Posted: November 25th, 2022

Assignment 2

This week, you will continue building your small MNC.  Work on addressing the following questions while continuing developing your small MNC:

  • How can your business be affected if the Fed attempts to strengthen the dollar in the foreign 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?
  • Go to https://is.gd/mvAvYX and determine whether the central bank in your target country intervenes to control its currency in the foreign exchange market.
  • 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?

Submit your idea for a small MNC using an APA formatted essay.  Remember, you should cite and reference all sources.

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