Walmart Spot Rate

Topics: Currency, United States dollar, Foreign exchange market Pages: 2 (472 words) Published: April 15, 2010

a. A. Walmart’s use of the spot market in China would allow the retailer to exchange their excess required holdings into other foreign currencies.  The spot market makes the exchange of yuan into other currencies a seamless process.  If Walmart consistently purchases home goods from manufacturing plants in Russia, the spot market will allow Walmart to convert their earned yuan into rubles to pay for Russian goods. b.

c. B. Walmart may at sometime utilize an international money market in order to borrow short-term funds to build new retail outlets in emerging markets.  Excess funds from sales in China could be placed into a foreign money market in anticipation of new operations in the respective country.  Advantage of utilizing this type of money market is to secure better interest rate or the country’s currency may be expected to increase in the near future.  Any advantage a company has in anticipation of expected currency appreciations, the better off they will be when operations begin, their money will go further.  d.

e. C. Walmart may also choose to take on long-term debt with the use of the international bond market.  Much like anticipating a foreign countries increase in currency in the money market, a bond market will allow Walmart to take in immediate debt in the respective country.  Once operations begin in this new market, earnings received in the new currency can be used to pay off interest of this new debt.  Walmart will also attract more attention from foreign investors, if they issue bonds in those foreign countries.  Walmart must use caution, depending on which way the exchange rate works in their favor, it may either prove to be beneficial or they may realize a loss due to currency deflation.   

Chapter 4

Problem 5

If Japan relaxes its import controls:

a. A. The US demand schedule for Japanese yen will shift inward b. B. The supply schedule of yen will shift outward
c. C. The...
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