Assignment: International Finance Project
1. You provide foreign exchange consulting services using economic fundamental data. Your client would like to have an idea about the US dollar and Mexican peso and US dollar and Japanese yen exchange rates six months in the future. Based on fundamentals create a forecast for these exchange rates. To accomplish this you should do the following:
a) Plot the exchange rates and try to identify patterns that can be projected to the future.
b) Get the following economic data for each country including the US: inflation, balance on the current account, interest rates and GDP growth rates.
c) Use the economic data to assess where the exchange rates will be in 6 months.
d) Run a regression between the exchange rate and 2 economic variables. Use the regression to forecast the exchange rate.
2. The client GE sold $300 million in turbines to a Mexican utility payable in 6 months and $500 million to a Japanese utility payable in 1 year.
a) Compute the dollar proceeds from the sales if GE decides to hedge using forward contracts.
b) Compute the dollar proceeds from the sales if GE decides to hedge foreign exchange exposure using options.
Format your assignment according to the following formatting requirements:
1. The answer should be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides.
2. The response also include a cover page containing the title of the assignment, the student's name, the course title, and the date. The cover page is not included in the required page length.
3. Also Include a reference page. The Citations and references should follow APA format. The reference page is not included in the required page length.