CHAPTER 21 THE GLOBAL CAPITAL MARKET 国际经济学PPT

英语作文-金融资产管理公司积极布局海外市场，拓展全球业务In the realm of financial asset management, companies are increasingly looking beyond their domestic markets to harness the vast potential of the global economy. As these firms venture into international waters, they are not merely dipping their toes; they are diving headfirst into the complexities and opportunities that the world has to offer.The strategic move to expand into overseas markets is not one taken lightly. It requires a deep understanding of diverse economic landscapes, regulatory environments, and cultural nuances. Financial asset management companies that excel in this arena are those that have done their homework, studying the intricacies of each market with the same diligence they apply to their investment portfolios.One of the primary motivations for this global expansion is the search for growth. In a world where domestic markets may be saturated or experiencing slow growth, the allure of untapped markets is strong. By establishing a presence in multiple countries, financial asset management firms can tap into new customer bases, diversify their assets, and mitigate risks associated with any single market's volatility.Moreover, technology has been a significant enabler in this global pursuit. With advancements in fintech, companies can now offer their services across borders with greater ease. Digital platforms allow for seamless transactions, portfolio management, and customer engagement, regardless of geographical boundaries. This technological prowess is not just a tool but a strategic asset that firms leverage to gain a competitive edge.However, global expansion is not without its challenges. Navigating the regulatory waters of different countries can be akin to charting a course through a maze of legal and compliance requirements. Each country presents its own set of rules, and a misstep can result in significant setbacks. Thus, financial asset management companies invest heavilyin legal expertise and compliance to ensure that their global operations run smoothly and within the bounds of the law.Cultural sensitivity is another critical factor. What works in one market may not resonate in another. Successful firms are those that adapt their approach to align with local preferences and business practices. This might mean tweaking marketing strategies, customizing service offerings, or even adjusting communication styles to build trust and rapport with international clients.The benefits of a well-executed global strategy are manifold. Firms that manage to establish a foothold in foreign markets often enjoy increased brand recognition, a diversified revenue stream, and a more robust business model capable of weathering economic fluctuations. Furthermore, the cross-pollination of ideas and best practices across different regions can lead to innovation and improved services for clients worldwide.In conclusion, as financial asset management companies actively layout their strategies for overseas markets, they are not just expanding their global footprint; they are shaping the future of finance. Through careful planning, technological innovation, and cultural acumen, these firms are poised to make the most of the global stage, offering their clients a gateway to a world of opportunities. The journey is complex, but for those who navigate it successfully, the rewards are as boundless as the markets they seek to capture. 。

Chapter 3International Financial Markets Lecture OutlineMotives for Using International Financial Markets Motives for Investing in Foreign MarketsMotives for Providing Credit in Foreign MarketsMotives for Borrowing in Foreign MarketsForeign Exchange MarketHistory of Foreign ExchangeForeign Exchange TransactionsExchange QuotationsForeignInterpretingCurrency Futures and Options MarketsInternational Money MarketOrigins and DevelopmentStandardizing Global Bank RegulationsInternational Credit MarketSyndicated LoansInternational Bond MarketEurobond MarketDevelopment of Other Bond MarketsComparing Interest Rates Among CurrenciesInternational Stock MarketsIssuance of Foreign Stock in the U.S.Issuance of Stock in Foreign MarketsComparison of International Financial MarketsHow Financial Markets Affect an MNC’s ValueChapter ThemeThis chapter identifies and discusses the various international financial markets used by MNCs. These markets facilitate day-to-day operations of MNCs, including foreign exchange transactions, investing in foreign markets, and borrowing in foreign markets.Topics to Stimulate Class Discussion1. Why do international financial markets exist?2. How do banks serve international financial markets?3. Which international financial markets are most important to a firm that consistently needsshort-term funds? What about a firm that needs long-term funds?Critical debateShould firms that go public engage in international offerings?Proposition Yes. When a firm issues shares to the public for the first time in an initial public offering (IPO), it is naturally concerned about whether it can place all of its shares at a reasonable price. It will be able to issue its shares at a higher price by attracting more investors. It will increase its demand by spreading the shares across countries. The higher the price at which it can issue shares, the lower is its cost of using equity capital. It can also establish a global name by spreading shares across countries.Opposing view No. If a firm spreads its shares across different countries at the time of the IPO, there will be less publicly traded shares in the home country. Thus, it will not have as much liquidity in the secondary market. Investors desire shares that they can easily sell in the secondary market, which means that they require that the shares have liquidity. To the extent that a firm reduces its liquidity in the home country by spreading its share across countries, it may not attract sufficient home demand for the shares. Thus, its efforts to create global name recognition may reduce its name recognition in the home country.With whom do you agree? State your reasons. Use InfoTrac or some other search engine to learn more about this issue. Which argument do you support? Offer your own opinion on this issue.ANSWER: The key is that students recognize the tradeoff involved. A firm that engages in a relatively small IPO will have limited liquidity even when all of the stock is issued in the home country. Thus, it should not consider issuing stock internationally. However, firms with larger stock offerings may be in a position to issue a portion of their shares outside the home country. They should not spread the stocks across several countries, but perhaps should target one or two countries where they conduct substantial business. They want to ensure sufficient liquidity in each of the foreign countries where they sell shares.Stock Markets are inefficientPropositionI cannot believe that if the value of the euro in terms of, say, the British pound increases three days in a row, on the fourth day there is still a 50:50 chance that it will go up or down in value. I think that most investors will see a trend and will buy, therefore the price is morelikely to go up. Also, if the forward market predicts a rise in value, on average, surely it is going to rise in value. In other words, currency prices are predictable. And finally, if it were so unpredictable and therefore unprofitable to the speculator, how is it that there is such a vast sum of money being traded every day for speculative purposes – there is no smoke without fire.The simple answer is that if that is what you believe, buy currencies that have viewOpposingincreased three days in a row and on average you should make a profit, buy currencies where the forward market shows an increase in value. The fact is that there are a lot of investors with just your sort of views. The market traders know all about such beliefs and will price the currency so that such easy profit (their loss) cannot be made. Look at past currency rates for yourself, check all fourth day changes after three days of rises, any difference is going to be not enough to cover transaction costs or trading expenses and the slight inaccuracy in your figures which are likely to be closing day mid point of the bid/ask spread. No, all currency movements are related to information and no-one knows if tomorrows news will be better or worse than expected.With whom do you agree? Could there be undiscovered patterns? Could some movements not be related to information? Could some private news be leaking out?ANSWER: Clearly there are no obvious patterns. Discussion on the impossibility of obvious patterns is worth emphasizing. However, does market inefficiency necessarily involve patterns, could market manipulation be occasional. There is worrying evidence from share price movements that there is unusual movement before announcements on many occasions, so the ideathat traders do not occasionally collude and move the price without supporting economic evidence is not an unreasonable view. Proof is however difficult as we have to separate anticipation from prior knowledge, the lucky speculator from the speculator who was in the know.Answers to End of Chapter Questions1. Motives for Investing in Foreign Money Markets. Explain why an MNC may invest fundsin a financial market outside its own country.ANSWER: The MNC may be able to earn a higher interest rate on funds invested in a financial market outside of its own country. In addition, the exchange rate of the currency involved may be expected to appreciate.2. Motives for Providing Credit in Foreign Markets. Explain why some financial institutionsprefer to provide credit in financial markets outside their own country.ANSWER: Financial institutions may believe that they can earn a higher return by providing credit in foreign financial markets if interest rate levels are higher and if the economic conditions are strong so that the risk of default on credit provided is low. The institutions may also want to diversity their credit so that they are not too exposed to the economic conditions in any single country.3. Exchange Rate Effects on Investing. Explain how the appreciation of the Australian dollaragainst the euro would affect the return to a French firm that invested in an Australian money market security.ANSWER: If the Australian dollar appreciates over the investment period, this implies that the French firm purchased the Australian dollars to make its investment at a lower exchange rate than the rate at which it will convert A$ to euros when the investment period is over.Thus, it benefits from the appreciation. Its return will be higher as a result of this appreciation.4. Exchange Rate Effects on Borrowing. Explain how the appreciation of the Japanese yenagainst the UK pound would affect the return to a UK firm that borrowed Japanese yen and used the proceeds for a UK project.ANSWER: If the Japanese yen appreciates over the borrowing period, this implies that the UK firm converted yen to pounds at a lower exchange rate than the rate at which it paid for yen at the time it would repay the loan. Thus, it is adversely affected by the appreciation. Its cost of borrowing will be higher as a result of this appreciation.5. Bank Services. List some of the important characteristics of bank foreign exchange servicesthat MNCs should consider.ANSWER: The important characteristics are (1) competitiveness of the quote, (2) the firm’s relationship with the bank, (3) speed of execution, (4) advice about current market conditions, and (5) forecasting advice.6. Bid/ask Spread. Delay Bank’s bid price for US dollars is £0.53 and its ask price is £0.55.What is the bid/ask percentage spread?ANSWER: (£0.55– £0.53)/£0.55 = .036 or 3.6%7. Bid/ask Spread. Compute the bid/ask percentage spread for Mexican peso in which the askrate is 20.6 New peso to the dollar and the bid rate is 21.5 New peso to the dollar.ANSWER: direct rates are 1/20.6 = $0.485:1 peso as the ask rate and 1/21.5 = $0.465:1 peso as the bid rate so the spread is[($0.485 – $0.465)/$0.485] = .041, or 4.1%. Note that the spread is fro the Mexiccan peso not the dollar.8. Forward Contract. The Wolfpack ltd is a UK exporter that invoices its exports to the UnitedStates in dollars. If it expects that the dollar will appreciate against the pound in the future, should it hedge its exports with a forward contract? Explain..ANSWER: The forward contract can hedge future receivables or payables in foreign currencies to insulate the firm against exchange rate risk. Yet, in this case, the Wolfpack Corporation should not hedge because it would benefit from appreciation of the dollar when it converts the dollars to pounds.9. Euro. Explain the foreign exchange situation for countries that use the euro when theyengage in international trade among themselves.ANSWER: There is no foreign exchange. Euros are used as the medium of exchange.10. Indirect Exchange Rate. If the direct exchange rate of the euro is worth £0.685, what is theindirect rate of the euro? That is, what is the value of a pound in euros?ANSWER: 