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Intl Finance Weeks 2 and 3 Notes

by: Dan Notetaker

Intl Finance Weeks 2 and 3 Notes FINA 37000 01

Marketplace > Ithaca College > Finance > FINA 37000 01 > Intl Finance Weeks 2 and 3 Notes
Dan Notetaker

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About this Document

These notes cover the slides we went over and Professor Cheng's interjections
International Finance
Dr. Cheng
Class Notes
Intl Finance
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This 3 page Class Notes was uploaded by Dan Notetaker on Wednesday February 10, 2016. The Class Notes belongs to FINA 37000 01 at Ithaca College taught by Dr. Cheng in Winter 2016. Since its upload, it has received 5 views. For similar materials see International Finance in Finance at Ithaca College.


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Date Created: 02/10/16
Int’l Finance Pros vs cons -Higher standard of living for both nations -Pains of adjustments for displaced workers Trade Issues -Labor Union -Outsourcing -Labor Laws -government subsidies -Piracy -Environmental restrictions Trade Policies are often affected by -politics -security (national interest) US Trade Deficit (Aprox annual) -BT = Export – Import -500 Billion = 2.4 Trillion -2.9 Trillion -By product (2008) -Petroleum=250 Billion – 50 Billion =200 Billion Consumer goods (electronics, clothing) = 100B -Auto = 80 B .. .. Current Account -Payments for merchandise and services -Factor income payments (Interest, dividend and wages) -transfer payment Capital and Financial Accounts -FDI -Portfolio investment (under 10% control) FDI Foreign Direct Investment -FDI (physical asset or financial investment exceeding 10% control) -Ex. Coca Cola built bottling facilities in China (low labor cost) -Honda built plant in Ohio (bypass tariff and shipping cost) Top recipients of FDI 1. US 2. France 3. China 4. UK 5. Russia 6. Hong Kong Balance of Capital Account = Bc Portfolio investment (under 10%) Bc=FDI + Portfolio Investment+ short term investment Guess whether net Bc is positive or negative for the US 2/8 3 slides in Price of a $ is determined by demand and supply of $ overseas Ex. Clothes are cheaper in the Us as opposed to Hong Kong-weird because HK’s so close to China. Factors other than price change will shift demand and supply When you can change along the demand curve vs. shift the curve line itself- when you have to add a third factor to the price/demand curve -Factors increasing demand (shift Right) 1. Foreigners buy more U.S. products (new product) 2. Foreigners invest in U.S. a. Interest Rate + -for the first time in 8 years the Fed hiked the interest rate. -incentive? -young people in Wall Street are witnessing their first Hike -US is doing better than other countries so they could afford to raise – 4.9% unemployment rate – virtually always going to be 5.0% -New health care law- anyone that works more than 30 hrs. have to have health care - have to look beyond stats b. U.S. economic strength + c. risk outside the U.S. + Stock market went down when Unemployment rate was announced, bad news is good news thing. Economic Growth may cause two opposing effects on exchange rate 1. Investment effect – attract more foreign investment 2. Consumption effect- increase appetite for consumption and import ( China) Investment effect is more immediate because investment money can be shifted quickly. (Dollar rises upon good news on GDP.) so in the long run, it’s a toss up


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