公司理財chap020-文庫吧資料
2025-01-04 22:00本頁面
【正文】 translated back to U.S. dollars for accounting purposes, even if foreign currency is not actually converted back to dollars. If gains and losses from this translation flowed through directly to the income statement, there would be significant volatility in EPS. Current accounting regulations require that all cash flows be converted at the prevailing exchange rates, with currency gains and losses accumulated in a special account within shareholders equity.,Translation Exposure,Large multinational firms may need to manage the exchange rate risk associated with several different currencies. The firm needs to consider its net exposure to currency risk instead of just looking at each currency separately. Hedging individual currencies could be expensive and may actually increase exposure.,Managing Exchange Rate Risk,Changes in value due to political actions in the foreign country Investment in countries that have unstable governments should require higher returns. The extent of political risk depends on the nature of the business: The more dependent the business is on other operations within the firm, the less valuable it is to others. Natural resource development can be very valuable to others, especially if much of the ground work in developing the resource has already been done. Local financing can often reduce political risk.,20.7 Political Risk,What does an exchange rate tell us? What is triangle arbitrage? What are absolute purchasing power parity and relative purchasing power parity? What are covered interest arbitrage and interest rate parity? What are uncovered interest parity and the International Fisher Effect? What are the two methods for international capital budgeting? What is the difference between shortrun interest rate exposure and longrun interest rate exposure? How can you hedge each type? What is political risk and what types of business face the greatest risk?,Quick Quiz,。 = 11.56%,Domestic FV = $1,071 and British FV = $1,071,Transactions Costs The interest rate available to an arbitrageur for borrowing, ib,may exceed the rate he can lend at, il. There may be bidask spreads to overcome, Fb/Sa F/S Thus (Fb/Sa)(1 + i165。800,Invest 163。 the 163。892.48 back into dollars at F163。 = 11.56% for one year to achieve 163。) invest 163。800 = $1,000247。 in one year his investment will be worth $1,071 = $1,000?(1+ i$) = $1,000?(1.071). Alternatively, this trader could: exchange $1,000 for 163。(0) = 120,receive $106,250,pro
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