1/0.685 = 1.46 euros.11. Cross Exchange Rate. Assume Poland’s currency (the zloty) is worth £0.17 and theJapanese yen is worth £0.005. What is the cross (implied) rate of the zloty with respect to yen?ANSWER: £0.17/£0.005 = 34 zloty:1 yen12. Syndicated Loans. Explain how syndicated loans are used in international markets.ANSWER: A large MNC may want to obtain a large loan that no single bank wants to accommodate by itself. Thus, a bank may create a syndicate whereby several other banks also participate in the loan.13. Loan Rates. Explain the process used by banks in the Eurocredit market to determine the rateto charge on loans.ANSWER: Banks set the loan rate based on the prevailing LIBOR, and allow the loan rate to float (change every 6 months) in accordance with changes in LIBOR.14. International Markets. What is the function of the international money market? Brieflydescribe the reasons for the development and growth of the European money market. Explain how the international money, credit, and bond markets differ from one another.ANSWER: The function of the international money market is to efficiently facilitate the flow of international funds from firms or governments with excess funds to those in need of funds.Growth of the European money market was largely due to (1) regulations in the U.S. that limited foreign lending by U.S. banks; and (2) regulated ceilings placed on interest rates of dollar deposits in the U.S. that encouraged deposits to be placed in the Eurocurrency market where ceilings were nonexistent.The international money market focuses on short-term deposits and loans, while the international credit market is used to tap medium-term loans, and the international bond market is used to obtain long-term funds (by issuing long-term bonds).15. Evolution of Floating Rates. Briefly describe the historical developments that led to floatingexchange rates as of 1973.ANSWER: Country governments had difficulty in maintaining fixed exchange rates. In 1971, the bands were widened. Yet, the difficulty of controlling exchange rates even within these wider bands continued. As of 1973, the bands were eliminated so that rates could respond to market forces without limits (although governments still did intervene periodically).16. International Diversification. Explain how the Asian crisis would have affected the returnsto a UK. firm investing in the Asian stock markets as a means of international diversification.[See the chapter appendix.]ANSWER: The returns to the UK firm would have been reduced substantially as a result of the Asian crisis because of both declines in the Asian stock markets and because of currency depreciation. For example, the Indonesian stock market declined by about 27% from June 1997 to June 1998. Furthermore, the Indonesian rupiah declined against the U.S. dollar by 84%.17.Eurocredit Loans.a.With regard to Eurocredit loans, who are the borrowers?b. Why would a bank desire to participate in syndicated Eurocredit loans?c. What is LIBOR and how is it used in the Eurocredit market?ANSWER:a. Large corporations and some government agencies commonly request Eurocredit loans.b. With a Eurocredit loan, no single bank would be totally exposed to the risk that theborrower may fail to repay the loan. The risk is spread among all lending banks within the syndicate.c. LIBOR (London interbank offer rate) is the rate of interest at which banks in Europe lendto each other. It is used as a base from which loan rates on other loans are determined in the Eurocredit market.18. Foreign Exchange. You just came back from Canada, where the Canadian dollar was worth£0.43. You still have C$200 from your trip and could exchange them for pounds at the airport, but the airport foreign exchange desk will only buy them for £0.40. Next week, you will be going to Mexico and will need pesos. The airport foreign exchange desk will sell you pesos for £0.055 per peso. You met a tourist at the airport who is from Mexico and is on his way to Canada. He is willing to buy your C$200 for 1500 New Pesos. Should you accept the offer or cash the Canadian dollars in at the airport? Explain.ANSWER: Exchange with the tourist. If you exchange the C$ for pesos at the foreign exchange desk, the C$200 is multiplied by £0.40 and then divided by £0.055 ie a ratio of £0.40/0.055 = 7.27 pesos to the C$. The total pesos would be 200 x 7.27 = 1454 pesos, a little less than is being offered by the tourist.19. Foreign Stock Markets. Explain why firms may issue stock in foreign markets. Why mightMNCs issue more stock in Europe since the conversion to a single currency in 1999?ANSWER: Firms may issue stock in foreign markets when they are concerned that their home market may be unable to absorb the entire issue. In addition, these firms may have foreign currency inflows in the foreign country that can be used to pay dividends on foreign-issued stock. They may also desire to enhance their global image. Since the euro can be used in several countries, firms may need a large amount of euros if they are expanding across Europe.20. Stock Market Integration. Bullet plc a UK firm, is planning to issue new shares on theLondon Stock Exchange this month. The only decision still to be made is the specific day on which the shares will be issued. Why do you think Bullet monitors results of the Tokyo stock market every morning?ANSWER: The UK stock market prices sometimes follow Japanese market prices. Thus, the firm would possibly be able to issue its stock at a higher price in the UK if it can use the Japanese market as an indicator of what will happen in the UK market. However, this indicator will not always be accurate.Advanced Questions21. Effects of September 11. Why do you think the terrorist attack on the U.S. was expected tocause a decline in U.S. interest rates? Given the expectations for a potential decline in U.S.interest rates and stock prices, how were capital flows between the U.S. and other countries likely affected?ANSWER: The attack was expected to cause a weaker economy, which would result in lower U.S. interest rates. Given the lower interest rates, and the weak stock prices, the amount of funds invested by foreign investors in U.S. securities would be reduced.22. International Financial Markets. Carrefour the French Supermarket chain has established retail outlets worldwide. These outlets are massive and contain products purchased locally as well as imports. As Carrefour generates earnings beyond what it needs abroad, it may remit those earnings back to France. Carrefour is likely to build additional outlets especially in China.a. Explain how the Carrefour outlets in China would use the spot market in foreign exchange.ANSWER:The Carrefour stores in China need other currencies to buy products from other countries, and must convert the Chinese currency (yuan) into the other currencies in the spot market to purchase these products. They also could use the spot market to convert excess earnings denominated in yuan into euros, which would be remitted to the French parent.b. Explain how Carrefour might utilize the international money markets when it isestablishing other Carrefour stores in Asia.ANSWER: Carrefour may need to maintain some deposits in the Eurocurrency market that can be used (when needed) to support the growth of Carrefour stores in various foreign markets. When some Carrefour stores in foreign markets need funds, they borrow from banks in the Eurocurrency market. Thus, the Eurocurrency market serves as a deposit or lending source for Carrefour and other MNCs on a short-term basis. (Eurocurrency refers to international currencies, most likely the dollar, not just the euro!)c. Explain how Carrefour could use the international bond market to finance theestablishment of new outlets in foreign markets.ANSWER: Carrefour could issue bonds in the Eurobond market to generate funds needed to establish new outlets. The bonds may be denominated in the currency that is needed; then, once the stores are established, some of the cash flows generated by those stores could be used to pay interest on the bonds.23.Interest Rates. Why do interest rates vary among countries? Why are interest rates normallysimilar for those European countries that use the euro as their currency? Offer a reason why the government interest rate of one country could be slightly higher than that of the government interest rate of another country, even though the euro is the currency used in both countries.ANSWER: Interest rates in each country are based on the supply of funds and demand for funds for a given currency. However, the supply and demand conditions for the euro are dictated by all participating countries in aggregate, and do not vary among participating countries. Yet, the government interest rate in one country that uses the euro could be slightly higher than others that use the euro if it is subject to default risk. The higher interest rate would reflect a risk premium.Blades plc Case Study。

Chapter 1二、短语翻译。

英翻汉Sluggish economy 萧条的经济Full employment 充分就业Trade deficit 贸易赤字in-depth analysis 深入的分析Industrialized countries 工业化free-trade agreement 自由贸易协定international specialization国际专业化product differentiation 产品差别trade surplus 贸易盈余determinative factor 决定性因素三、汉翻英经济双赢economic win-win 关税壁垒tariff barrier收入不平等wage inequality 劳动生产率labor productivity解雇工人lay off works 生产要素factor of production双边协议bilateral deal 回归分析regression analysis市场准入market access 世界经济复world economic recovery四. Translation1. The monitoring system will finally substitute the US Government’s cap on cigar imports from Cuba.2. The quarrel between Mexico and the US will be no avail and it may disrupt the lifting of the agricultural tariffs under the North American Free Trade Agreement.3. An economic cooperation business forum, which will discusshow to minimize the negative impact of global economic imbalance adjustment on China, will take place shortly before the ministerial conference.4. Few Americans attribute this to such obvious causes as a devalued dollar or business cycle.5. Recent research has shed light on the fact that there are heavy financial and political costs associated with the measures necessary to reduce the emission of greenhouse gases.6. There are rumors that the government struck a private deal with the corporation’s chairman last month.7. The opposition is exerting pressure on the US government to change the policy towards textile imports.8. Since the establishment of the bilateral free-trade agreement, the emerging economy has always been at the forefront of science and technology.9. In general, floating exchange rates are supposed to insulate countries from persistent differences in inflation with their trading partners.10. According to conservative estimates, by 2010, China’s import and export volume with North America and the EU would surpass $400 billion respectively, with ten ASEAN countries exceeding $200 billion.五、完形填空1.manufacturingpetitive3.deficit4.budget5.expanding6.recovery7.revival8.emerging9.innovation 10.propertyChapter2二、consumer-goods 消费品discount retailers折扣零售商brand equity 品牌资产价值advertising budget 广告预算real-time sales data 实时销售数据sales promotion促销profit margin 盈利scanner data扫描数据三、汉翻英价格溢价price premium 基线销售base-line sales减价price reductions 广告支出advertising spending营销组合marketing mix 销量溢价quantity premium产品数量（种类）product-line variety 美元分配allocation of dollars四. 翻译1. The government has allocated $ 0.1billion to the development and utilization of renewable energy in the rural areas.2. We should not develop the Western region at the expense of environment. Therefore the government has been following a sustainable development road attaching equal importance toeconomic development and environment protection.3. As a big responsible nation, China will strictly be abide by the WTO rules and honor its commitments.4. The rapid growth in China’s grain production can be ascribed to the fact that the Chinese government has implemented a series of reform policy and measures in the rural areas, such as raising the prices of grain purchased by the state.5. In the globalization era, not all countries play on the level playground. Some developing countries have to adhere to some marketing principles, or even accede to the requests of some governments.6. Over the past year, the global investment demand was on the wane; the major world currencies suffered swift turbulence and some emerging markets underwent severe financial crisis.7. Networks fundamentally alter the nature of competition and level the playing field, especially for smaller business regardless of the barriers like time and distance.8. Through micro credit projects, with the credit available on demand, farmers are able to pay back both the principle and interest in time.9. China’s vigorous economic development is indicative of the fact that China has become one of the countries that enjoy the highesteconomic growth speed in the world.10. With the reform of the wholly state-owned commercial banks, when some qualified commercial banks seek listing in the stock market, others certainly will follow suit.