Lecture Essentials of corporate finance - Chapter 18: International aspects of financial management

International Aspects of Financial Management Chapter 18 Key Concepts and Skills • Understand how exchange rates are quoted and what they mean • Know the difference between spot and forward rates • Understand purchasing power parity and interest rate parity and the implications for changes in exchange rates • Understand the types of exchange rate risk and how they can be managed • Understand the impact of political risk on international business investing Copyright ª 2007 McGraw­Hill Australia Pty Ltd 18­2 PPTs t/a Essentials of Corporate Finance by Ross, Chapter Outline • Terminology • Foreign Exchange Markets and Exchange Rates • Purchasing Power Parity • Exchange Rates and Interest Rates • Exchange Rate Risk • Political Risk Copyright ª 2007 McGraw­Hill Australia Pty Ltd 18­3 PPTs t/a Essentials of Corporate Finance by Ross, Domestic Financial Management and International Financial Management • Considerations in International Financial Management – Have to consider the effect of exchange rates when operating in more than one currency – Have to consider the political risk associated with actions of foreign governments – More financing opportunities when you consider the international capital markets and this may reduce the firm’s cost of capital Copyright ª 2007 McGraw­Hill Australia Pty Ltd 18­4 PPTs t/a Essentials of Corporate Finance by Ross, International Finance Terminology • Cross-rate • Eurobond • Eurocurrency (Eurodollars) • Foreign bonds • Gilts • London Interbank Offer Rate (LIBOR) • Swaps Copyright ª 2007 McGraw­Hill Australia Pty Ltd 18­5 PPTs t/a Essentials of Corporate Finance by Ross, ... - tailieumienphi.vn