1 / 22

Chapter 11

Chapter 11. International Business. START. EXIT. Chapter Outline. 11.1 Currency Conversion Chapter Summary Chapter Exercises. 11.1 Currency Conversion. It’s a well-worn cliché to say that the world is getting smaller and business is becoming more global all the time and it’s true.

brennan-wilson
Download Presentation

Chapter 11

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Chapter 11 International Business START EXIT

  2. Chapter Outline 11.1 Currency Conversion Chapter Summary Chapter Exercises

  3. 11.1 Currency Conversion • It’s a well-worn cliché to say that the world is getting smaller and business is becoming more global all the time and it’s true. • There are plenty of products at your local shopping mall or even the grocery store that come from all sorts of exotic locations. • Just as much of the world’s business is conducted in English, much of the world’s business is conducted in U.S. dollars. • Most countries, though, have currencies of their own or participate with others in a shared currency such as the euro. • To convert between currencies, we must know the exchange rate.

  4. 11.1 Currency Conversion Example 11.1.1 • Problem • Convert US $3,724.59 into euros using the rate of 0.7838 (see page 470 of your textbook). • Solution US$1 = €0.7838 US$1 x 3,724.59 = €0.7838 x 3,724.59 $3,724.59 = €2,919.33

  5. 11.1 Currency Conversion Example 11.1.2 • Problem • Convert 348 Turkish new lira into US$ using the rate of 0.6692. • Solution L1 = US$0.6692 L1 x 348 = US$0.6692 x 348 L348 = US$232.88

  6. 11.1 Currency Conversion • Forward rates present an opportunity to lock in an exchange rate today for a currency exchange that will take place in the future. • Businesses and financial institutions sometimes try to protect themselves from sudden changes in the exchange rates by making an agreement with another business or financial institution to exchange currencies at a future date at a rate agreed on today.

  7. 11.1 Currency Conversion Example 11.1.4 • Problem • In August 2006, Rylad Drugs, an American company, sold a large order of pharmaceuticals to a Japanese wholesaler. The price was set at ¥13,500,000, and it was agreed that payment would be made when the order was delivered in mid-November. At the current exchange rate, Rylad is comfortable with the price, but it is worried that changes in the yen-dollar exchange rate over the next 3 months might make this deal less attractive. • Rather than run the risk of being hurt by changes in the exchange rate, suppose that on Thursday, August 24, 2006, the company made a deal to convert this sum into U.S. dollars 3 months later, on November 24, 2006. When the exchange was made, how much did they receive in dollars?

  8. 11.1 Currency Conversion Example 11.1.4 Cont. • Solution Using the 3-month forward rate gives: ¥1 = $0.008691 ¥13,500,000 = US$117,328.50

  9. 11.1 Currency Conversion Example 11.1.5 • Problem • Convert C$8,000 Canadian dollars into Mexican pesos (see Table 11.2, p. 474, in your textbook). • Solution C$1 = Mex$9.83930 C$8,000 = Mex$78,714

  10. 11.1 Currency Conversion Example 11.1.6 • Problem • Convert 40,000 Russian rubles into Thai baht. • Solution R1 = US$0.03731 R40,000 = US$1,492.40 $1 = B37.693 $1,492.40 = B56,253 R40,000 = B56,253

  11. 11.1 Currency Conversion

  12. 11.1 Currency Conversion Example 11.1.7 • Problem • Suppose you want to exchange $200 for euros. Calculate the amount you would receive in euros from the retail table given on a previous slide. • Solution €1 = $1.2954 €1/1.2954 = $1.2954/1.2954 €0.771962328 = $1 €0.771962328 x 200 = $1 x 200 €154.39 = $200

  13. Converting from US$ into a Foreign Currency Converting from a Foreign Currency into US$ Converting between Two Foreign Currencies Conversion Using Retail Rates Chapter 11 Summary

  14. Chapter 11 Exercises EXIT

  15. Problem 1 • Convert US $500 into euros if the exchange rate is US$1 = €0.8115. CHECK YOUR ANSWER

  16. Solution 1 • Convert US $500 into euros if the exchange rate is US$1 = €0.8115. • US$1 x 500 = €0.8115 x 500 • US$500 = €405.75 BACK TO GAME BOARD

  17. Problem 2 • Convert 500 Jordanian dinars into US dollars if the exchange rate is 1 JOD = US$1.4114. CHECK YOUR ANSWER

  18. Solution 2 • Convert 500 Jordanian dinars into US dollars if the exchange rate is 1 JOD = US$1.4114. • 1 JOD x 500 = US$1.4114 x 500 • 500 JOD = US$705.70 BACK TO GAME BOARD

  19. Problem 3 • Convert 300 euro into Japanese yen using Table 11.2 on page 474. CHECK YOUR ANSWER

  20. Solution 3 • Convert 300 euro into Japanese yen using Table 11.2 on page 474. • 1€ = 0.00673¥ • 300€ = 300 x 0.00673¥ • 300€ = 2,019¥ BACK TO GAME BOARD

  21. Problem 4 • Suppose you want to exchange $100 for Mexican pesos. How much would you receive in pesos? Use the retail table on Slide 11. CHECK YOUR ANSWER

  22. Solution 4 • Suppose you want to exchange $100 for Mexican pesos. How much would you receive in pesos? Use the retail table on Slide 11. • 1 MXN = $0.0917 • 1 MXN/0.0917 = $0.0917/0.0917 • $1 = 10.905 MXN • $100 = 1,090.51 MXN BACK TO GAME BOARD

More Related