五、完形填空1.blame2.damaged3.short-term4.building5.profiability6.arm7.boosts8.orientation9.moreover 10.loweringChapter3二. Privileged minority 享有特权的少数人Gas station加油站Marketing research 市场调查Professional competence 专业技能A sales point 卖点Product design 产品设计Potential consumer潜在顾客Business disaster 商业灾难三、汉翻英日常生活daily life 广告活动advertising campaigns物理特征physical characteristic 视觉想象visual imagination国媒体national media 销售增长sales increase销售渠道distribution system产品到导向型的广告product-orientated advertising四. 翻译1. Experts have attributed the main cause of the company’s poor performance to its poor HR functions, especially the appointmentof the senior management.2. British Airways intends to create a more flexible and modern corporate culture through the relocation3. Rumors about redundancy make the company at its worst in terms of morale ever since its foundation.4. After financial scandals, many companies can only resort to charity activities to improve their corporate image.5. Politicians should not engage in business affairs that might affect their political judgment.6. As a sleeping partner of the enterprise, he is entitled to share the profits, but is deprived of participating in its management.7. After watching this interview, she realizes how difficult it is to be a venture capitalist. For one thing, you need to have the money; for another, you need to have the insight to pick the right(promising) start-ups.8. T o enter a specific market, in addition to acquiring sufficient knowledge about our target customers, we also need to know about the local policies and abide by them.9. With the efforts of these university students, it was brought to light that this world-famous multinational had established some sweat factories in China.10. In a time when customers change constantly and rapidly intheir needs, only companies who are quick to respond can survive and succeed in the end.五、完形填空1.sincere2.privileged3.led4.constitutes5.intellectual6.resort7.instead8.reduce9.clients 10.divertChapter4三. Phrase Translation1. 人口流动2. 供应商网络3.标准零配件4. 特殊制造技术3.互补经济体 6.反日情绪7. 外方合作人, 外国附属公司8.上市企业并购mergers and acquisition海外扩overseas expansion全球化战略globalization strategy保护主义措施protectionist measures市场准入access to market知识产权intellectual property right贸易伙伴trading partners资本投入capital investment四. 翻译1. Vendors now offer systems that work only with their hardware, but they are trying to make their equipment integrate with other’s hardware.2. Agricultural exports, by contrast, respond immediately, growing at an annual rate of 17.7 percent in 1980 and 1981.3. This book takes a strategic view of business and develops the ability to take a multidisciplinary approach to managing a business and resolving problems and issues.4. Thanks to the recession and 9/11, Mayor Michael Bloomberg must contend with a whopping budget deficit projected to 60 billion.5. Dispose of batteries properly. Do not throw them into fire or expose to high temperature.6. In the future, in addition to syndicating our groups’ efforts, we will ally with foreign companies to leverage advantages and enhance global competitiveness.7. We are certain that in due course of time, the economic reforms will have brought about results and benefits that will go beyond China’s boundaries.8. One of the major banks has lowered its interest rate and the other bank is expected to follow suit.9. During these quarterly meetings, it’s the boss’s responsibility to respond to each manager’s plan.10. We will put in place a new order of the socialist market economy through completing the market system and rectifying and regulating the market behavior.五、完形填空1. ambivalent,2.integration3. hindered4. from5. by.6. shortage,7. options8. acquisitions9. strategy 10. allianceChapte r 5三、汉翻英上市公司对…随时留意, 小心提防会计师事务所国外子公司经济规划的持观望态度(财务)调帐报告业绩评定指标/方法Generally accepted accounting principles revenue recognitionIncome statement earnings per share Managing director credit-rating agenciesFinance chiefs/executives institutionalinvestors四. 翻译1. Escal ating costs have almost wiped out the company’s profits from last year.2. This area is studded with bars all vying for customer attention. But it’s not easy to pin down what exactly it is that pleases customers the most.3. The project team decided to adhere to its original plan despite the appalling weather.4. At the press conference, the PR manager reiterated that the company’s operation has returned to normal. However, many private shareholders remain skeptical about such claims.5. The new labor law, which took effect last year, is likely to raise the labor cost of a considered number of enterprises6. The less senior employees are reluctant to express their views or make any suggestions because they don’t think their ideas will really be put into practice.7. Local relief organizations have also embarked on fund-raising campaigns so as to provide more financial support for the earthquake victims.8. Up to 30 companies submitted their request for price rises, but most of them didn’t stand a chance of getting approval from theregulatory agency.9. The decision-makers seem to have already given up on the reform program though its initiators are still trying hard to elicit support from other stakeholders.10. The new model, which has just been released onto the market recently, is being touted as the most energy-efficient and environmentally-friendly product of its kind.五、完形填空1. toll2.leveraged3. grips4. shaping5.counterpart6. joint7.potential8. with9.light 10. transparent 11. responses 12. onChapter 8三、汉翻英公司未来愿景消减成本利用资源投资组合untapped niches 尚未被竞争者发现的市场机会convenience stores 便利店market segments 市场细分premium brand 高端品牌实施战略execute strategy竞争优势competitive advantage实证研究empirical studies核心品牌core brand分销系统distribution system控股公司 a holding company文化冲突culture clashes股东财富shareholders wealth四. 翻译1. The management believes that its existing manufacturing and marketing expertise can be leveraged with the new business.2. Jack Welch, General Electric chairman, was universally acclaimed as one of the most successful manager in the 20th century.3. The Japanese company is unanimous in its support of divestiture since the acquired business unit is destroying the corporate value.4. This study reveals several fault lines that companies frequently encounter as they execute their corporate strategy.5. Problems arose at the very outset when Anheuser Busch acquired Eagle Snacks.6. AT&T put up with losses in NCR almost from the start, butcontinued to subsidize it.7. Mattel expected to derive above-average profitability from the acquisition of The Learning Company.8. We must bear in mind that a corporate strategy must be constantly evaluated and divestiture decisions made before it is too late.9. AT&T realized that telecom equipment is not identical to computer technologies.10. We can’t view the fai lure of the acquisition strategy in isolation. It’s the result of a combination of several factors, rather than unidimensional.五、完形填空1.acquisitions .2.executing3.divestiture4.at5. on6.plunged7.that8.synergies9.core 10.premium。

CHAPTER 21 INTERNATIONAL TAX ENVIRONMENTSUGGESTED ANSWERS AND SOLUTIONS TO END-OF-CHAPTERQUESTIONS AND PROBLEMSQUESTIONS1. Discuss the twin objectives of taxation. Be sure to define the key words.Answer: There are two basic objectives of taxation that are necessary to discuss to help frame our thinking about the international tax environment: tax neutrality and tax equity.Tax neutrality has its foundations in the principles of economic efficiency and equity. Tax neutrality is determined by three criteria. Capital-export neutrality is the criterion that an ideal tax should be effective in raising revenue for the government and not have any negative effects on the economic decision making process of the taxpayer. That is, a good tax is one that is efficient in raising tax revenue for the government and does not prevent economic resources from being allocated to their most appropriate use no matter where in the world the highest rate of return can be earned. A second neutrality criterion is national neutrality. That is, regardless of where in the world taxable income is earned it is taxed in the same manner by the taxpayer’s national tax authority. In theory, national tax neutrality is a commendable objective, as it is based on the principle of equality. The third neutrality criterion is capital-import neutrality. This criterion implies that the tax burden placed on the foreign subsidiary of a MNC by the host country should be the same regardless in which country the MNC is incorporated and the same as that placed on domestic firms.Tax equity is the principle that all similarly situated taxpayers should participate in the cost of operating the government according to the same rules. This means that regardless in which country an affiliate of a MNC earns taxable income, the same tax rate and tax due date apply.2. Compare and contrast the three basic types of taxation that governments levy within their tax jurisdiction.Answer: There are three basic types of taxation that national governments throughout the world use in generating tax revenue: income tax, withholding tax, and value-added tax. Many countries in the world obtain a significant portion of their tax revenue from imposing an income tax on personal and corporate income. An income tax is a direct tax, that is, one that is paid directly by the taxpayer on whom it is levied. The tax is levied on active income, that is, income that results from production by the firm orindividual or from services that have been provided. A withholding tax is a tax levied on passive income earned by an individual or corporation of one country within the tax jurisdiction of another country. Passive income includes dividends and interest income, and income from royalties, patents or copyrights paid to the taxpayer. A withholding tax is an indirect tax, that is, a tax borne by a taxpayer that did not directly generate the income that serves as the source of the passive income. The tax is withheld from payments the corporation makes to the taxpayer and turned over to the local tax authority. A value-added tax (VAT) is an indirect national tax charged on the sales price of a service or consumption good as it moves through the various stages of production and/or service. As such, a VAT is a sales tax borne by the final consumer.3. Show how double taxation on a taxpayer may result if all countries were to tax the worldwide income of their residents and the income earned within their territorial boundaries.Answer: There are two fundamental types of tax jurisdiction: the worldwide and the territorial. The worldwide method of declaring a national tax jurisdiction is to tax national residents of the country on their worldwide income no matter in which country it is earned. The territorial method of declaring a tax jurisdiction is to tax all income earned within the country by any taxpayer, domestic or foreign. Hence, regardless of the nationality of a taxpayer, if the income is earned within the territorial boundary of a country it is taxed by that country.If a MNC was a resident of a country that taxed worldwide income, the foreign-source income of its foreign affiliates would be taxed in the parent country. If the host country also taxes the income of the affiliate earned within its territorial borders, the foreign affiliate would pay taxes on the same income both in the host country and in the parent country. To avoid this “evil,” some mechanism needs to be established to prevent double taxation.4. What methods do taxing authorities use to eliminate or mitigate the evil of double taxation?Answer: The typical approach to avoiding double taxation is for a nation not to tax foreign-source income of its national residents. An alternative method, and the one the U.S. follows, is to grant to the parent firm foreign tax credits against U.S. taxes for taxes paid to foreign tax authorities on foreign-source income.5. There is a difference in the tax liability levied on foreign-source income depending upon whether a foreign branch or subsidiary form of organizational structure is selected for a foreign affiliate. Please elaborate on this statement.Answer: A foreign branch is not an independently incorporated firm separate from the parent, it is an extension of the parent. Consequently, active or passive foreign-source income earned a the branch is consolidated with the domestic-source income of the parent for determining the U.S. tax liability, regardless of whether or not the foreign-source income has been repatriated to the parent. A foreign subsidiary is an affiliate organization of the MNC that is independently incorporated in the foreign country, and one in which the U.S. MNC owns at least 10 percent of the voting equity stock. A foreign subsidiary in which the U.S. MNC owns more than 10 but less than 50 percent of the voting equity is a minority foreign subsidiary or a uncontrolled foreign corporation. Active and passive foreign-source income derived from a minority foreign subsidiary is taxed in the U.S. only when remitted to the U.S. parent firm via a dividend. A foreign subsidiary in which the U.S. MNC owns more than 50 percent of the voting equity is a controlled foreign corporation. Active