Assignment 3: Trends in Direct Investment and Exchange Rates

Assignment 3: Trends in Direct Investment and Exchange Rates

Part One: Trends in Direct Investment

Go to the government website,www.bea.gov. Research the trends in direct foreign investment.

Required:

1. What significant overall trends are evident in the area of direct investments by U.S. firms?

1. Select any three countries and compare the direct investments in those countries by the U.S. Why do some countries have more direct investments from the U.S. than others?

1. Over the last ten years, what has been the trend for the U.S. in terms of direct investment in other countries? For other countries investing in the U.S.?

Part Two: Exchange Rates

1. You just negotiated a transaction for your company with a French company that will result in €2,000,000 Euros in 90 days. The current spot rate for the Euro is €0.0080. The forward rate is €0.0090 and you expect the spot rate to decline in 90 days to €0.0078. If you would like to hedge your position by selling the Euro forward, how much will you receive now if you sell forward?

1. Explain the difference between a floating exchange rate system and a fixed exchange rate system. What are the advantages and disadvantages of each? What are the functions of foreign exchanges?

Please include references

 

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