international finance project

Section one: Introduction
In this section you will introduce the main product of the parent MNC located in the EU. this MNC needs to expand its business by selling its product in a foreign country. You should choose that country but do not choose a country that has a pegged exchange rate system with the Euro currency. Then you have to state what method of international business you will use to sell the product in that country and provide explanation why did you choose this method. (1 page)
2. Section two: Assessing Country Factors That Will Affect the Demand for the Product
In this section you determine whether your business would be affected by government barriers. Therefore review the government controls set by that country’s government that could influence the exchange rates. Investigate only foreign exchange barriers and foreign trade barriers presented in chapter 4 and for more details about those barriers you can read chapter 6. (Maximum 1 page)
3. Section 3: Using the Foreign Exchange Market.
The country you chosen should adopt either a freely floating or managed float exchange rate systems. Access Recent Exchange Rates of the foreign currency you chosen; Go online to one of the currency exchange sites. Explain how the main foreign currency for your business has changed over the last twelve months/quarters/years. Use tables and charts to clarify your explanations and do not rely on text only to recognize the issues regarding exchange rate risk that are discussed throughout the text. (1 page)
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4. Section 4: Using Exchange Market Derivatives
Conducting international business means that you will receive foreign currency when selling your product or pay with foreign currency when buying your supplies from that same country. In this section you will demonstrate how you can use currency derivatives to hedge the exchange rate risk of your MNC by make a hypothetical example of using derivatives to hedge the exchange rate risk of your MNC. (Maximum 2 pages)
 Hedging against receivables: The main parent MNC is expecting to receive a cash flow of 10 million Euro’s from its business in that foreign country after 30 days if the current spot rate does not change. However, the foreign exchange rate is expected to depreciate.
 Hedging against payables: The main parent MNC is expecting to pay for supplies in foreign currency equivalent to 2 million Euro’s from its business that foreign country after 30 days. However, the foreign exchange rate is expected to appreciate.
 For the previous two cases you have to decide to use futures or options to hedge the exchange rate risk of your MNC and explain why you choose which.
 To access Futures and options Quotes Go to www.cmegroup.com and choose FX from the menu of services, then determine the prevailing futures/ options price of the main foreign currency for your business. After that determine the prevailing spot rate, what is the discount or premium of the futures price?
5. Section 5: Summary and Conclusions (1 page)
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A good project will show clearly each step of the process of conducting international business in that foreign country. With a good justification of each decision you make. Then it is recommended that you support your work with graphs and trends when possible. Adding your own comments to the project will enrich your project. Groups: this project could be by groups of two students only or individual if you prefer. Text format: Font: 12 pt, Times New Roman; Margin: one inch from all sides, Spacing: 1.5 spaced. Pages should be numbered. Cover page will not be numbered. Cover page will have the names and student Id. Length: The paper should be approximately 9 pages long including cover page and references page. It may be a little more or less. I will give more weight to quality rather than quantity. Referencing: The project must be based on the rules of academic writing. When you use the ideas of somebody else, you must give a reference. References should be consistent. That is, only one method of referencing should be followed. You cannot mix various styles when giving references. Plagiarism: Cut and paste will not be tolerated at all. If you want to use other authors’ ideas word-for- word, do it properly by putting those words under quotation marks. Do not use too many quotations because it will reduce your own input. You will get points based on originality, effort, depth of discussion, and format/organization. Project Evaluation