AGGREGATE EFFECTS ON EXCHANGES RATES

in the question they mentioned country k, we have to choose a country in order to compare it to uk currency, I prefer to use U.S dollar. there should be diagrams, figures and tables from different journals. all the information should be updated to the recent days.

we should follow all the requirements that I will attach as a document. there are three different question. Q1 should be around 1200 words, Q2 1200 words and Q3 600 words.

Module:    BAC6017 Finance of International Business Level 3 – Coursework1 (Aggregate effects on exchange rates)

Word limit: 3,000 words

Assume that the United Kingdom invests heavily in government and corporate securities of Country K.  In addition, residents of Country K invest heavily in the United Kingdom.  Approximately £10 billion worth of investment transactions occur between these two countries each year.  The total pound value of trade transactions per year is about £8 billion. This information is expected to also hold in the future.

Because your firm exports goods to Country K, your job as international cash manager requires you to forecast the value of Country K’s currency (the “krank”) with respect to the pound. 

You are required to:

  • Discuss and evaluate the factors that influence exchange rates.

(40 marks)

  • Explain how each of the following conditions will affect the value of the krank, holding other things equal. 
  • UK inflation has suddenly increased substantially, while Country K’s inflation remains low.
  • UK interest rates have increased substantially, while Country K’s interest rates remain low. Investors of both countries are attracted to high interest rates.
  • The UK income level increased substantially, while Country K’s income level has remained unchanged.
  • The UK is expected to impose a small tariff on goods imported from Country K.

(40 marks)

  • Aggregate all of these impacts to develop an overall forecast of the krank’s movement against the pound.

(20 marks)

(100 marks in total)

Reference:

Madura, Jeff and Roland Fox (2014), International Financial Management, 3rd Revised Edition, Cengage Learning

Note: One printed copy is to be submitted through I-ZONE and an electronic copy to be sent to Turnitin by due day.

Assessment Criteria

Standard assessment regulations apply. You must reference your work as required by Cardiff Metropolitan University regulations.

This is assessment One and contributes 50% of the overall module assessment.

Learning Outcomes. On successful completion of this assessment, the student will:

  • Demonstrate an awareness of economic issues and the interaction of exchange rates;
  • Demonstrate a critical insight into the determination of exchange rates;
  • Apply key factors which affect exchange rates to multinational corporate case with specific concern for future cash flows;
  • Critically evaluate the main principles of exchange rates forecasting which helps decision making for multinational corporates.

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