foreign-source income from a controlled foreign corporation is taxed in the U.S. only as remitted to the U.S. parent, but passive income is taxed in the U.S. as earned, even if it has not been repatriated to the parent.PROBLEMS1. There are three production stages required before a pair of skis produced by Fjord Fabrication can be sold at retail for NOK2,300. Fill in the following table to show the value added at each stage in the production process and the incremental and total VAT. The Norwegian VAT rate is 24 percent._______________________________________________________________________Production Selling Value IncrementalStage Price Added VAT_______________________________________________________________________1 NOK 4502 NOK1,9003 NOK2,300Total VAT_______________________________________________________________________Solution:Production Selling Value IncrementalStage Price Added VAT_______________________________________________________________________1 NOK 450 NOK 450 NOK1082 NOK1,900 NOK1,450 NOK3483 NOK2,300 NOK 400 NOK 96Total VAT NOK552_______________________________________________________________________2.The Docket Company of Asheville, NC USA is considering establishing an affiliate operation in the city of Wellington, on the south island of New Zealand. It is undecided whether to establish the affiliate as a branch operation or a wholly-owned subsidiary. New Zealand taxes income of both resident corporations and branch operations at a flat rate of 33 percent. It also withholds taxes at a rate of 15 percent on dividends paid by resident corporations to recipients in the United States. The United States has an income tax rate of 35 percent on income earned worldwide, but gives a tax credit for taxes paid to another country. Based on this information, is a branch or subsidiary the recommended form for the affiliate?Answer: If Docket establishes a branch operation in New Zealand, it will pay a total of 35 percent on its New Zealand source income. It will pay 33 percent in New Zealand and an additional 2 percent in the United Sates after a receiving a tax credit for the New Zealand taxes. If Docket sets up its New Zealand affiliate as a wholly-owned subsidiary, the subsidiary will pay taxes at 33 percent on New Zealand taxable income and it must also withhold 15 percent on dividends paid to the parent. Total taxes credits will be [.33 + .15 – (.33 x .15)] = .4305 or 43.05 percent in the United States. Thus, taxes will be 43.05 percent if excess tax credits of 8.05 percent cannot be used and 35 percent if they can. Consequently a branch operation is the advisable form for the affiliate operations.MINI CASE: SIGMA CORP.’S LOCATION DECISIONSigma Corporation of Boston is contemplating establishing an affiliate operation in the Mediterranean. Two countries under consideration are Spain and Cyprus. Sigma intends to repatriate all after-tax foreign-source income to the United States. At this point, Sigma is not certain whether it would be best to establish the affiliate operation as a branch operation or a wholly-owned subsidiary of the parent firm.In Cyprus, the marginal corporate tax rate is 15 percent. Foreign branch profits are taxed at the same rate. In Spain, corporate income is taxed at 35 percent, the same rate as in the United States. Additionally, foreign branch income in Spain is also taxed at 35 percent. The withholding tax treaty rates with the U.S. on dividend income paid from Cyprus is zero percent and 10 percent paid from Spain.The financial manager of Sigma has asked you to help him determine where to locate the new affiliate and which organizational structure to establish. The location decision will be largely based on whether the total tax liability would be smallest for a foreign branch or a wholly owned subsidiary in Cyprus or Spain.Suggested Solution for Sigma Corp.’s Location DecisionForeign-source income of a foreign branch of a U.S. MNC in Cyprus would be taxed at a rate of 15 per cent in Cyprus. The after-tax foreign-source income would be grossed-up for U.S. tax purposes, and income taxes at the rate of 35 percent would be levied in the U.S. If the Cyprus affiliate was established as a wholly-owned subsidiary, the total tax liability in Cyprus would also be 15 percent because there is no withholding tax on dividends paid to the United States. Additional taxes in the U.S. would be due, bringing the total tax liability up to the U.S. income tax rate of 35 percent.Foreign-source income of a foreign branch of a U.S. MNC in Spain would be taxed at a rate of 35 per cent in Spain. Since the Spanish income tax rate and the U.S. income tax rate are both 35 percent, no additional income taxes would be due in the U.S. on grossed-up foreign-source taxable income. If the Spanish affiliate was a wholly-owned subsidiary, the total (income and withholding) tax liability in Spain would be: [.35 + .10 - (.35 x .10)] = .415, or 41.5 percent. Since this is greater than the U.S. income tax rate of 35 percent, no additional taxes would be due in the U.S. If there are excess foreign tax credits (equal to 6.5 percent of foreign-source taxable income) that can all be used by carrying them back two years or forward five years, then the total tax liability will equal the U.S. income tax rate of 35 percent. If excess foreign tax credits cannot all be used, as is more typically the case, the total tax liability can be as high as 41.5 percent.Consequently, all else being equal, Sigma Corporation should be indifferent between establishing either a wholly-owned subsidiary or branch in Cyprus. It would want to establish a branch operation in Spain.。

Chapter 1Introduction⏹Chapter OrganizationWhat Is International Economics About?The Gains from TradeThe Pattern of TradeHow Much Trade?Balance of PaymentsExchange Rate DeterminationInternational Policy CoordinationThe International Capital MarketInternational Economics: Trade and Money⏹Chapter OverviewThe intent of this chapter is to provide both an overview of the subject matter of international economics and to provide a guide to the organization of the text. It is relatively easy for an instructor to motivate the study of international trade and finance. The front pages of newspapers, the covers of magazines, andthe lead reports on television news broadcasts herald the interdependence of the U.S. economy with the rest of the world. This interdependence may also be recognized by students through their purchases of imports of all sorts of goods, their personal observations of the effects of dislocations due to international competition, and their experience through travel abroad.The study of the theory of international economics generates an understanding of many key events that shape our domestic and international environment. In recent history, these events include the causes and consequences of the large current account deficits of the United States; the dramatic appreciation of the dollar during the first half of the 1980s followed by its rapid depreciation in the second half of the 1980s; the Latin American debt crisis of the 1980s and the Mexican crisis in late 1994; and the increased pressures for industry protection against foreign competition broadly voiced in the late 1980s and more vocally espoused in the first half of the 1990s. The financial crisis that began in East Asia in 1997 and spread to many countries around the globe and the Economic and Monetary Union in Europe highlighted the way in which various national economies are linked and how important it is for us to understand these connections. These global linkages have been highlighted yet again with the rapid spread of the financial crisis in the United States to the rest of the world. At the same time, protests at global economic meetings and a rising wave of protectionist rhetoric have highlighted opposition to globalization. The text material will enable students to understand the economic context in which such events occur.© 2012 Pearson Education, Inc. Publishing as Addison-Wesley2 Krugman/Obstfeld/Melitz • International Economics: Theory & Policy, Ninth Edition©2012 Pearson Education, Inc. Publishing as Addison Wesley Chapter 1 of the text presents data demonstrating the growth in trade and the increasing importance of international economics. This chapter also highlights and briefly discusses seven themes which arisethroughout the book. These themes are (1) the gains from trade; (2) the pattern of trade; (3) protectionism; (4) the balance of payments; (5) exchange rate determination; (6) international policy coordination; and (7) the international capital market. Students will recognize that many of the central policy debates occurring today come under the rubric of one of these themes. Indeed, it is often a fruitful heuristic to use current events to illustrate the force of the key themes and arguments which are presented throughout the text.。

CHAPTER 21: OPTION VALUATIONPROBLEM SETS1. The value of a put option also increases with the volatility of the stock. We see this from theput-call parity theorem as follows:P = C – S0 + PV(X) + PV(Dividends)Given a value for S and a risk-free interest rate, then, if C increases because of an increase in volatility, P must also increase in order to maintain the equality of the parity relationship.2. A $1 increase in a call option’s exercise price would lead to a decrease in the option’s value ofless than $1. The change in the call price would equal $1 only if: (i) there were a 100%probability that the call would be exercised, and (ii) the interest rate were zero.3. Holding firm-specific risk constant, higher beta implies higher total stock volatility. Therefore,the value of the put option increases as beta increases.4. Holding beta constant, the stock with a lot of firm-specific risk has higher total volatility. Theoption on the stock with higher firm-specific risk is worth more.5. A call option with a high exercise price has a lower hedge ratio. This call option is less in themoney. Both d1 and N(d1) are lower when X is higher.6. a. Put A must be written on the stock with the lower price. Otherwise, given the lowervolatility of Stock A, Put A would sell for less than Put B.b. Put B must be written on the stock with the lower price. This would explain its higherprice.c. Call B must have the lower time to expiration. Despite the higher price of Stock B, CallB is cheaper than Call A. This can be explained by a lower time to expiration.d. Call B must be written on the stock with higher volatility. This would explain its higherprice.e. Call A must be written on the stock with higher volatility. This would explain its higherprice.7.Exercise Price Hedge Ratio 120 0/30 = 0.000 110 10/30 = 0.333 100 20/30 = 0.667 90 30/30 = 1.000As the option becomes more in the money, the hedge ratio increases to a maximum of 1.0.8.S d 1 N(d 1) 45 -0.0268 0.4893 50 0.5000 0.6915 550.97660.83569.a. uS 0 = 130 ⇒ P u = 0 dS 0 = 80 ⇒ P d = 30 The hedge ratio is:5380130300dS uS P P H 00d u -=--=--=b.Riskless Portfolio S = 80 S = 130 Buy 3 shares 240 390 Buy 5 puts 150 0 Total390390Present value = $390/1.10 = $354.545c.The portfolio cost is: 3S + 5P = 300 + 5P The value of the portfolio is: $354.545 Therefore: P = $54.545/5 = $10.9110. The hedge ratio for the call is:5280130020dS uS C C H 00d u =--=--=Riskless Portfolio S = 80 S = 130 Buy 2 shares 160 260 Write 5 calls 0 -100 Total160160Present value = $160/1.10 = $145.455 The portfolio cost is: 2S – 5C = $200 – 5C The value of the portfolio is: $145.455 Therefore: C = $54.545/5 = $10.91 Does P = C + PV(X) – S?10.91 = 10.91 + 110/1.10 – 100 = 10.9111. d 1 = 0.3182 ⇒ N(d 1) = 0.6248d 2 = –0.0354 ⇒ N(d 2) = 0.4859 Xe - r T = 47.56 C = $8.1312. P = $5.69This value is derived from our Black-Scholes spreadsheet, but note that we could have derived the value from put-call parity:P = C + PV(X) – S 0 = $8.13 + $47.56 - $50 = $5.6913. a. C falls to $5.5541b. C falls to $4.7911c. C falls to $6.0778d. C rises to $11.5066e. C rises to $8.718714. According to the Black-Scholes model, the call option should be priced at:[$55 ⨯ N(d1)] – [50 ⨯ N(d 2)] = ($55 ⨯ 0.6) – ($50 ⨯ 0.5) = $8Since the option actually sells for more than $8, implied volatility is greater than 0.30.15. A straddle is a call and a put. The Black-Scholes value would be:C + P = S0 N(d1) - Xe–rT N(d 2) + Xe–rT [1 - N(d 2)] - S0 [1 - N(d1)]= S0 [2N(d1) - 1] + Xe–rT [1 - 2N(d 2)]On the Excel spreadsheet (Spreadsheet 21.1), the valuation formula would be:B5*(2*E4 - 1) + B6*EXP(-B4*B3)*(1 - 2*E5)16. The rate of return of a call option on a long-term Treasury bond should be more sensitive tochanges in interest rates than is the rate of return of the underlying bond. The option elasticityexceeds 1.0. In other words, the option is effectively a levered investment and the rate of return on the option is more sensitive to interest rate swings.17. Implied volatility has increased. If not, the call price would have fallen as a result of thedecrease in stock price.18. Implied volatility has increased. If not, the put price would have fallen as a result of thedecreased time to expiration.19. The hedge ratio approaches one. As S increases, the probability of exercise approaches 1.0.N(d1) approaches 1.0.20. The hedge ratio approaches –1.0. As S decreases, the probability of exercise approaches 1.