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FIN00126 International Finance

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1) You believe that IRP presently exists. The nominal annual interest rate in Peru is 5 percent and in Canada is 3 percent. You expect that annual inflation will be about 3 percent in Peru and 2 percent in Canada. The spot rate of the Peruvian Sol PEN/CAD 0.4.Put options on Soles are available with a one year expiration date, an exercise price of PEN/CAD 0.45, and a premium of CAD 0.07 per unit.

You will receive 1 million Peruvian Soles in one year. Use four (4) digits for your PEN/CAD exchange rate calculations.

a) Determine the expected amount of Canadian Dollars that you will receive if you use a forward contract hedge. 

b) Determine the expected amount of Canadian Dollars you will receive if you do not hedge and believe in purchasing power parity.

c) Determine the amount of Canadian dollars that you will expect to receive if you use a currency put option hedge. Account for the premium you would pay on the put option. 

2) Explain and provide examples of how multinational corporations (MNC) reduce their transaction and economic exposures. Factual (and referenced) examples will attract higher marks. 

3) Explain the differences (at least 4) between foreign direct investment (FDI) and portfolio investment (PI).Collect the required the data from the Australian Bureau of Statistics (ABS) website (you may also need to explore other government sources such as the Reserve Bank of Australia, Austrade, Treasury, Department of Foreign Affairs and Trade, etc.) and answer the following questions:

4) List the 8 largest countries by value of Foreign Direct Investment in Australian in the years 2004 and 2014. You need to provide the list of countries as well as the amount of FDI invested in AUD. 

5) What factors do you think account for these countries investing large amounts of FDI in Australia? Discussion should be based on unit’s content and other reliable sources of reference.

6) Have the list of investing countries changed over the concerned period? What might account for these changes? Consider global economic issues/trends and industries.

7) Do you expect a change to the 2014 list over the next 5 years? Explanation should be based on the unit’s material (i.e. application of the theories learned). 
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My Assignment Help. International Finance [Internet]. My Assignment Help. 2021 [cited 17 October 2021]. Available from: https://myassignmenthelp.com/free-samples/fin00126-international-finance/ongoing-prosperity.html.

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