Benefits and Costs of Canadian Miners from Investment in Australia - Business Assignment Help

Assignment Task :

Question B1.

Read the case study given in Appendix 1 at the end of exam paper. Then answer the following questions (in answering the questions, you must use your critical analysis, common sense, future forecasting ability and your rational imagination):

(a) Explain the benefits and costs of Canadian miners from investment in Australia.

(b) Explain the benefits and cost of Australia from investment by Canadian miner. 

Question B2.

(a) Critically discuss the theory of absolute advantage and the theory of comparative advantage in international trade using examples.  

(b) Discuss why import quota is much more effective than import tariff in controlling imports.       

Question B3.

Explain how have improvements in technology contributed to the globalization of markets and globalization of production?  

Question B4.

(a) Critically discuss the relative merits and demerits of fixed and floating exchange rate regimes.  

(b) You are living in a developing country. Advise with arguments what type of exchange rate regime would be suitable for your country. 

Part C: TWO problem solving questions. Answer all the questions.  

Question C1.

(a) Discuss the different categories of foreign exchange risk and the techniques to reduce those foreign exchange risks.  

(b) You are a Manager of an international business firm in Australia. Your firm has exported some goods in Japan, the export earning ¥1,000,000 is receivable by the next 3 months. Current exchange rate is $1 = ¥120. You expect that the Japanese Yen may appreciate to $1 = ¥100 by the next 3 months. 

Required:

(i) Explain the implication(s) to your business if Yen appreciates.  

(ii) Except buying forward and using swaps, explain the collection strategy you will take to minimise your business risks due to the expected change in the exchange rate.                        

Question C2. 

Assume there are two countries Australia and Japan, each produces a similar basket of goods and services. Suppose the price of this basket of goods and services in Australia is AU$500 and the price of the same basket of goods and services in Japan is ¥ 50000. 

Calculate the following:

(a) According to PPP theory, calculate the dollar/yen and yen/dollar spot exchange rate. 

(b) Suppose over the next 12 months the price of the basket is expected to rise to AUD$600 in Australia and to ¥65000 in Japan. Calculate the one-year forward dollar/yen exchange rate. Comment on the new rate compared to the rate in answer  

(c) Given your answers to (a) and (b) above, and given that the current interest rate in Australia is 3% per annum, what would you expect the current interest rate to be in Japan?               

(d) If Japan’s nominal interest rate is 15% and inflation rate is 8%, what should be the real interest rate in Japan?  

(e) You have a television manufacturing industry in China. In mid-June, you received an order from Australia for exporting 1000 TV sets. Payment of $1,000,000 is due in mid-December. You expect the dollar to fall from $1= ¥6 to $1= ¥5 by December. You can borrow dollar at 5% a year. Interest rate in Chinese bank is 4% a year.

Required: 

(i) Explain the implications to your business due to the change in the exchange rate.                 

(ii) Also explain your strategy to face this foreign exchange risk if any.

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