12.5 global financial management (not assessed

Question 1

Global Financial Management

Answer 1

• Exchange Rates
• Interest Rates
• Methods of International Payment
• Hedging
• Derivatives

Question 2

Global Financial Management: EXCHANGE RATE

Answer 2

• Value of one country’s money
• AUD appreciates = Imported goods cheaper
• AUD depreciates = Imported goods expensive

Question 3

Global Financial Management: INTEREST RATES

Answer 3

• Higher interest rates = Higher risk
• AUD depreciates = Interest payments increase because more AUD is needed to pay same foreign currency

Question 4

Global Financial Management: METHODS OF INTERNATIONAL PAYMENT

Answer 4

• Payment in Advance: Payment sent before goods are sent
• Clean payment: Payment sent after goods are sent
• Letter of credit: Bank guarantees payment for goods once agreement to buyer’s term of purchase
• Bill of exchange: Pay certain amount at specific time

Question 5

Global Financial Management: HEDGING

Answer 5

• Value of one currency in another currency on a particular day
• NOT

Question 6

Global Financial Management: DERIVATIVES

Answer 6

• Financial instruments used to reduce exporting risks due to currency fluctuations
• FORWARD EXCHANGE CONTRACT
• OPTIONS CONTRACT
• SWAP CONTRACT

Question 7

nn

Answer 7

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