When engaging in international trade, the major issue that arises is that of foreign currency risk. Dealing primarily with credit sales, companies that make credit sales or purchases based on another currency deal with a foreign currency risk if the currency at the time of the sale is different from the time the money is collected. To deal with this issue, companies have looked to hedges in order to limit the risk of dealing with foreign currency. The two major forms of hedging are foreign currency options and forward contracts. Dependent on whether a forward contract or option was used, these can give the seller the right or obligation to sell the foreign currency at a predetermined rate.

Question 3

A company may be interested in foreign direct investment because they want to increase sales and profits, enter a rapidly growing or emerging market, reduce costs by taking advantage of lower production costs in other regions, protect domestic markets by weakening the growth of competitors, protect foreign markets by generating sales through exports to a particular country, or acquire technological and managerial knowledge. In addition foreign counties may be able to gain capital by entering the US market and the New York stock exchange. There are many advantages that come with foreign direct investments.

Question 8

This would allow the company to raise capital much quicker as a result of being exchanged in other companies. This would make the company more liquid. Companies expect to benefit from a lower cost of capital that arises because their shares become more accessible to global investors whose access would otherwise be restricted because of international investment barriers. Furthermore, cross listing may also be motivated by product and labor market exposure. By listing in a foreign country, the company may be more incline to acquisitions and to