Assignment:
Question 1. "Management of Transaction Exposure" Answer the following:
- Discuss and compare hedging transaction exposure using the forward contract versus money market instruments.
- Determine the best way to leverage a currency options contract as a hedging tool compared with a forward contract. Provide specific examples to support your response.
Question 2. "Management of Economic Exposure" Answer the following:
- General Motors exports cars to Spain, but the strong dollar against the euro hurts sales of GM cars in Spain. In the Spanish market, GM faces competition from Italian and French car makers, such as Fiat and Renault, whose operating currencies are the euro. From the second e-Activity, determine the best course for GM to take to maintain its market share in Spain. Explain your rationale.
- Discuss the advantages and disadvantages of maintaining multiple manufacturing sites as a hedge against exchange rate exposure.