1. Minimum 150 words
After reading about the financial crisis in Chapter 11, consider the impact of international banking operations on less-developed countries. What additional risks do they face that are less concerning in developed countries?
In your response, please include at least two professional sources to support your analysis.
2. Minimum 150 words
What are tariffs? What are non-tariff barriers? Select a good not chosen by one of your classmates and find that good in the U.S. Harmonized Tariff Schedule. What tariff would a member of the WTO pay if they wanted to export that good to the United States?
3. Foreign Investment: Minimum 500 words
Suppose that you hold a piece of land in the city of London that you may want to sell in one year. As a U.S. resident, you are concerned with the dollar value of the land. Assume that if the British economy booms in the future, the land will be worth £2,000, and one British pound will be worth $1.50/£. If the British economy slows down, on the other hand, the land will be worth less, say, £1,500, but the pound will be weaker, say, $1.40/£. You feel that the British economy will experience a boom with a 60 percent probability and a slowdown with a 40 percent probability.
a. Estimate your exposure to the exchange risk.
b. Compute the variance of the dollar value of your property that is attributable to exchange rate uncertainty.
c. Discuss how you can hedge your exchange risk exposure and examine the [possible] consequences of hedging.