Recent Question/Assignment
Question 3
Your company has contracted to buy an equipment from the US costing US$265,000. The equipment is due to arrive in 6 weeks’ time, when payment in US dollars will be effected. The current exchange rate is US$1 = S$1.2600, but the US dollar is expected to appreciate to US$1 = S$1.28. Your boss has tasked you to look into managing the foreign exchange (FX) risk of this transaction. Analyse the characteristics of the forward exchange market and currency futures market for managing FX risk, and present to your boss the advantages / disadvantages of each market, including their main uses. [You may find it useful to set up a table of comparison between the two instruments.] (10 marks)
[Word Limit: Maximum of 400 words]
Question 4
Examine the history of the European Monetary Union (EMU) and answer the following questions:
(a) Provide a short account of how the Euro came into existence.
(4 marks)
(b) Discuss the pros and cons of the single currency.
(5 marks)
(c) In light of the European Sovereign Debt crisis which is still being resolved, discuss the problems or challenges of EMU and why it may not be an optimum currency area. [You may find it instructive to compare EMU with the United States of America, which is a political, economic and monetary union of 51 states.] (6 marks)
[Word Limit: Maximum of 800 words]
Question 5
Analyse the characteristics and stocks and bonds. In what major ways do stocks differ from bonds? Explain the main reasons why some companies choose to list in foreign stock exchange in addition to the domestic stock exchange. (10 marks)
[Word Limit: Maximum of 400 words]