lecture 3 part 3 Flashcards
what is globalization
supports free trade (by removing barriers) and the integration of national economies
what are the g7 countries
france, italy, uk, us, canada, japan, germany
how does globalization introduce risk
country risk, economic systems, language differences, cultural diffferences, currency differences
how does the foreign exchange rate introduce risk
unexpected changes in currency values may occur
how can risk be prevented in a foreign exchange rate
hedge a currency transaction
how is their country risk
nationalization
adversely change tax laws
change laws relation to labor and prices
disallow any remittance of funds
require local citizens to participate in the firm
impose duties and tariffs on any imports
what are multinational corporations
firm that operates in more than one country
what is a transnational corporation
are multinational firms that have widely dispersed ownership and are managed from a global prespective
what is a spot rate
exchange rate you pay on the spot if you want money
what is a forward rate
the rate you agree to pay for in the future
what is a cross rate
given two quotes of foreign exchange rates involving three currencies, you can find the exchange rate between the third pair of currencies
what are foreign exchange markets
a group of international markets connected electronically where currencies are bought and sold in wholesale amounts
