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Assignment 6 Global Financial Management Module Code

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13 views2 pages

Assignment 6 Global Financial Management Module Code

Homework from school

Uploaded by

ildacglcsambu
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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ASSIGNMENT 6

GLOBAL FINANCIAL MANAGEMENT

Module Code: LBA215

Short-Term Financing
International Cash Management

Prepared by: Michael Ha


Version: November 2024

Total: 100 marks. There are 5 questions in this assignment.

QUESTION 1 [20 marks]


What are the sources of short-term financing for MNCs?

QUESTION 2 [20 marks]


How does an MNC determine whether to use foreign financing?

QUESTION 3 [20 marks]


As the Finance Manager of AIG, you are considering financing with USD or a foreign
currency, Canadian dollar, CAD. The interest rate of CAD is 3%. What is the
effective financing rate if the Canadian dollar is expected to appreciate by 1% over
the loan life?

QUESTION 4 [20 marks]


A US-based MNC is considering financing its operation by borrowing in Euro. The
interest rate of Euro is 5%. There is a 60% probability that Euro will appreciate 5%
and a 40% probability that Euro will depreciate 3% over the loan life. What is the
expected value of the effective financing rate?

QUESTION 5 [20 marks]


A US-based MNC examines the possible benefits of financing with a portfolio of 2
currencies, the Canadian dollar, CAD, and Japanese yen, JPY. The MNC uses equal
weights meaning 50% of the required amount is financed in CAD and 50% is
financed in JPY.

The interest rate of CAD is 3% and the interest rate of JPY is 4%

There is a 40% probability that CAD will appreciate 10% and a 60% probability that
it will depreciate 1%.

There is a 30% probability that JPY will appreciate 8% and a 70% probability that it
will depreciate 2%.

1. Scenario 1: CAD appreciates and JPY appreciates. What is the probability that
this scenario occurring?

1
2. Scenario 2: CAD appreciates and JPY depreciates. What is the probability that
this scenario occurring?
3. Scenario 3: CAD depreciates and JPY appreciates. What is the probability that
this scenario occurring?
4. Scenario 4: CAD depreciates and JPY depreciates. What is the probability that
this scenario occurring?
5. What is the effective financing rate of the 50/50 portfolio in Scenario 1?
6. What is the effective financing rate of the 50/50 portfolio in Scenario 2?
7. What is the effective financing rate of the 50/50 portfolio in Scenario 3?
8. What is the effective financing rate of the 50/50 portfolio in Scenario 4?

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