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Essay Instructions: The paper should facilitate learning by following current developments in global financial markets. A comprehensive report on selected currency pairs should be prepared. Although the analysis should be forward looking, the path of the exchange rates in the recent past should be part of the analysis. The FX markets are closely linked to global equity, money and bond markets. The paper also requires an analysis of the development in these parallel markets. The paper should include graphs and charts in appendix. An explanation should be provided for the movement of currencies, and their interactions with the parallel markets. The currency pairs to be tracked are
? USD/EUR
? USD/JPY
? USD/GBP

The starting date is June 15, 2004 and the end date is august 07, 2004. All data should be within these dates. Develop your own narrative and explanations after filtering the information. All information should be properly referenced. Remember the paper is supposed to be a personal opinion paper. All opinions must be made in light of the gathered data.

Essay Instructions: Term Brief: Each student will write a strategic assessment on one of the following:
Option 1: Focus on the Chinese Yuan

With reference to a home country of your choice, assess the impact of the USD/Yuan exchange rate on companies in that home country. The paper should contain 1) an overview and update on the relation between the Chinese Yuan and the US dollar, 2) discussion of threats posed by the exchange rate and related trends to home country companies, 3) discussion of opportunities posed by the exchange rate and related trends to home country companies, 4) recommendations for national policy that the home country should adopt to effectively respond to the emergence of of the Yuan as an influencial currency, and 5) recommendations to home country companies on actions they should take to effectively prepare for various scenarios related to the Yuan.



Option 2: Focus on the Euro

With reference to a home country of your choice, assess the impact of the Euro on companies in that home country (preferably outside the Euro-zone). The paper should contain 1) an overview and update on the implementation of the Euro, 2) discussion of threats posed by the Euro to home country companies, 3) discussion of opportunities posed by the Euro to home country companies, 4) recommendations for national policy that the home country should adopt to effectively respond to the emergence of the Euro, and 5) recommendations to home country companies on actions they should take to effectively respond to the emergence of the Euro.

Essay Instructions: Scout Finch is the Chief Financial Officer [CFO] of SALEM Manufacturing, a U.S. based manufacturer of gas turbine equipment. She has just concluded negotiations for the sale of a turbine generator to Crown, a British firm for One million pounds. This single sale is quite large in relation to SALEM?s present business. SALEM has no other current foreign customers, so the currency risk of this sale is of particular concern. The sale is made in March with payment due three months later in June. Scout Finch has collected the following financial market information for the analysis of her currency exposure problem:
? Spot Exchange rate: $1.5640 per British pound.
? Three month forward rate: $1.5549 per pound
? SALEM?s cost of capital: 16%
? U.K. three month borrowing interest rate: 12.0% (or 3.0% per quarter)
? U.K. three month investment interest rate: 10.0% (or 2.5% per quarter)
? U.S. three month borrowing interest rate: 12.0% ( or 3.0% per quarter)
? U.S. three month investment interest rate: 8.0% (or 2.0% per quarter)
? June put option in the over-the-counter (bank) market for 1,000,000 British pounds;
Strike price $1.55 (nearly at-the money) 1.5% premium
? June put option in the over-the counter (bank) market for 1,000,000 British pounds:
Strike price $1.51 (out-of-the money) 1.0% premium
? SALEM?s foreign exchange advisory service forecasts that the spot rate in there months will be $1.56 per British pound.
Like many manufacturing firms, SALEM operates on relatively narrow margins. Although Ms. Finch and SALEM would be very happy if the pound appreciated versus the dollars, concerns center on the possibility that the pound will fall. When Ms. Finch budgeted this specific contract, she determined that the minimum acceptable margin was at a sale price of $1,500,000. The budget rate, the lowest acceptable dollar per pound exchange rate, was therefore established at $1.5 per British pound. Any exchange rate below would result in Dayton actually losing money on the transaction.
Four alternatives are available to Dayton to manage the exposure:
1. Remain un-hedged.
2. Hedge in the forward market.
3. Hedge in the money market.
4. Hedge in the options market. What should SALEM do?

Essay Instructions: Take an example of dual or alternative currency discussed in one or more readings, or one reading plus the film ?Pig Tusks and Paper Money.? How do the currency/currencies you discuss help to organize, express, or shape social life? How effective are they?