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Essay / Research Paper Abstract
This 7 page paper answers different questions regarding international finance. The first questions looks at then use of the spot market as well as how and why Eurocurrencies may be used. The second looks at the way in which interest rates of one country may impact on currency exchange rates of another country and how this may be interpreted by the market. The third looks at the use of forward contracts and the last question looks at issuing bonds in different currencies where there are different interest rates. The bibliography cites 5 sources.
Page Count:
7 pages (~225 words per page)
File: TS14_TEintfnc.rtf
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Unformatted sample text from the term paper:
profit into a lose and a loss into a profit. 1. (a). The spot rate is the current rate for an immediate transaction. In the currency market immediate usually
means delivery within two days (Howells and Bain, 1998). For a company that is in another country the sport rate may be seen as offering both opportunities and disadvantages. Wal-Mart
may be selling imported goods, but it is also selling local goods, the sales levels of these may be less predictable and the turnover of currency, the use of the
spot market is one that does not require advance planning and can be used to exchange currency as required allowing for the retention of currency for local payments allowing for
more effective use of the cash flow and the reduction of the levels of exchange that need to take place. The use of the sport market also allows for
the elimination of some forward contract costs and the costs of hedging, it can also be used on an ad hoc basis, with cash that has been retained exchanged only
when the rate is favourable, subject to cash flow allowing for this. (b). When Wal-Mart seeks to expand into other Asian countries it may choose to make use of euro
currency. A Eurocurrency is a currency that is held in a country other than that for which it is legal tender. This may be used for holding funds or as
funds to provide loans. An example dollars deposited in a bank in Asia will be Eurodollars. The benefit here is obvious, the ability to use the home currency despite having
the transactions take place in a different country. The benefit may be that funds could be held or borrowed without the exchange rate risk that would mean exposure to either
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