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Foreign Exchange
a) As the AUD is gaining value (buying power) and the EUR is losing value over time, June is in an excellent position with her European suppliers granting her a 60-day credit period and her Australian customers paying on 30-day credit terms: the AUD she receives in payment within 30 days will be worth more in EUR 30 days later, when her own payments are due, meaning she will save money.
b) One hedging strategy June could employ to shield against movements in either direction by either currency would simply be to shorten credit terms with suppliers and customers, paying as soon as bills were in and collecting as fast as possible, in a currency-swap type scenario. This has other business implications...
June could also use forward contracts, locking in agreed-upon exchange rates for future purchases and sales over longer periods of times.
c) According to the basic theory of interest rate parity, appreciation in a currency will generally bear some relation to interest paid on investments in that currency, such that the interest earned in two different currencies ought to be equal as long as no external factor makes an arbitrage opportunity value available. That is, though the AUD is appreciating faster than the EUR, which might in fact be depreciating, an investment in AUD is not likely to earn more in true value (buying power) than a similar investment…
By May 2012, MedAssets long-term debts are approximately $959.94 Million. Additionally, MedAssets secures loans that carry interest rates. With significant amount of loans that the company has secured and notes that the company has issued, the company faces interest rates risks. To mitigate the effect of risks associated with the fluctuation of the interest rates, the company enters into the series of financial instrument to guide against the risks from
Financial Derivatives This study emphasized the importance roles of financial derivatives, which has been known for the last decade and its effects on the Global financial crisis. It further analyzes the impact of financial derivatives and how it can be controlled to prevent corporations from incurring a lot of risks. It also explains the existence of financial derivatives since 1970, to the recent Global Financial Crisis which occurred in the 2006. Risk
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Bank of America and Merrill Lynch would have to be separated and Goldman Sachs could no longer be a bank holding company. "Commercial banks would take deposits, manage the nation's payments system, make standard loans and even trade securities for their customers -- just not for themselves. The government, in return, would rescue banks that fail. On the other side of the wall, investment houses would be free to
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