International Finance Paper
[A] Discuss the financial and economic environment during the semester with a focus on its relevance to your business and the AUSTRALIAN economy and business environment.
[B] You should include your overview of analyses of this environment appearing in the popular press (primarily business periodicals such as WSJ, BW, Forbes, Fortune, Barrons, and web sites devoted to the global financial marketplace). Feel free to agree or disagree with what the “experts” are saying.
[C] Your analysis should include how you and other U.S. businesspeople will/could/might be impacted by events that occurred during the semester in the economies of Australian and the U.S. economy.
II. RESPONSES TO CHAPTERS 1-10 (Real Time Web Project) QUESTIONS:
The business that you are starting is a website designed to provide specific information to young persons (in your foreign country only) interested in coming to the U.S. to study at a university or college. You may want to briefly explain your business model (i.e. how you will make money) and any relevant information about your Product, Promotion, or the Price you will charge your target group of customers (parents? Students? In the foreign country).
[A] You will be required to turn in typed, written responses to all questions listed below representing the first ten chapters of your text. Please label each chapter’s responses and number them clearly.
[B] Remember that the primary purpose of this project if to have you apply the theories and concepts that we have covered in class during the semester. This means that you should take every opportunity in answering these questions to show that you understand the course material and are able to apply it. This also means that you should always discuss the specific impact of any events and trends on your particular business. That is, for your answers in each chapter, make sure you explain the relevance to your business of the answers you provide!!
[C] You should reference any material that you use that is not your own (for example, quotes/ideas from your text, articles from the popular financial press, internet sources). In doing so, please include a list of references/sources cited at the end of your report in a Bibliography.
Format for Quotes: (LAST NAME, YEAR) citation in the body of the paper where the idea is used.
****YOU WILL BE REQUIRED TO PROVIDE THE SPECIFIC SOURCE AND DATE FOR ALL OF THE DATA YOU COLLECT (HENCE, ALL NUMBERS YOU INCLUDE)!!
The return on your business is highly dependent on the potential demand for the services you offer. The risk of your business is the uncertainty surrounding the demand for your services (which affects your revenue) and the expenses associated with your business.
A starting point for assessing the potential return and risk of your business is to review general background information about the potential customers that may someday purchase your services.
Go to www.cia.gov and review the information provided in the “World Factbook” Country Profile for Australia.
1. Identify the type of information (such as demographics, education or income statistics) listed here that may have some influence on the return and the risk of this business (of course, always explain WHY this information is relevant for your firm)
2. Identify any other information not listed here that could affect the return and risk of this business. Explain the relevance.
Go to www.census.gov/foreign-trade/balance assess the recent flow of trade (merchandise and services) between your country and the U. S. Assess the change in the volume of trade between the U. S. and your country. You will also find the additional websites listed in Chapter 2 of your text useful here (such as www.ita.doc.gov ).
Go to the websites found in Chapter 3 to assess updated economic information about Australia’s financial markets.
Your business is exposed to potential movements in the exchange rate of the Australian Dollar, (abbreviated as “AUD”) as is explained in several of the following websites:
Go to one of the websites to obtain exchange rate information and assess recent exchange rate movements of the AUD:
Go to a source that allows you to assess recent exchange rate movements (such as Yahoo.finance) of AUD/USD trends over the past year. Compare the forward/futures price of AUD (with respect to the USD) to the prevailing spot rate for your currency. If there is more than one contract (maturity) available for your currency, choose the one that is approximately one year from the present.
Go to www.bis.org/ (or the foreign Central Bank’s own website) to learn about the Central Bank of Australia.
To recognize the relationship between interest rates and the forward (or futures) discount, review here your responses in Chapters 3 and 5. First, show the current interest rate in Australia and compare to the corresponding U. S. interest rate. Next, compare the futures price of AUD to the prevailing spot rate. Take the reciprocal of the Indirect exchange rate so that you can compare it to the futures price quoted in dollars.
Find an online source (such as Yahoo finance or trading economics.com) to assess recent changes in inflation to compare to recent changes in the exchange rate of the AUD. Assume the U. S. inflation rate is relatively stable.
Go to cmegroup.com under “FX” to assess AUD/USD futures contract prices on the AUD. Compare the futures price of your currency to the prevailing spot rate.
Consider how your business would be exposed to exchange rate risk. Explain your exchange rate risk by answering the following questions.
III. SUMMARY AND CONCLUSIONS:
[A]Overall, what is your assessment of the viability
of this business and it’s potential as an on-going enterprise? Why?
[B] Discuss some of the things you learned about the global marketplace by completing this project and making managerial decisions when your customer base is comprised mostly of non-American consumers.
[C] Include summary comments about the international financial plan for your business (comment on source
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