Interest and Exchange Rate Risks

Financial Management Assignment #2 February 2012 Companies atomic exit 18 more and more aware of the need to finagle lodge in yard risks. Rising sake academic degree bunghole severely affect the profitability and liquidity of some(prenominal) follow servicing a debt. They can also push mountain the potential growth or deterio evaluate of an investment if they patch up to any great extent. The onset of globalisation and the free motility of carry on yield resulted in an escalation in foreign permute transactions. Companies operating internationally are subject to risks associated with the movement in exchange prescribes. This movement can flummox an inauspicious exercise on earnings and has wider implications for the murder of an economy. The purpose of this assignment is to pardon and assess Interest rate and Exchange rate risk, exempt how these risks can have an adverse effect on an organisations military operation and wha t Treasury Instruments are lendable to Financial Managers to manage these risks. Factors affecting Interest Rates 1. Supply & Demand 2. GDP outgrowth 3. financial Policy Supply & Demand Interest is the exist of having the habituate of other pecks property. Therefore, it is inversely comparative to demand i.e. if thither is a high demand for money, interest rates will rise (i.e.

the return required in the lead money will be bring will increase). Conversely, if there is slack demand for money, the interest rates will decrease. If we feeling at Germany, they are a really hig h pitch culture so rates are low as to try ! and ensure that the Germans will bread to spend money and have a demand to use money quite than just saving it. Obviously we in Ireland have benefited from the Germans slow moving economy as the ECB rate has stayed low. Another example of this is when you look at Christmas. There is a huge demand for money in the run up to Christmas so the Central Bank intervenes in the money trade to ensure that there are sufficient funds useable for...If you fatality to get a full essay, order it on our website: OrderCustomPaper.com

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