Part 1: Homework

Chapter 1
1. Comparative advantage
a. Explain how the theory of comparative advantage relates to the need for international business.
b. Explain how the product cycle theory relates to the growth of an MNC.
2. Valuation of an MNC
Hudson Co., a U.S. firm, has a subsidiary in Mexico, where political risk has recently increased. Hudson’s best guess of its future peso cash flows to be received has not changed. However, its valuation has declined as a result of the increase in political risk. Explain.

Chapter 2
1. IMF
a. What are some of the major objectives of the IMF?
b. How is the IMF involved in international trade?
2. Exchange Rate Effect on Trade balance
Would the U.S. balance-of –trade deficit be larger or smaller if the dollar depreciates against all currencies, versus depreciating against some currencies but appreciating against others? Explain.

Chapter 3
1. Foreign Exchange
You just came back from Canada, where the Canadian dollar was worth $ 0.70. You still have C$200 from your trip and could exchange them for dollars at the airport, but the airport foreign exchange desk will only buy them for $ 0.60. Next week, you will be going to Mexico and will need pesos. The airport foreign exchange desk will sell you pesos for $ .10 per peso. You met a tourist at the airport who is from Mexico and is on his way to Canada. He is willing to buy your C$200 for 1,300 pesos. Should you accept the offer or cash the Canadian dollars in at the airport? Explain.

Chapter 4
1. Factors affecting Exchange rates
Brazil’s inflation rate was very high. Explain why this places pressure on the Brazilian currency.
2. Speculation
Blue Demon Bank expects that the Mexican peso will depreciate against the dollar from its
Spot rate of $0.15 to $ 0.14 in 10 days. The following interbank lending and borrowing rates exist:

CURRENCY LENDING RATE BORROWING RATE
Dollars 8.00% 8.30%
Thai baht 8.50% 8.70%

Assume that Blue Demon Bank has a borrowing capacity of either $ 10 million or 70 million pesos in the interbank market, depending on which currency it wants to borrow.

a. How could Blue Demon Bank attempt to capitalize on its expectations without using deposited funds? Estimate the profits that could be generated from this strategy.
b. Assume all the preceding information with this exception: Blue Demon Bank expects the peso to appreciate from its present spot rate of $ 0.15 to $ 0.17 in 30 days. How could it attempt to capitalize on its expectations without using deposited funds? Estimate the profits that could be generated from this strategy.

Part II: Weekly Reflection
In the Weekly Reflection Forum, in 200 words or more, will comment on the topic coverage that was of most interest that week. State how the knowledge could be applied at your current or prior position and how the you and/or your employer could benefit.

Part III: Article Review – should contain a minimum of 500 words and be submitted in APA format.

Find an article from the past three months using an Internet or DUO library (LInC) search that addresses one of the topics from the textbook chapters for the week assigned and the previous week (see below for how to access DUO for business articles). The format for writing the Article Review is discussed below. The Article Review is always due on Day 1 of the week assigned.

Your reference sources are limited to the Wall Street Journal, Financial Times, New York Times, Barron’s, Investors’ Business Daily, The Economist, or an academic journal article from a respected finance journal. These resources are available in the DUO library (LInC). Other sources must be approved prior to submission. Note that websites of the “wiki” or “~pedia” variety are not considered scholarly resources and should not be used as references. They are not acceptable references in the Capstone Course, so it is good to avoid the habit of relying on these types of websites early in the program.
To complete the Article Review, you should research the assigned topic to provide a measure of information about the topic’s significance to the current business climate regarding financial management. A minimum of 2 reference sources other than the textbook is required for editorial balance. In order to be considered for the full 50 points, each Article Review should contain a minimum of 500 words and be submitted in APA format.

Write the Article Review in Microsoft Word, use the Spelling and Grammar Tool, and attach it or copy and past it to a new thread in the appropriate Article Review Forum of the Discussion Board. Then, submit the Review to turnitin.com in the Assignment Submission Folder in Weekly Materials for the week that the Review is assigned. Article Reviews will be graded in accordance with the rubric provided in the Syllabus section of Blackboard.

The Article Review layout is simple and consists of the following three headings:
1. Overview/Summary
2. Opinion/Analysis
3. Relevance to International Financial Management.

The first section should contain a brief, executive style Overview/Summary and a statement of the author’s hypothesis or proposition. The Opinion/Analysis section should demonstrate your critical thinking and analysis of the subject matter. The Relevance to International Financial Management section should offer an insight-building summary, recommendations, findings and conclusions. The majority of the Article Review content should be in the Opinion/Analysis and Relevance to International Financial Management sections.