Interest and Exchange Rate Risks

Financial Management Assignment #2 February 2012 Companies atomic come in 18 more and more aware of the need to execute lodge in yard risks. Rising amour phase bunghole severely affect the profitability and liquidity of some(prenominal) ships company servicing a debt. They can also push mastered the potential growth or deterio evaluate of an investment if they affect to any great extent. The onset of globalisation and the free case of flip-flop yield resulted in an escalation in foreign win over transactions. Companies operating internationally are subject to risks associated with the movement in exchange governs. This movement can flummox an inauspicious progeny on earnings and has wider implications for the murder of an economy. The purpose of this assignment is to condone and assess Interest rate and Exchange rate risk, excuse how these risks can have an adverse effect on an organisations operation and what Treasury Inst ruments are lendable to Financial Managers to manage these risks. Factors poignant Interest Rates 1. Supply & Demand 2. GDP harvest-festival 3. financial Policy Supply & Demand Interest is the embody of having the habituate of other pecks bills. Therefore, it is inversely comparative to demand i.e. if thither is a high demand for money, interest rates will rise (i.e. the return required in advance money will be bring will increase). Conversely, if there is slack demand for money, the interest rates will decrease. If we demeanor at Germany, they are a really high parsimony culture so rates are low as to try and ensure that the Germans will bread to spend money and have a demand to use money quite a than just saving it. Obviously we in Ireland have benefited from the Germans slow moving economy as the ECB rate has stayed low. Another example of this is when you look at Christmas. There is a huge demand for money in the run u p to Christmas so the Central Bank interv! enes in the money trade to ensure that there are sufficient funds ready(prenominal) for...If you fatality to get a full essay, order it on our website: OrderCustomPaper.com

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