23 Jul IS YOUR BUSINESS SUBJECT TO ECONOMIC EXPOSURE?
Consider how your business would be exposed to exchange rate risk. Explain your exchange rate risk Show more Consider how your business would be exposed to exchange rate risk. Explain your exchange rate risk both transactions risk and economic risk by answering the following questions. 2. Is your business subject to transaction exposure? Explain how and why/why not. Is your business subject to economic exposure? Explain how and why/why not. GIVE EXAMPLES. Overall do you think that the value of your business would be favorably or unfavorably affected with the expected future movement of the JPY/USD exchange rate? Explain your rationale. 3. Go to your data collected earlier to assess historical exchange rate movements (Yahoo.finance works for this) of the JPY/USD. Consider how the dollar cash flows from your services may have changed each year if exchange rates changed over each of the last 3 years. Specifically assume that your annual revenue will be 30000000 (JPY) per year and determine the value of that amount in dollars based on the exchange rate today one year ago two years ago and three years ago. Does it appear that your dollar revenue would have changed significantly due to exchange rate movements had you been in business during the last three years? Show your calculations! Assume that you expect the JPY/USD will change over the next year by the same degree as it changed over the past year. Given the futures price of the JPY and the percentage change of the JPY/USD over the past year would it be wise to sell futures to hedge the JPY/USD that will be converted to dollars one year from now? Explain why or why not. Show less
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