HW Assignment Example | Topics and Well Written Essays - 250 words - 18

HW - Assignment Example It relates to the growth of MNC by evaluating the stages that an international product has to go through thus revealing product decline and appreciations as a result of competition c. Low home inflation will mean high consumption and less saving. This will in turn increase imports and reduce export thus increasing deficit in a country’s current account. Foreign imports will signify a strong competition thus low inflation. The demand for South Korean won will increase with the increase in demand for imports. The supply for South Korean won will reduce due to increase in its exports. The result will be a shift in equilibrium value of the South Korean won upwards, thus increasing its value. The high interest rates in US will increase demand for US currency as a result of hot money flows. This will see appreciation in US dollar demand for Argentina pesos will decrease, while its supply will increase. The equilibrium value for the pesos will thus depreciate Rise in income levels of US will increase demand and consumption thus increasing imports. The demand for British pounds will increase, while supply for British pound for sale will decrease, the equilibrium value of the British pound will increase thus signifying an appreciation in the value of British pound b. In speculating, the speculators who anticipate for appreciation of the currency will purchase the future contracts of the currency as opposed to those who anticipate the currency’s decline who will sell currency future contracts of that currency When the US based firm wants to lock its maximum price to be paid for euros in future, then the US firm can consider purchasing a call option for euros. Similarly, when the US firm wants the price of its receivables to be lock at minimum prices for the euros, then the US firm can consider put option on euros. A speculator should purchase a call option of Australian dollar when the Australian dollar is devalued and low compared