Rates and Risks Associated with Transaction and Translation Exposure” Please respond to the following:
- From the first e-Activity, determine whether or not the Big Mac Index supports the theory of PPP. Analyze the essential manner in which the IFE is reflected in the different prices on The Big Mac Index from country to country. Elaborate on the correlations between inflation and index prices, and the correlations between personal incomes and prices.
- From the second e-Activity, examine the main effect that relative inflation and interest rates could have on the selected company’s translation and transaction exposures from subsidiaries abroad. Outline a plan that proposes key steps that an MNC could take in order to mitigate translation and transaction exposures on international operations. Recommend two (2) tools that an MNC could use in order to mitigate such exposures.
Week 5 Activity is at the bottom
Week 5 eActivity
- Go to The Economist’s Website, located at com/content/big-mac-index“>http://www.economist.com/content/big-mac-index, and explore the Big Mac Index. Focus on what it tells you about PPP and the relative prices between Thailand and the U.S. in particular. Be prepared to discuss.
- Select a Fortune 500 company that is of interest to you. Use the Internet and the following links to research the manner in which translation exposure could affect the company in question.
- Yahoo! Finance, located at http://finance.yahoo.com/
- X-Rates, located at http://www.x-rates.com/table/?from=thb
- CoinMill.com, located at http://coinmill.com/THB_USD.html
- “Industry Analysis: Recreation” article, located at http://www.valueline.com/Stocks/Industries/Industry_Analysis__Recreation.aspx
Focus on the location of most of the company’s foreign subsidiaries and the major currencies that the company must use on a daily basis. Consider the key tools that are available for the selected company to minimize translation exposure when the company repatriates earnings at the end of the fiscal year. Be prepared to discuss.
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