Recently, Wal-Mart established two retail outlets in the city of Shanzen, China, which has a population of 3.7 million. These outlets are massive and contain products purchased locally as well as imports. As Wal-Mart generates earnings beyond what it needs in Shanzen, it may remit those earnings back to the United States. Wal-Mart is likely to build additional outlets in Shanzen or in other Chinese cities in the future.

a. Explain how the Wal-Mart outlets in China would use the spot market in foreign exchange.

b. Explain how Wal-Mart might utilize the international money markets when it is establishing other Wal-Mart stores in Asia.

c. Expalin how Wal-Mart could use the international bond market to finance the establishment of new outlets in foreign markets.

My answers:

a. Many foreign transactions do not require an exchange of currencies but allow a given currency to cross country borders therefore it will be easy for the US dollar to be exchanged on the spot market.

b. When short term funds are needed, Wal-Mart will be able to utilize internation money markets to finance imports,etc.

c. By utilizing the international bond market, Wal-Mart will have access to long-term funds in the foreign market to help with establishing new outlets within the foreign markets.