BUS 2303- With the U.S. dollar impressively fortifying against other real coinage

BUS 2303- With the U.S. dollar impressively fortifying against other real coinage

Subject: Business    / Finance
Question

Running Your Own MNC

I. The purpose of the project:

This project allows you to create a small international business and apply key concepts from the selected chapters to run the business throughout the school term. The questions listed below are for your reference. That means you don’t need to organize the project by answering these questions one by one because this is a project, not an essay questions test. You are only required to discuss the major factors which may have a significant impact on the operation of your MNC.

4. Chapter 6 (20 points)

Monitoring Central Bank Intervention

How can your business be affected if the Fed attempts to strengthen the dollar in the for-eign exchange market?
If the Fed decides to weaken the dollar, how will your business be affected?
How can indirect central bank intervention affect your business even if there is no impact on exchange rates?

Accessing Central Bank Information

Go to the Web site link for the central bank in your target country. Determine whether this central bank intervenes to control its currency in the foreign exchange market.

5. Chapter 7 (20 points)

Assessing Spot and Forward Rates

Obtain a quotation for the spot rate of the foreign currency (that you will receive from your business) from the bank where you intend to conduct your foreign exchange transactions. Then, obtain a quotation for the spot rate of the foreign currency from another bank. Does it appear that the spot rates are aligned across locations at a given point in time?
Obtain a quotation for the one-year forward rate of the foreign currency from the bank where you intend to conduct your foreign exchange transactions. Then, use a business periodical to determine the prevailing one-year interest rates in the United States and the foreign country of concern. Does it appear that interest rate parity exists?
Review the data on forward rates from The Wall Street Journal or another source to determine whether the foreign currency of concern typically exhibits a discount or a premium. Then review data on interest rates to compare the foreign country of concern and the U.S. interest rates. Does it appear that the forward rate of the foreign currency exhibits a premium (discount) when its interest rate is lower (higher) than the U.S. interest rate, as suggested by interest rate parity?

6. Chapter 8 (10 points)

Determining Whether IFE Holds

Use The Wall Street Journal or another data source to record the interest rate differential between the interest rate of the foreign country in which you plan to do business and the U.S. rate over the last five or so quarters. Then, review the exchange rate percentage change in the foreign currency of concern over each of those corresponding quarters to determine whether the international Fisher effect (IFE) appears to hold over those quarters for that currency.

**This project is split into 3 different sections, I am working on the above sections.

Product = Hybrid car

Country = Mexico

*6-7 pages including references