[N(d1) –1] approaches –1 as N(d1) approaches 0.21. A straddle is a call and a put. The hedge ratio of the straddle is the sum of the hedge ratios ofthe individual options: 0.4 + (–0.6) = –0.222. a. The spreadsheet appears as follows:The standard deviation is: 0.3213b. The spreadsheet below shows the standard deviation has increased to: 0.3568Implied volatility has increased because the value of an option increases with greatervolatility.c. Implied volatility increases to 0.4087 when expiration decreases to four months. Theshorter expiration decreases the value of the option; therefore, in order for the optionprice to remain unchanged at $8, implied volatility must increase.d. Implied volatility decreases to 0.2406 when exercise price decreases to $100. Thedecrease in exercise price increases the value of the call, so that, in order to the optionprice to remain at $8, implied volatility decreases.e. The decrease in stock price decreases the value of the call. In order for the option priceto remain at $8, implied volatility increases.23. a. The delta of the collar is calculated as follows:Position DeltaBuy stock 1.0Buy put, X = $45 N(d1) – 1 = –0.40Write call, X = $55 –N(d1) = –0.35Total 0.25If the stock price increases by $1, then the value of the collar increases by $0.25. Thestock will be worth $1 more, the loss on the purchased put will be $0.40, and the callwritten represents a liability that increases by $0.35.b.If S becomes very large, then the delta of the collar approaches zero. Both N(d1) termsapproach 1. Intuitively, for very large stock prices, the value of the portfolio is simply the(present value of the) exercise price of the call, and is unaffected by small changes in thestock price.As S approaches zero, the delta also approaches zero: both N(d1) terms approach 0.For very small stock prices, the value of the portfolio is simply the (present value of the)exercise price of the put, and is unaffected by small changes in the stock price.24. Put X DeltaA 10 -0.1B 20 -0.5C 30 -0.925. a. Choice A: Calls have higher elasticity than shares. For equal dollar investments, a call’scapital gain potential is greater than that of the underlying stock.b. Choice B: Calls have hedge ratios less than 1.0, so the shares have higher profit potential.For an equal number of shares controlled, the dollar exposure of the shares is greaterthan that of the calls, and the profit potential is therefore greater.26. a. uS 0 = 110 ⇒ P u = 0 dS 0 = 90 ⇒ P d = 10 The hedge ratio is:2190110100dS uS P P H 00d u -=--=--=A portfolio comprised of one share and two puts provides a guaranteed payoff of $110, with present value: $110/1.05 = $104.76 Therefore:S + 2P = $104.76$100 + 2P = $104.76 ⇒ P = $2.38b. Cost of protective put portfolio = $100 + $2.38 = $102.38c.Our goal is a portfolio with the same exposure to the stock as the hypothetical protective put portfolio. Since the put’s hedge ratio is –0.5, the portfolio consists of (1 – 0.5) = 0.5 shares of stock, which costs $50, and the remaining funds ($52.38) invested in T-bills, earning 5% interest. Portfolio S = 90 S = 110 Buy 0.5 shares 45 55 Invest in T-bills 55 55 Total100110This payoff is identical to that of the protective put portfolio. Thus, the stock plus bills strategy replicates both the cost and payoff of the protective put.27. The put values in the second period are:P uu = 0P ud = P du = 110 − 104.50 = 5.50 P dd = 110 − 90.25 = 19.75To compute P u , first compute the hedge ratio:3150.10412150.50udSuuSP P H 0ud uu -=--=--=Form a riskless portfolio by buying one share of stock and buying three puts. The cost of the portfolio is: S + 3P u = $110 + 3P u The payoff for the riskless portfolio equals $121: Riskless Portfolio S = 104.50 S = 121 Buy 1 share 104.50 121.00 Buy 3 puts 16.50 0.00 Total121.00121.00Therefore, find the value of the put by solving:$110 + 3P u = $121/1.05 ⇒ P u = $1.746 To compute P d , compute the hedge ratio:0.125.9050.10475.1950.5ddSduSP P H 0dd du -=--=--=Form a riskless portfolio by buying one share and buying one put. The cost of the portfolio is: S + P d = $95 + P d The payoff for the riskless portfolio equals $110: Riskless Portfolio S = 90.25 S = 104.50 Buy 1 share 90.25 104.50 Buy 1 put 19.75 5.50 Total110.00110.00Therefore, find the value of the put by solving:$95 + P d = $110/1.05 ⇒ P d = $9.762 To compute P, compute the hedge ratio:5344.095110762.9746.1dS uS P P H 00d u -=--=--=Form a riskless portfolio by buying 0.5344 of a share and buying one put. The cost of the portfolio is: 0.5344S + P = $53.44 + PThe payoff for the riskless portfolio equals $60.53:Riskless Portfolio S = 95 S = 110Buy 0.5344 share 50.768 58.784Buy 1 put 9.762 1.746Total 60.530 60.530Therefore, find the value of the put by solving:$53.44 + P = $60.53/1.05 ⇒ P = $4.208Finally, we verify this result using put-call parity. Recall from Example 21.1 that:C = $4.434Put-call parity requires that:P = C + PV(X) – S$4.208 = $4.434 + ($110/1.052) - $100Except for minor rounding error, put-call parity is satisfied.28. If r = 0, then one should never exercise a put early. There is no “time value cost” to waiting toexercise, but there is a “volatility benefit” from waiting. To show this more rigorously, consider the following portfolio: lend $X and short one share of stock. The cost to establish the portfolio is (X – S 0). The payoff at time T (with zero interest earnings on the loan) is (X – S T). Incontrast, a put option has a payoff at time T of (X – S T) if that value is positive, and zerootherwise. The put’s payoff is at least as large as the portfolio’s, and therefore, the put must cost at least as much as the portfolio to purchase. Hence, P ≥ (X – S 0), and the put can be sold for more than the proceeds from immediate exercise. We conclude that it doesn’t pay to exercise early.29. a. Xe-rTb. Xc. 0d. 0e. It is optimal to exercise immediately a put on a stock whose price has fallen to zero. Thevalue of the American put equals the exercise price. Any delay in exercise lowers valueby the time value of money.30. Step 1: Calculate the option values at expiration. The two possible stock prices and thecorresponding call values are:uS 0 = 120 ⇒ C u = 20 dS 0 = 80 ⇒ C d = 0 Step 2: Calculate the hedge ratio.2180120020dS uS C C H 00d u =--=--=Therefore, form a riskless portfolio by buying one share of stock and writing two calls. The cost of the portfolio is: S – 2C = 100 – 2CStep 3: Show that the payoff for the riskless portfolio equals $80: Riskless Portfolio S = 80 S = 120 Buy 1 share 80 120 Write 2 calls 0 -40 Total8080Therefore, find the value of the call by solving:$100 – 2C = $80/1.10 ⇒ C = $13.636Notice that we did not use the probabilities of a stock price increase or decrease. These are not needed to value the call option.31.The two possible stock prices and the corresponding call values are:uS 0 = 130 ⇒ C u = 30 dS 0 = 70 ⇒ C d = 0 The hedge ratio is:2170130030dS uS C C H 00d u =--=--=Form a riskless portfolio by buying one share of stock and writing two calls. The cost of the portfolio is: S – 2C = 100 – 2CThe payoff for the riskless portfolio equals $70: Riskless Portfolio S = 70 S = 130 Buy 1 share 70 130 Write 2 calls 0 -60 Total7070Therefore, find the value of the call by solving:$100 – 2C = $70/1.10 ⇒ C = $18.182Here, the value of the call is greater than the value in the lower-volatility scenario.32. The two possible stock prices and the corresponding put values are:uS 0 = 120 ⇒ P u = 0dS 0 = 80 ⇒ P d = 20 The hedge ratio is:2180120200dS uS P P H 00d u -=--=--=Form a riskless portfolio by buying one share of stock and buying two puts. The cost of the portfolio is: S + 2P = 100 + 2PThe payoff for the riskless portfolio equals $120: Riskless Portfolio S = 80 S = 120 Buy 1 share 80 120 Buy 2 puts 40 0 Total120120Therefore, find the value of the put by solving:$100 + 2P = $120/1.10 ⇒ P = $4.545 According to put-call parity: P + S = C + PV(X) Our estimates of option value satisfy this relationship:$4.545 + $100 = $13.636 + $100/1.10 = $104.54533. If we assume that the only possible exercise date is just prior to the ex-dividend date, then therelevant parameters for the Black-Scholes formula are:S 0 = 60r = 0.5% per month X = 55 σ = 7%T = 2 monthsIn this case: C = $6.04If instead, one commits to foregoing early exercise, then we reduce the stock price by the present value of the dividends. Therefore, we use the following parameters:S 0 = 60 – 2e − (0.005 ⨯ 2) = 58.02 r = 0.5% per month X = 55 σ = 7%T = 3 months In this case, C = $5.05The pseudo-American option value is the higher of these two values: $6.0434. True. The call option has an elasticity greater than 1.0. Therefore, the call’s percentage rate ofreturn is greater than that of the underlying stock. Hence the GM call responds more thanproportionately when the GM stock price changes in response to broad market movements.Therefore, the beta of the GM call is greater than the beta of GM stock.35. True. The elasticity of a call option is higher the more out of the money is the option. (Eventhough the delta of the call is lower, the value of the call is also lower. The proportionalresponse of the call price to the stock price increases. You can confirm this with numerical examples.) Therefore, the rate of return of the call with the higher exercise price respondsmore sensitively to changes in the market index, and therefore it has the higher beta.36. As the stock price increases, conversion becomes increasingly more assured. The hedge ratioapproaches 1.0. The price of the convertible bond will move one-for-one with changes in the price of the underlying stock.37. Salomon believes that the market assessment of volatility is too high. Therefore, Salomonshould sell options because the analysis suggests the options are overpriced with respect to true volatility. The delta of the call is 0.6, while that of the put is 0.6 – 1 = –0.4. Therefore, Salomon should sell puts and calls in the ratio of 0.6 to 0.4. For example, if Salomon sells 2 calls and 3 puts, the position will be delta neutral:Delta = (2 ⨯ 0.6) + [3 ⨯ (–0.4)] = 038. If the stock market index increases 1%, the 1 million shares of stock on which the options arewritten would be expected to increase by:0.75% ⨯ $5 ⨯ 1 million = $37,500The options would increase by:delta ⨯ $37,500 = 0.8 ⨯ $37,500 = $30,000In order to hedge your market exposure, you must sell $3,000,000 of the market indexportfolio so that a 1% change in the index would result in a $30,000 change in the value of the portfolio.39. S = 100; current value of portfolioX = 100; floor promised to clients (0% return)σ = 0.25; volatilityr = 0.05; risk-free rateT = 4 years; horizon of programa. Using the Black-Scholes formula, we find that:d1 = 0.65, N(d1) = 0.7422, d 2 = 0.15, N(d 2) = 0.5596Put value = $10.27Therefore, total funds to be managed equals $110.27 million: $100 million portfolio valueplus the $10.27 million fee for the insurance program.The put delta is: N(d1) – 1 = 0.7422 – 1 = –0.2578Therefore, sell off 25.78% of the equity portfolio, placing the remaining funds in T-bills. Theamount of the portfolio in equity is therefore $74.22 million, while the amount in T-bills is:$110.27 million – $74.22 million = $36.05 millionb.At the new portfolio value, the put delta becomes: –0.2779This means that you must reduce the delta of the portfolio by:0.2779 – 0.2578 = 0.0201You should sell an additional 2.01% of the equity position and use the proceeds to buyT-bills. Since the stock price is now at only 97% of its original value, you need to sell: $97 million ⨯ 0.0201 = $1.950 million of stock40. Using the true volatility (32%) and time to expiration T = 0.25 years, the hedge ratio for Exxonis N(d1) = 0.5567. Because you believe the calls are under-priced (selling at an impliedvolatility that is too low), you will buy calls and short 0.5567 shares for each call you buy.41. The calls are cheap (implied σ = 0.30) and the puts are expensive (impliedσ = 0.34). Therefore, buy calls and sell puts. Using the “true” volatility ofσ = 0.32, the call delta is 0.5567 and the put delta is: 0.5567 – 1.0 = –0.4433Therefore, for each call purchased, buy: 0.5567/0.4433 = 1.256 puts42. a.To calculate the hedge ratio, suppose that the market index increases by 1%. Then the stock portfolio would be expected to increase by:1% ⨯ 1.5 = 1.5% or 0.015 ⨯ $1,250,000 = $18,750Given the option delta of 0.8, the option portfolio would increase by:$18,750 ⨯ 0.8 = $15,000Salomon’s liability from writing these options would increase by the same amount. The market index portfolio would increase in value by 1%. Therefore, SalomonBrothers should purchase $1,500,000 of the market index portfolio in order to hedge its position so that a 1% change in the index would result in a $15,000 change in the value of the portfolio.b.The delta of a put option is:0.8 – 1 = –0.2Therefore, for every 1% the market increases, the index will rise by 10 points and the value of the put option contract will change by:delta ⨯ 10 ⨯ contract multiplier = –0.2 ⨯ 10 ⨯ 100 = –$200 Therefore, Salomon should write: $12,000/$200 = 60 put contractsCFA PROBLEMS1. Statement a: The hedge ratio (determining the number of futures contracts to sell) ought to beadjusted by the beta of the equity portfolio, which is 1.20. The correct hedge ratio would be:400,22.1000,2β2,000β500100$million 100$=⨯=⨯=⨯⨯Statement b: The portfolio will be hedged, and should therefore earn the risk-free rate, not zero, as the consultant claims. Given a futures price of 100 and an equity price of 100, the rate of return over the 3-month period is: (100 - 99)/99 = 1.01% = approximately 4.1% annualized 2.a.The value of the call option is expected to decrease if the volatility of the underlying stock price decreases. The less volatile the underlying stock price, the less the chance of extreme price movements and the lower the probability that the option expires in the money. This makes the participation feature on the upside less valuable.The value of the call option is expected to increase if the time to expiration of the option increases. The longer the time to expiration, the greater the chance that the option will expire in the money resulting in an increase in the time premium component of the option’s value.b. i. When European options are out of the money, investors are essentially saying that theyare willing to pay a premium for the right, but not the obligation, to buy or sell theunderlying asset. The out-of-the-money option has no intrinsic value, but, since optionsrequire little capital (just the premium paid) to obtain a relatively large potential payoff,investors are willing to pay that premium even if the option may expire worthless. TheBlack-Scholes model does not reflect investors’ demand for any premium above thetime value of the option. Hence, if investors are willing to pay a premium for an out-of-the-money option above its time value, the Black-Scholes model does not value thatexcess premium.ii. With American options, investors have the right, but not the obligation, to exercise theoption prior to expiration, even if they exercise for non-economic reasons. This increasedflexibility associated with American options has some value but is not considered in theBlack-Scholes model because the model only values options to their expiration date(European options).3. a. American options should cost more (have a higher premium). American options give theinvestor greater flexibility than European options since the investor can choose whetherto exercise early. When the stock pays a dividend, the option to exercise a call early canbe valuable. But regardless of the dividend, a European option (put or call) never sellsfor more than an otherwise-identical American option.b. C = S0 + P - PV(X) = $43 + $4 - $45/1.055 = $4.346Note: we assume that Abaco does not pay any dividends.c. i) An increase in short-term interest rate ⇒ PV(exercise price) is lower, and call valueincreases.ii) An increase in stock price volatility ⇒ the call value increases.iii) A decrease in time to option expiration ⇒ the call value decreases.4. a. The two possible values of the index in the first period are:uS0 = 1.20 × 50 = 60dS0 = 0.80 × 50 = 40The possible values of the index in the second period are:uuS0 = (1.20)2 × 50 = 72udS0 = 1.20 × 0.80 × 50 = 48duS0 = 0.80 × 1.20 × 50 = 48ddS0 = (0.80)2 × 50 = 32C uu = 72 − 60 = 12 C ud = C du = C dd = 0 Since C ud = C du = 0, then C d = 0.To compute C u , first compute the hedge ratio:214872012udSuuSC C H 0ud uu =--=--=Form a riskless portfolio by buying one share of stock and writing two calls. The cost of the portfolio is: S – 2C u = $60 – 2C u The payoff for the riskless portfolio equals $48: Riskless Portfolio S = 48 S = 72 Buy 1 share 48 72 Write 2 calls 0 -24 Total4848Therefore, find the value of the call by solving:$60 – 2C u = $48/1.06 ⇒ C u = $7.358 To compute C, compute the hedge ratio:3679.040600358.7dS uS C C H 00d u =--=--=Form a riskless portfolio by buying 0.3679 of a share and writing one call. The cost of the portfolio is: 0.3679S – C = $18.395 – C The payoff for the riskless portfolio equals $14.716: Riskless Portfolio S = 40 S = 60 Buy 0.3679 share 14.716 22.074 Write 1 call 0.000 −7.358 Total14.71614.716Therefore, find the value of the call by solving:$18.395 – C = $14.716/1.06 ⇒ C = $4.512P uu = 0P ud = P du = 60 − 48 = 12 P dd = 60 − 32 = 28To compute P u , first compute the hedge ratio:214872120udSuuSP P H 0ud uu -=--=--=Form a riskless portfolio by buying one share of stock and buying two puts. The cost of the portfolio is: S + 2P u = $60 + 2P u The payoff for the riskless portfolio equals $72: Riskless Portfolio S = 48 S = 72 Buy 1 share 48 72 Buy 2 puts 24 0 Total7272Therefore, find the value of the put by solving:$60 + 2P u = $72/1.06 ⇒ P u = $3.962 To compute P d , compute the hedge ratio:0.132482812ddSduSP P H 0dd du -=--=--=Form a riskless portfolio by buying one share and buying one put. The cost of the portfolio is: S + P d = $40 + P d The payoff for the riskless portfolio equals $60: Riskless Portfolio S = 32 S = 48 Buy 1 share 32 48 Buy 1 put 28 12 Total6060Therefore, find the value of the put by solving:$40 + P d = $60/1.06 ⇒ P d = $16.604 To compute P, compute the hedge ratio:6321.04060604.16962.3dS uS P P H 00d u -=--=--=Form a riskless portfolio by buying 0.6321 of a share and buying one put.The cost of the portfolio is: 0.6321S + P = $31.605 + PThe payoff for the riskless portfolio equals $41.888:Riskless Portfolio S = 40 S = 60Buy 0.6321 share 25.284 37.926Buy 1 put 16.604 3.962Total 41.888 41.888Therefore, find the value of the put by solving:$31.605 + P = $41.888/1.06 ⇒ P = $7.912d. According to put-call-parity:C = S0 + P - PV(X) = $50 + $7.912 - $60/(1.062 ) = $4.512This is the value of the call calculated in part (b) above.5. a. (i) Index increases to 1402. The combined portfolio will suffer a loss. The written callsexpire in the money; the protective put purchased expires worthless. Let’s analyze theoutcome on a per-share basis. The payout for each call option is $52, for a total cashoutflow of $104. The stock is worth $1,402. The portfolio will thus be worth: $1,402 -$104 = $1,298The net cost of the portfolio when the option positions are established is:$1,336 + $16.10 (put) - [2 ⨯ $8.60] (calls written) = $1,334.90(ii) Index remains at 1336. Both options expire out of the money. The portfolio will thus beworth $1,336 (per share), compared to an initial cost 30 days earlier of $1,334.90. Theportfolio experiences a very small gain of $1.10.(iii) Index declines to 1270. The calls expire worthless. The portfolio will be worth $1,330,the exercise price of the protective put. This represents a very small loss of $4.90 comparedto the initial cost 30 days earlier of $1,334.90b. (i) Index increases to 1402. The delta of the call approaches 1.0 as the stock goes deep intothe money, while expiration of the call approaches and exercise becomes essentially certain.The put delta approaches zero.(ii) Index remains at 1336. Both options expire out of the money. Delta of eachapproaches zero as expiration approaches and it becomes certain that the options willnot be exercised.(iii) Index declines to 1270. The call is out of the money as expiration approaches. Deltaapproaches zero. Conversely, the delta of the put approaches -1.0 as exercise becomescertain.c. The call sells at an implied volatility (11.00%) that is less than recent historical volatility(12.00%); the put sells at an implied volatility (14.00%) that is greater than historicalvolatility. The call seems relatively cheap; the put seems expensive.。

Chapter 1IntroductionDiscussion Questions1.In the domestic case, accounting is an information service that provides financialinformation about a domestic entity to domestic users of that information. Internationalaccounting is distinctive in that the entity being reported on is either a multinationalcompany with operations and transactions that transcend national boundaries or involves an entiiy with reporting obligations to readers who are located outside the reportingentity’s country of domicile.2.Advantage: Some might argue that measurement, disclosure, and external auditing arethree distinct (although related) processes, involving different members of the company.For example, corporate attorneys often are involved in disclosure issues, but seldomintervene in measurement issues. The Board of Directors works with the external auditors but not necessarily with the comptroller s office. Thus, discussion of accountingrequirements and voluntary accounting choices in different jurisdictions is simplified by focusing on the three components of accounting. Disadvantage: measurement, disclosure and auditing are interdependent, and should not be viewed in isolation of one another. A company choosing to disclose as little as possible, for example, may use accountingmeasurement approaches that reduce the information content of financial statements, and select an external auditor who will be relatively lenient in enforcing accountingrequirements. One alternative classification might include accounting (measurement and disclosure), and auditing. A second classification might include financial reporting(annual and interim reporting, regulatory filings) and ad hoc disclosure (press releases,analyst meetings, etc). Any classification is arbitrary, and potentially useful depending on its purpose.3.Factors contributing to the internationalization of the subject of accounting include: thegrowth and spread of multinational operations around the world, the phenomenon ofglobal competition, the increasing number of cross-border mergers and acquisitions thatoccur almost daily, continued advances in information technology, and theinternationalization of the world’s capital markets.4.International trade involves importing and exporting activities. The major accountingissue associated with foreign trade involves accounting for foreign currency transactions.Foreign direct investment, on the other hand, involves conducting operations abroad.This activity exposes accountants to a new set of issues that run the gamut from having to consolidate foreign currency accounts based on diverse measurement rules to issues ofevaluating the performance of foreign subsidiary managers.5.Students will overwhelmingly argue in favor of harmonization. This is probably a goodstarting point for the course. After they are introduced to the chapters leading up toChapter 8, some may no longer feel that harmonization is necessarily the answer to all of their international accounting problems.6.Recent developments such as the growth and spread of multinational operations,Internationalization of the world’s capital markets, increased cross border mergers andacquisitions, the phenomenon of global competition and financial innovation haveincreased reader dependence on foreign financial statements. An understanding ofaccounting differences and their effect on reported measures of profitability, efficiency, solvency and liquidity are critical if proper decisions are to be made. Internationalaccounting issues have become more complex in recent years for several reasons.Financial transactions are becoming more complex, affecting both national andinternational accounting. For example, the use of complex financial instruments anddeveloping accounting standards for these exotic instruments has been problematic.Global financial markets also are becoming more volatile, leading to large changes in asset and balance sheet amounts (such as related to investments) and major sources of income and expense. The related accounting issues are difficult. The growinginternationalization of business also promotes complexity. Foreign currency transactions and translation have been troublesome accounting issues for years, and are becoming more important as cross-border business and finance increase. Also, differences innational accounting principles potentially are more troublesome as business becomes more international. However, as convergence efforts worldwide accelerate, and more and more companies and countries adopt International Financial Reporting Standards (IFRS), complexity arising from differences in national accounting principles will decrease.7.Examples of external reporting issues include:a. Does translation from one set of measurement rules to another change theinformation content of the original message?b. Should accounts of foreign operations be translated to parent currency whenconsolidated statements are prepared?c. Which exchange rates should be employed when translating from one currency toanother?Examples of internal reporting issues include:a. Which exchange rates should be used for budgeting purposes?b. Should foreign managers be evaluated in terms of parent currency or the localcurrency of the country in which the manager operates?c. Which prices should one use when transferring goods or services betweenmembers of the multinational enterprise- cost, market, cost-plus or some othermetric?8.Global capital market activities and transactions reach beyond single political or legaljurisdictions. For example, global