公司理财第十八章

公司理财第十八章

International Aspects of Financial ManagementChapter 18

McGraw-Hill/Irwin McGraw-Hill

© 2004 The McGraw-Hill Companies, Inc. All rights reserved.

公司理财第十八章

Key Concepts and SkillsUnderstand how exchange rates are quoted and what they mean Know the difference between spot and forward rates Understand purchasing power parity and interest rate parity and the implications for changes in exchange rates Understand the types of exchange rate risk and how it can be managed Understand the impact of political risk on international business investing 18.1McGraw-Hill/Irwin McGraw-Hill

© 2004 The McGraw-Hill Companies, Inc. All rights reserved.

公司理财第十八章

Chapter Outline Terminology Foreign

Exchange Markets and Exchange Rates Purchasing Power Parity Exchange Rates and Interest Rates Exchange Rate Risk Political Risk

18.2McGraw-Hill/Irwin McGraw-Hill

© 2004 The McGraw-Hill Companies, Inc. All rights reserved.

公司理财第十八章

Domestic Financial Management and International Financial Management Considerations

in International Financial

ManagementHave to consider the effect of exchange rates when operating in more than one currency Have to consider the political risk associated with actions of foreign governments More financing opportunities when you consider the international capital markets and this may reduce the firm’s cost of capital 18.3McGraw-Hill/Irwin McGraw-Hill

© 2004 The McGraw-Hill Companies, Inc. All rights reserved.

公司理财第十八章

International Finance Terminology American Cross-rate Eurobond Eurocurrency

Depository Receipt (ADR)

(Eurodollars) Foreign bonds Gilts London Interbank Offer Rate (LIBOR) Swaps18.4McGraw-Hill/Irwin McGraw-Hill

© 2004 The McGraw-Hill Companies, Inc. All rights reserved.

公司理财第十八章

Global Capital MarketsThe number of exchanges in foreign countries continues to increase, as does the liquidity on those exchanges Exchanges that allow for the flow of capital are extremely important to developing countries The United States has one of the most developed capital markets in the world, but foreign markets are becoming more competitive and are often willing to try more innovative ways to do business

18.5McGraw-Hill/Irwin McGraw-Hill

© 2004 The McGraw-Hill Companies, Inc. All rights reserved.

公司理财第十八章

Work the Web Example Thinking

about going to Mexico for spring break or Japan for your summer vacation? How many pesos or yen can you get in exchange for $1000? Click on the web surfer to find out

18.6McGraw-Hill/Irwin McGraw-Hill

© 2004 The McGraw-Hill Companies, Inc. All rights reserved.

公司理财第十八章

Exchange RatesThe price of one country’s currency in terms of another Most currency is quoted in terms of dollars Consider the following quote:

France (Franc) .1460 6.8479 The first number (.1460) is how many U.S. dollars it takes to buy 1 French Franc The second number (6.8479) is how many French Francs it takes to buy $1 The two

numbers are reciprocals of each other (1/6.8479 = .1460) 18.7McGraw-Hill/Irwin McGraw-Hill

© 2004 The McGraw-Hill Companies, Inc. All rights reserved.

公司理财第十八章

Example: Exchange Rates

Suppose you have $10,000 . Based on the rates in Figure 18.1, how many Italian Lira can you buy?Exchange rate = 2021.37 Lira per U.S. dollar Buy 10,000(2021.37) = 20,213,700 Lira

Suppose you are visiting London and you want to buy a souvenir that costs 1000 British pounds. How much does it cost in U.S. dollars?Exchange rate = .6669 pounds per dollar Cost = 1000 / .6669 = $1499.48 18.8

McGraw-Hill/Irwin McGraw-Hill

© 2004 The McGraw-Hill Companies, Inc. All rights reserved.

公司理财第十八章

Example: Triangle Arbitrage

We observe the following quotes10.00 FF per $1 2.00 DM per $1 4.00 FF per DM

What is the cross rate?

(10.00 FF/$1) / (2.00 DM/$1) = 5 FF per DM

We have $100 to invest; buy low, sell highBuy $100(10 FF/$1) = 1000 FF, use FF to buy DM Buy 1000FF / (4 FF/DM) = 250 DM, use DM to buy dollars Buy 250 DM / (2 DM/$1) = $125 Make $25 risk-free 18.9

McGraw-Hill/Irwin McGraw-Hill

© 2004 The McGraw-Hill Companies, Inc. All rights reserved.

公司理财第十八章

Transaction Terminology

Spot trade – exchange currency immediately

Spot rate – the exchange rate for an immediate trade

Forward trade – agree today to exchange currency at some future date and some specified price (also called a forward contract)Forward rate – the exchange rate specified in the forward contract If the forward rate is higher than the spot rate, the foreign currency is selling at a premium (when quoted as $ equivalents) If the forward rate is lower than the spot rate, the foreign currency is selling at a discount 18.10

McGraw-Hill/Irwin McGraw-Hill

© 2004 The McGraw-Hill Companies, Inc. All rights reserved.

公司理财第十八章

Absolute Purchasing Power Parity Price

of an item is the same regardless of the currency used to purchase it Requirements for absolute PPP to holdTransaction costs are zero No barriers to trade (no taxes, tariffs, etc.) No difference in the commodity between locations

Absolute

PPP rarely holds in practice for many

goods18.11McGraw-Hill/Irwin McGraw-Hill

© 2004 The McGraw-Hill Companies, Inc. All rights reserved.

公司理财第十八章

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