Exchange Rate Considerations
Please help me address the following case:
Mr. Swanson has expressed confusion about how foreign exchange rates will affect Content Cow Dairy if it expands to international markets. You tell Mr. Swanson that he has raised a good problem and that you will draft and send him a report with information on this topic.
In your report, include the following:
- Compare/contrast the risks and benefits of pricing goods in U.S. dollars or pricing goods in local currency when selling in a foreign market.
- describe rate parity theory and how it is used to predict future exchange rates.
- find out the current Forward Exchange Rate for the United States and Egypt. (Show your calculations).
- describe the relationship between monetary policy, interest rates, and exchange rates.
- Briefly introduce other factors that influence exchange rate fluctuations. Address whether any of these are a factor when looking at the future exchange rate between the United States and Egypt.