capital market transactions include the following: (1) an American tourist buying Australian dollars for travel purposes in the South Pacific; (2)a Japanese insurance company buying German government bonds as an investment; and(3) a Nigerian agricultural development project receiving cash subsidies from theEuropean Union (EU).The international equities market is one global capital market. A second such market covers foreign exchange transactions, that is, when one national currency is exchanged into, traded forward, hedged, swapped, or otherwise converted to another nationalcurrency. This market is estimated at hundreds of billions of U.S. dollars per day. The total world foreign exchange market is the largest market on earth. The international bond market is still another global capital market. The bonds constituting this market areunderwritten by international syndicates of banks and are marketed and traded all over the world. Global capital markets are a vital part of the world economy.9.English should be designated as the formal international accounting language. Technicalaccounting terms ( terms of art) do not travel well internationally. Since technicalaccounting terms often have attributed meanings (for example, generally acceptedaccounting principles are neither generally accepted nor principles ), it is difficult orimpossible to translate these terms into other languages and retain their original meanings.In other disciplines, such considerations have caused the establishment of Latin as the universal language for botanical classifications, Italian as the language for specifying the tempo (and other matters of interpretation) of musical compositions, and English as the language of electronic computing. Since accounting is used worldwide, a singleworldwide language for accounting makes sense.Why should English be the worldwide language for accounting? English already hasbecome the language of world commerce and multinational business. Thus, the universal use of English in accounting would parallel a well-established business practice. Also, the accounting discipline was in many respects developed as an offshoot of Anglo-American economics, which means that the language roots of many accounting terms and concepts are English. Among non-English speaking people, English is the mostcommon second language. The vast majority of the world’s accounting literature iswritten in English, and nearly all international accounting conventions and conferences use English as the official language. Multinational corporations generally use English in their accounting and financial operating manuals, as well as for corporatecommunications, without regard to national domiciles. Therefore, the worldwide benefits of adopting English as the universal language of accounting are likely to be greater than for any other language, and the worldwide costs are likely to be less.10.Emerging markets are those whose financial systems are emerging from state dominationthrough a process of liberalization. Developed countries are those with liberalizedfinancial systems. Many people believe that liberalization is highly beneficial to sustained economic growth. Many different classifications of developed versus emerging market countries are used, and often the terms are not defined, although no one correct set of definitions for developed and emerging markets exists.Students should be encouraged to suggest their own criteria as to what constitutes adeveloped as opposed to an emerging market. The emerging market countries are in geographic regions that are generally not highly industrialized. But one cannot generalize here as extensive economic liberalization is taking place in these countries (in some more than in others). For example, entry barriers to foreign businesses, government regulation of banking operations, and credit controls have been eased in many of the countries once classified as “emerging.”11.Privatizations of state-owned corporations have had dramatic effects on global capitalmarkets. Often, the privatized entities are large, well-known companies in which thenational government retains a large ownership interest, and retail (individual, non-institutional) investors often are encouraged to buy shares in newly privatized entities. Asa result, the shareholder base in the market grows dramatically, investors become moreactive market participants, and market capitalization increases.Privatizations also mean that management must now compete in the market place formarket share, external capital and corporate control. In such a world, accounting systems must properly motivate managers to work toward the accomplishment of theorganization’s overall goals in an efficient manner while putting together credibleexternal financial statements that will enable it to secure the necessary capital to financecorporate growth. Many of these external and internal reporting issues are covered in the balance of the chapters in this book.12.Those opposed to outsourcing see it as a threat to domestic jobs and a form ofexploitation by companies engaged in the practice. Some even see it as a moral issue.However, they miss the point of international trade. While outsourcing may reduce jobs in one sector, they reflect differences in comparative advantage, which ultimately makes possible greater employment in other sectors and or lower consumer prices whichincreases real wealth. One need only look at higher education in America. Whereasstenographers in the U.S. may be losing jobs to stenographers in India, more and moreIndian families are sending their children to the U.S. for their higher education,increasing the demand for support services in the higher education sector.A look at Exhibit 1.2 shows that over time, countries with greater exports than importseventually become net importers and vice versa. The importance of internationalaccounting will not diminish. Countries have been trading with each other since antiquity and will continue to do. Even if the volume of trade were to diminish, an unlikely event, the network of trading partners continues to expand globally and with it accounting issues associated with international trade.Exercises1.For steps one and two in which the idea for the Proliant ML150 is spawned in Singaporeand approved in Texas, differences in legal practices regarding rights and compensationschemes for intellectual property development may vary between the U.S. and Singapore as the latter’s legal system has been influenced by the U.K. system. Internat ional taxissues also surface in terms of royalty payment arrangements and their tax consequences in both Singapore and the U.S.For step 4, language communications between Singapore and Taiwan could pose someissues of interpretation. Production in Taiwan raises internal reporting issues such asshould exchange rate fluctuations between the Taiwanese dollar and the U.S. dollar beincorporated into the cost of production or accounted for separately as a non-operatingforeign exchange gain or loss. In evaluating the creditworthiness of the Taiwanesemanufacturer, should the financial statements of the Taiwanese manufacturer betranslated to U.S. GAAP or not. If a ratio analysis is performed, should Taiwaneseliquidity and solvency ratios be interpreted based on U.S. financial norms or Taiwanesenorms?For step 5, should clients in Southeast Asian countries be charged identical prices orshould prices be flexed for differences in exchange rates, transportation arrangements and “facilitating” payments. What legal issues are raised in the case of bribes expected on the part of commercial buyers and how would these payments be treated under the U.S.Foreign Corrupt Practices Act?2. A suggested index might look like the following. The instructor should focus on thestudent’s rationale for his or her rating as some students may have more knowledge ofspecific country developments than others and students will naturally exhibit differentdegrees of risk-aversion.Industrialized CountriesUnited States 1Canada 1Japan 1United Kingdom 1France 1Germany 1Italy 1Australia 2New Zealand 2East AsiaHong Kong 1Indonesia 3South Korea 2Malaysia 2Phillipines 1Singapore 1Taiwan 3Thailand 2Latin AmericaArgentina 2Brazil 2Chile 2Colombia 2Mexico 1Peru 1Venezuela 2Middle East and AfricaEgypt 3Israel 2Morocco 2South Africa 1Turkey 2South AsiaBangladesh 2India 2Nepal 3Pakistan 3Sri Lanka 33.The compounded annual growth rate for merchandise exports from 1985 to 2005 wasapproximately 8.7%. The growth rate for merchandise imports was also 8.7% . The comparable growth rates for exports of services was 9.6% over the same 20 year period.It was 9.2% for imports. The outlook for accounting services to travel internationally are very good. Students interested in accounting careers should take note.4.The purpose of this exercise to get students to check out the wealth of stock relatedinformation available on the web. They will probably choose the five whose countriesare most familiar to them. Their exchanges will probably be located in highlyindustrialized economies and which afford access to relatively deep pools of capital. As one example, Luxembourg has long been popular because of its accommodating listingrequirements. However, students should note that the numbers of foreign companieslisted in markets other than the NYSE have been declining. This suggests that manyissuers question the benefits of such listings, and that the benefits of a foreign listinggenerally are greater in the United States. In particular, the U.S. represents a well-established market with strong investor protection. This is especially important in adown economy, as stringent disclosure requirements help to minimize perceivedinformation risk which, in turn, reduces price volatility.5.This exercise will require that students combine certain geographic categories ofmerchandise exports to achieve some comparability with Henekin’s disclosures. It would be interesting to poll students’ ex ante predictions of the correlations and have themponder reasons for any differences they find.Geographic Region Merchandise Exports Geographic Sales for HeinekenAfrica and Middle East 7.9% 12.6%Asia 29.2% 9.1%Europe 41% 65.5%Americas 17.6% 12.7%While correlations between percentage geographic distributions of merchandise exportsand beer sales are closer for Africa and the Middle East and for the Americas, there arebig differences in beer sales and merchandise export patterns for Asia and Europe.Obviously one cannot generalize microeconomic behavior from macroeconomic data.However, some students will be inclined to hypothesize similar patterns given thepopularity of beer consumption around the world. It will be fun brainstorming reasonsfor the observed differences. Might observed differences be due to national differencesin consumer tastes, import restrictions and perhaps the success of national advertisingcampaigns? More important, this exercise should reinforce the notion of environmentaldifferences as explanatory variables.6.The geographic spread of Heineken’s revenue streams suggest that the co mpany isexposed to foreign exchange rate risk. This complicates the process of forecasting thecompany’s future earnings and resultant cash flows. Moreover, the numbers beingreported are the results of a consolidation process. The cardinal rule to remember here is that when exchange rates change, data in parent currency may change even though local currency amounts may not. For managerial accountants, the conduct of foreignoperations raises numerous issues of financial control. For example, which currencyshould be used to evaluate foreign subsidiary performance, the parent currency or thelocal currency? In preparing operating budgets, which exchange rate combination should be used to translate original budgets and subsequently track performance? Whenplanning capital expenditures, how do you factor inflation, foreign exchange rate risk and sovereign risk into measures of future project cash flows, cost of capital estimates andplanned investment outlays? Should capital budgeting decisions be made from theproject’s perspective or a company perspective? Again, this exercise is designed to raise questions that will be addressed in subsequent chapters.7.Issues triggered by Exhibit 1-5 include :a. What criteria are used to determine when a foreign affiliate is to be consolidatedwith that of the parent company? While majority ownership is one criterion forconsolidation, do other criteria exist internationally and why?b. When consolidating the accounts of a foreign affiliate with that of the parentshould accountants first restate the accounting measurement rules of the foreignaffiliate to the reporting requirements of the parent company or should thereporting requirements of the affiliate’s country of domicile prevail? Whichmethod produces the more meaningful information for statement readers?c. When consolidating the accounts of a foreign affiliate should the accountanttranslate the currency of the affiliate to the reporting currency of the parentcompany? If so, which exchange rates should be employed for each balancesheet