For your job as the business reporter for a local newspaper, you are given the assignment of putting together a series of articles on the multinational finance and the international currency markets for your readers. Much recent local press coverage had been given to losses in the foreign exchange markets by JGAR, a local firm that is the subsidiary of Daedlufetarg, a large German manufacturing firm. Your editor would like you to address several specific questions dealing with multinational finance.

Prepare responses to problems 1-4:

1. What new problems and factors are encountered in international as opposed to domestic financial management?

2. What does the term arbitrage profits mean?

3. What can a firm do to exchange risk?

4. What are the differences between a forward contract, a futures contract, and options?