国际商务International_Business_(Charles_W.L._Hill_第七版)Chap011_The_Global_Capital_Market教材教学课件.ppt

Foreign Exchange Risk And The Cost Of Capital Adverse exchange rates can increase the cost of foreign currency loans While it may initially seem attractive to borrow foreign currencies, when exchange rate risk is factored in, that can change Firms can hedge their risk by entering into forward contracts to purchase the necessary currency and lock in the exchange rate, but this will also raise costs Firms must weigh the benefits of a lower interest rate against the risk of an increase in the real cost of capital due to adverse exchange rate movements Implications For Managers Growth in global capital markets has created opportunities for firms to borrow or invest internationally Firms can often borrow at a lower cost than in the domestic capital market Firms must balance the foreign exchange risk associated with borrowing in foreign currencies against the costs savings that may exist The growth of capital markets also offers opportunities for firms, institutions, and individuals to diversify their investments and reduce risk Again, though investors must consider foreign exchange rate risk In 2006, some $6.5 trillion a year was flowing across national borders. This number is expected to grow by 11 percent annually. Market makers include commercial banks like Citicorp and investment banks like Bear Stearns and Merrill Lynch. The answer is a. Capital market loans include Equity loans- when corporations sell stock to investors Debt loans - when a corporation borrows money and agrees to repay a predetermined portion of the loan amount at regular intervals regardless of how much profit it is making In a purely domestic capital market the pool of investors is limited to residents of the country. This Places an upper limit on the supply of funds available Increases the cost of capital Management Focus: Deutsche Telekom Taps the Global Capital Market Summary This feature examines Deutsche Telekom’s privatization strategy. Deutsche Telekom, one of the world’s larges