account? For each income statement account?d. If fluctuating exchange rates produce foreign currency gains and losses duringthe consolidation process, how should these gains and losses be accounted for?8.The ROE ratios for Electrolux based on IFRS and U.S. GAAP was derived as follows:IFRS U.S. GAAPROE 1,763/25,888 + 23,636 1,518/25,057 + 23,5672 2= 1,763/24,762 =1,518/24,3129.For this exercise, we consider information provided by three stock exchanges: TheLondon Stock Exchange, the Deutsche Boerse and the Tokyo Stock Exchange. TheLondon Stock Exchange Web site () provides highly useful information. However, under the U.K. regulatory structure, the Financial Services Authority, not the LSE, is responsible for the admission of securities to official listing and continuing obligations of listed companies.The Deutsche Boerse ()has a 117-page document covering insider trading and required ad hoc disclosure, but nothing in any detail concerning periodic financial disclosures. There is a bar chart that claimed to show the relative transparency of the various Deutsche Boerse exchanges. Without even the most basic frame ofreference, it s hard to describe such a chart as anything but opaque.It might be well to advise students not to investigate financial disclosure requirements for the Tokyo Stock Exchange (www.tse.or.jp). The TSE does not have independentfinancial disclosure requirements. Rather, companies must conform with therequirements of Japan’s Securities and Exchange Law and regulations. The TSE provides this brief summary: Under the Securities and Exchange Law, the registrants are required to file annual and semi-annual reports with the Ministry of Finance, with copies to the stock exchanges where the securities are listed. The financial statements to be included in security registration statements and annual reports must comply with a wide range of formats and contents relating to disclosures prescribed in the regulations. The regulations require both the consolidated financial statements and non-consolidated financialstatements of the registrant. The financial statements prepared under the Securities and Exchange Law and relevant regulations are in major areas equivalent to those prevailing internationally.This summary obviously raises many more questions than it answers. The TSE alsoprovides a flow chart showing which documents are required to be filed, and their filing deadlines, but nothing concerning the required contents of these documents.For an illustrative example, consider the Deutsche Boerse and the London StockExchange. Note that Web sites change continuously. Therefore, the responses shown below are indicative only.Ratings (obviously) will be subjective. Students should be evaluated on the thoroughness and thoughtfulness of their evaluations10.If we divide the total foreign company listings for each region by the total listings for thatregion as one measure of foreign listings, we would obtain the following results: The Americas: 1,174/3,758 = 31.2%Asia-Pacific: 274/2,375 = 11.53%Europe-Africa-Middle-East 1,188/10,383 = 11.4%Student answers to the second part of the question will vary depending on which region of the world they expect to experience the most rapid growth in the years ahead.11.In addition to eliciting a variety of investment strategies, this question should drive homethe connection between accounting information and international investing. Theaccounting issues that will influence country investment allocations will be the extent oftransparency of a company’s accounts, the degree to which its accounting standards areoriented toward investor decisions and the quality of the audit functions in each country. Case 1-1E-Centives, Inc.e-centives, Inc. — Raising Capital in Switzerland1. Possible factors (from Exhibit 1.7) relevant in e-centives decision to raise capital and list on the Swiss Exchange s New Market:•Ease of raising capital (point 3). The Swiss Exchange s New Market has simple listing requirements designed to appeal to small companies. The contrast with the complex,detailed listing and reporting requirements in the United States is striking.•Availability of capital (point 4). Switzerland has a large, well-developed capital market.•Reputation of the exchange (point 5). The Swiss Exchange is well known for providing a high quality, efficient trading environment.•Corporate profile and brand identity (point 6). A listing on the New Market would dovetail with the company s possible expansion into Switzerland by giving it a higherprofile in the Swiss market. While e-centives is interested in expanding into Switzerland, it also is considering Germany and the United Kingdom, which have much largerconsumer markets. Therefore, this is not an overwhelming point in Switzerland s favor.•Regulatory environment (point 7). It is highly likely that e-centives chose Switzerland because its regulatory environment is unlike that of the United States.•Availability of investors (point 9). e-centives might be interested in possible investment from large Swiss pension funds, but it s not likely that such funds would invest in aspeculative, start-up enterprise.2. a. Possible reasons why e-centives chose not to raise public equity in the United States:•One possible reason would be to avoid the complex and expensive process of registering securities with the U.S. Securities and Exchange Commission and keeping up with theCommission’s periodic reporting requirements.•e-centives probably would not satisfy the listing requirements of a U.S. stock exchange (such as Nasdaq or a regional stock exchange).•Management might think that raising money in Switzerland rather than the U.S. might give them an appearance of quality, cleverness, and exclusivity that would not bepossible with a U.S. listing. (Your authors believe that such reasoning is far-fetched, but it s not unknown.)b. Possible drawbacks to not raising capital in the U.S. public markets.•Lack of access to the largest pool of investment capital in the world.•Lack of following by U.S. investment analysts, and lack of access to individual U.S.investors.•Trading volume on the Swiss Exchange New Market is much smaller than on the U.S.exchanges.•Listing in Switzerland does little to establish the reputation or raise the profile of e-centives in the United States.•The degree to which (mostly European) investors in the New Market would be interested in a struggling U.S. start-up certainly can be questioned.3. Advantages and disadvantages to e-centives of using U.S. GAAP.Advantages: U.S. accounting standards are highly credible and well known, which is important to a new company seeking investment capital, and would be much more familiar to the company’s management, outside auditors, and investors domiciled in the U.S. than any other set of standards. Use of U.S. GAAP would eliminate some suspicions of the company trying to put something over on investors by using some other set of GAAP, and U.S. GAAP is accepted explicitly by the Swiss Exchange.Disadvantages: U.S. accounting standards are not particularly well known to investors participating on the Swiss Exchange, who would be expected to know Swiss GAAP, GAAP of other major European markets, and possibly IAS (International Accounting Standards). Compliance with U.S. GAAP is more complex and expensive than compliance with other standards (such as IAS), and the company might see some cost savings by avoiding U.S. GAAP if it isn’t required to use them.4. Should the Swiss Exchange require e-centives to prepare its financial statements using Swiss accounting standards?This is a debatable point. One would expect that investors on the Swiss Exchange would be more familiar with Swiss accounting standards than with any other, and that requiring Swiss accounting standards would make financial disclosures more easily understood toth em than any others. This wouldn’t be true, however, for non-Swiss investors participating on the exchange, and ignores the fact that IAS increasingly are becoming a common language for financial accounting disclosures. Accepting IAS almost certainly would increase the pool of investors that would be able readily to understand disclosures by listed companies, and this would give the exchange a powerful reason to accept IAS in addition to (if not instead of) Swiss accounting standards.5. What are listing and financial reporting requirements of the Swiss Exchange s New Market? Does e-centives appear to fit the profile of the typical New Market company?From the case: The New Market is designed to meet the financing needs of rapidly growing companies Listing requirements are simple. For example, companies must have an operating track record of 12 months [note: not necessarily a profitable operating track record], [and] the initial public listing must involve a capital increase. All of these conditions apply well to e-centives, and on that basis the company does appear to fit the profile of the typical New Market company. The uniqueness of e-centives is in its decision to skip the U.S. capital markets.Case 1-2Infosys Technologies LimitedThis case is designed to get students into reading non-domestic financial statements. Many students will be surprised at the information content of Infosys’ financial statements as the company does not fit the typical stereotype of sub-par financial reporting in emerging markets. Indeed the company illustrates how competitive the world of business has become and the success that accrues to firms that base their futures on innovative thinking and adaptability. Students unused to seeing the report form of balance sheet will find it at odds with the classified balance sheet format that they were taught in class. Other things they will note include but are not limited to: use of a fiscal as opposed to a calendar year, the fact that the financial statements。

国际贸易实务英文版参考答案标准化管理处编码[BBX968T-XBB8968-NNJ668-MM9N]C h a p t e r1 I.YES，Pleaserefertothe1stparagraphofthetext.II.流动性过剩自给自足经济资源直接投资国际收支易货交易出口退税倾销出口型经济增长东道国贸易差额贸易顺差／贸易逆差欧盟国际收支顺差／国际收支逆差有形贸易无形贸易货物贸易服务贸易excessliquidityself-sufficient economicresourcesdirectinvestmentbalanceofpaymentsbarter exporttaxrebatedumpingexport-driveneconomicgrowthhostcountrybalanceoftradefavorable/unfavorablebalanceoftradeEuropeanUnionfavorable/unfavorablebalanceofpaymentsvisibletradeinvisibletradetradeingoodstr adeinservicesIIIThechartaboveshowstheU.S.importsfromChina,U.S.exportstoChinaandthetradebalance .TheU.S.hasanegativetradebalancewithChina,andithasbeengrowing.Duringtheperiodfrom1997to2003,importsfromChinahavegrown244%whileexportstoChinahavegrown221%,in dicatingthatthetradedeficitisincreasing.Therehadalreadybeenasizeabletradebalan cedeficitwithChinain1996,totaling$billionattheendoftheyear.IV1.Exportgoodsaretangiblegoodssentoutofcountries.2.Tradeinservicesareinternationalearningsotherthanthosederivedfromtheexporting andimportingoftangiblegoods.3.Importgoodsaretangiblegoodsbroughtin.4.Internationaltradeisallbusinesstransactionsthatinvolvetwoormorecountries.5.F DIisonethatgivestheinvestoracontrollinginterestinaforeigncompany.6.Investmentisusedprimarilyasfinancialmeansforacompanytoearnmoremoneyonitsmone ywithrelativesafety.V1.Internationaltradeisthefairanddeliberateexchangeofgoodsand/orservicesacrossn ationalboundaries.Itconcernstradeoperationsofbothimportandexportandincludesthe purchaseandsaleofbothvisibleandinvisiblegoods.2.Intoday'scomplexeconomicworld,neitherindividualsnornationsareself-sufficient.Nationsparticipateintheinternationaltradeformanyreasons.Astotheecon omicreasons,nonationhasalloftheeconomicresources(land,laborandcapital)thatitne edstodevelopitseconomyandculture,andnocountryenjoysaparticularitemsufficienten oughtomeetitsneeds.Asforthepreferencereasons,internationaltradetakesplacebecauseofinnovationofstyle.Besides,everynationcanspecializeinacertainfieldandenjoya comparativeadvantageinsomeparticularareaintermsoftradesothattheyneedtodobusine sswitheachothertomakeuseofresourcesmoreefficientlyandeffectively.3.Inmeasuringtheeffectivenessofglobaltrade,nationscarefullyfollowtwokeyindicat ors,namely,balanceoftradeandbalanceofpayments.4.FDI,theabbreviationformForeignDirectInvestment,meansbuyingofpermanentpropert yandbusinessinforeignnations.Itoccurswhenacquisitionofequityinterestinaforeign companyistrade.ThegreatsignificanceofFDIforChinamightbethat:FDIsolvetheproblem ofcapitalshortageforChinasothatChinamayspendthemoneyonimportingadvancedequipme ntandtechnologiesforitsinfrastructure,nationalsupportingindustry,keyprojects,e tc.Chapter2I关税壁垒非关税壁垒从量税配额保护性关税市场失灵幼稚产业许可证制度财政关税政府采购贸易保护主义从价税最低限价本地采购规则增加内需DomesticcontentRed-tapebarriersExportsubsidiesBindingquotaAbsolutequotasVER Tariff-ratequotasZeroquota"Buylocal"rulesTariffbarriersnon-tariffbarriersspecificdutiesquotaprotectivetariffmarketfailureinfantindustrylicensingsystemRevenuetariff governmentprocurementtradeprotectionismAdValoremDutiesfloorprice "buylocal"rulesraisedomesticdemand国内含量进口环节壁垒出口补贴绑定配额绝对配额自愿出口限制关税配额零配额本地采购原则II1.Protectionismmeansthedeliberateuseorencouragementofrestrictionsonimportstoen ablerelativelyinefficientdomesticproducerstocompetesuccessfullywithforeignprod ucers.保护主义是指蓄意使用或鼓励进口限制，以此使本国相对效率低的产品能成功地和外国产品竞争。