Consider the following situation: a firm based in the U.S. opens two storefronts in a Chinese town. The area has several million people. The storefronts are quite large and offer local products as well as imports from other countries. When the U.S.-based firm gains revenue over what it needs in the Chinese town, it may send those profits back to the U.S. The U.S.-based firm plans to build more storefronts in China.

a. How would the U.S.-based storefront in China use the spot market in foreign exchange?

b. How would the U.S.-based firm use the international money markets as it opens more storefronts in China?

c. Describe how the U.S.-based firm could use the international bond market to finance additional storefronts in China.