You are doing an internship at Money Maker Ltd. The trainer asked you to conduct a foreign currency analysis on the assigned company and write a professional report. She instructed you to identify THREE currencies that Nike, Inc is exposed against. This can be (1) due to its business structure (i.e. location of factories, customers and suppliers, and the currency that the products/services are quoted), and (2) arising from the competition against its rivals. Your trainer asked for the rationales of your selection. Then, you need to make exchange rate forecasts, and show how sensitive Nike, Inc value is against the change in the value of the foreign currencies that you have selected against the U.S. dollar. Note: As this needs to be a professional consultancy report, you need to provide an in-depth analysis on Nike, Inc business activities and where the exposure against the foreign currencies might be arising from. Thus, in the introduction, you need to briefly explain the business activities and environment of the company from the perspective of foreign currency exposure. The following are some suggestions to prepare the report; (1) Introduction (2) To select foreign currencies that you believe are important to Nike, Inc, you may check the company’s website and/or annual report first (3) To make foreign currencies forecasts, you may use the notions of International Fisher Effect and Purchase Power Parity. Here, you need to explain what these are and discuss the accuracy of these techniques in forecasting exchange rate. (a) In making one-year currency forecasts, for the IFE use the current spot exchange rates and the interest rates, and for the PPP use the current spot exchange rates and the inflation rate forecasts for 2020. For the IFE, if you cannot find the bond yield of government bill/note/bond rates for a relevant period, you may use the yield of a bond with a maturity date closest to 1 year from now.
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