Reference no: EM132066121
Topics
It is open book and open note. You may alsouse info posted on Canvas, e.g., examples used in class, your homework assignments and the posted answers, etc. (You may refer to other internet sites - provided the site does not provide answers to specific questions). You may not use email or work with any other person.
The exam will have 7 questions (multiple subparts for most); one question from each of the areas below. You must answer at least 4 during class (your choice). The other three you can take home and submit by midnight Friday, April 6.
Parity conditions
Explain the rationale suggesting that purchasing power parity should hold.
Explain the rationale suggesting that the international Fisher effect should hold.
Explain the rationale suggesting that the unbiased forward rate relationship (forward exchange parity) should hold.
Explain the rationale suggesting that interest rate parity should hold.
Calculate the expected future spot exchange rate or current forward exchange rate based on an appropriate parity condition.
Forecasting future exchange rates
Explain how to forecast future exchange rates using the following methods (what information is needed,mathematical calculations used to obtain the forecast, etc.):
random walk
purchasing power parity
international Fisher effect
unbiased forward rate (forward exchange parity)
moving average
auto-regression
structural model
weighted average
expert forecast
Explain the circumstances that must exist for a forecast method indicated above to provide a relatively accurate forecast
Given data, forecast a future exchange rate using the methods indicated
Foreign financial markets
Calculate dollar returns on a foreign investment
Describe the benefits of international diversification and identify alternative ways US investors can include international diversification in their portfolio
Describe the characteristics of foreign and international securities
Foreign and multinational capital budgeting
Describe conditions that must exist for a foreign or multinational project to have a positive NPV
Country risk
Identify sources of country risk
Explain some ways a company can identify, plan for or manage that risk
Currency risk
Explain the reason a company has:
translation risk
transaction risk
economic risk
Managing currency risk
Explain how a company can manage translation risk
Explain how a company can manage transaction risk using
risk shifting or risk sharing
a money market hedge
a forward contract
anfx option
funds adjustment
leading or lagging
counter-trade