ft N 4 &0l. f=O!i ~ULA& iO r_NOW 'lie.Id eavrtPd from roverro \n!eV'(),t aroltrage
De,t-e, tm.l lU
Of cah· - ~me CUrY'Pl70Y f>Cllllvalent COO:
~'
'11.,,\d e"'""'"d " lY\~,tmeru;
,c; ea.nied
- ll'\(tl?lJ
fnv"tmmt
.,lbi\ accorcting tu the R~t1Qr l:ffl:Ct : lnit\lLI it1\le<m\C!n!:
(\ + COC f) )( [Cl+'t\,) / ( I+ lF)1IJ - I J LISfd i_n_
cletetmirung
CCCr , c~t a csp i La.l in Fo1r.VJ1'1 CDLLl11YY r-JP V
on in hcnir- cottn t7 lj
l_ h ' 1nHati_
1r , 1rw·1attcn in ~ 11 co1in l:l !.J
ConvQthng au cash rl()w& from home cUJ'Y'Qncy
to foro1gY1 CLLITTn cy at rurcnariY'(J Po111g Pan):y
£oV-Pcei,tm Q)IC\"\argp n1~ al'ld tfien a,J.cu..1atirg
NPV llt t:-he fovPlgn cLLminy cart Of capital·
© S1 == fo " [( l+h,)/ (lti F)t SPPP
[ O CllYY'eYlt
!: ,
C
yectr
srot exchM QI? ratP
@ CFo = (init\a.t CO&t:)/&o = XXX
en "' ca&'n F\01-J / &I ,. XXX
etc.
l/'{ = f0reigt1 c1Am?ncy coc
: .tJy>V =- ,__
o etexmn-u ni \r iru-enn rclliJ fill'i ty Cl ~P) is
cu.,n--en.t\.~ WJ dwig : 'i (1+ih)•.!.x{1-1-ir)xF
Fo ==So x [ (H \n)/(l+if)] , s
Fo, fOn\lard n .U-P 'I
So= cu.rrent- spot r ~
in = iri t-err.n- rclli' \tlCfY1'1 cowilv\j :
;f jVlkere~t ratP fo~1g11 CC\..l.l'\11Y ,
EH'9:t\ve Mna.ndng '(at°" fOr- QW,nj y:,o&slblfl
rate or cho..hgQ in cummcy=
E (reff) " (H iF XI + (;,.o)) - I
ir = quoted iYW~t 'fate in FOVPign c1JXrency
1/- {) • v,o&Si\'.J\e , chfil'lg" 1n ro~igy, cl.lYmncy
Expectro f{na.ndrq rtlli? Cf- rowign cl.lrrQrc_y :
t;itpt>e~ finandtig ra.te = (~~uW~-;. 1( f:Crerf))
()AAlYUrilng ~hlch cL1.rrr1191 to bolTilN , .
Q) Whal i, t\1-e :/. pYOba.lo1Uty tWt.l: the fOV"e\Qn
cuwcmcy vab? wiU ~E? Wg~i-- ttlah rom'1?
@ \,Jna.t i, t\-\e 1. ~1-0\?a.loiOty tnat: t\'le fOrelgl"I
c\,U\"eY\cy r~ wiU bo lower- t:\,dt'I '1owie?
@ (Om.\'cO'e tw t\oJO.
@ Aciittio~a.lly I what i, l¼ie expttte:::l find.t\d~
r~ Uh> cortt\()ami to rome? u,~y o,.. kJgnor?
---- - -
counny VI&~ anatysrs
Polit\Cell ric~ l'\mgmid rctli~ A«\gn«I we~lli'
s y,
3 )l
f=lnancial vis~ I X 10·1. "
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