International Finance

Running head: INTERNATIONAL FINANCE
International Finance
Name of the Student:
Name of the University:
Authors Note:

INTERNATIONAL FINANCE
1
Table of Contents
Chapter 3 BHP Billiton:.............................................................................................................2
a. Explaining the various ways in which Citigroup could facilitate BHP’s Flow of funds,
while identifying the type of financial market where flow of funds occurs:.............................2
b. Indicating the characteristics that would help British subsidiary determine currency to
borrow:.......................................................................................................................................3
Chapter 5 Bruin Aircraft, Pty Ltd:.............................................................................................4
Chapter 6 Beacon Lighting:.......................................................................................................5
a. Describing the scenario that could allow Beacon to save more than 20 per cent on
production cost:..........................................................................................................................5
b. Describing the scenario that could allow Beacon to incur higher production cost, where
only parts are produced in Australia:.........................................................................................6
c. Explaining whether Beacon will have stable Australian dollar outflow payments to Alibaba
over the time:..............................................................................................................................6
d. Explaining whether Beacon risk changes at all as a result of its new relationship with
Alibaba:......................................................................................................................................7
Chapter 7 UniSuper:...................................................................................................................7
a. Indicating whether investments in Poland will be conducted without covering the position:
....................................................................................................................................................7
b. Suggesting the attempt on the converted interest arbitrage, while indicating the expected
return from using covered interest arbitrage:.............................................................................8
c. Stating what are the relevant risk involved in using the covered interest arbitrage:..............8
d. Indicating the choice that would be conducted for the relevant investments:.......................9
References and Bibliography:..................................................................................................10

INTERNATIONAL FINANCE
2
Chapter 3 BHP Billiton:
a. Explaining the various ways in which Citigroup could facilitate BHP’s Flow of funds,
while identifying the type of financial market where flow of funds occurs:
There are different ways in which Citigroup could facilitate BHP’s Flow of funds for
impacting the performance of their subsidiaries. The measure that can be taken by the
Citigroup are depicted as follows.
 Citigroup could become the underwriter between the subsidiary and the parent company
for effectively utilising the relevant preference shares and common stock. The
management of Citigroup can adequately arrange capital for both the subsidiary and the
parent company for supporting their production needs.
 The second measure that can be adopted by Citigroup is the repatriation of dividends
from the subsidiary to the parent company. The bank can become the mediator between
the parent company and the subsidiary, where the overall income in form of dividend can
be transferred from subsidiary company to the parent organisation.
 In the similar process, the bank can adequately issue relevant levels of loans to both the
parent company and the subsidiary for adequately improving their operational capability.
Furthermore, the bank can adequately become the official creditor of BHP Billiton and its
subsidiaries (Frieden, 2015).
 The Citigroup can adequately purchase relevant bonds from both BHP Billiton and its
subsidiaries for adequately supplying the relevant level of funds to the organisations. The
whole transaction will directly occur in the bond market, which can be used by the bank
for adequately supporting both BHP and its subsidiaries.

INTERNATIONAL FINANCE
3
 The Citigroup can adequately increase the relevant exposure in the short-term securities
or commercial papers of both BHP Billiton and its subsidiaries for providing all the
relevant cash to BHP and its subsidiaries.
b. Indicating the characteristics that would help British subsidiary determine currency
to borrow:
The overall analysis is relevantly based on subsidiaries that operate in United
Kingdom, where it would be better to get loans in the local currency from the Branch of Citi
Bank. In addition, the use of local currency loan format would eventually allow the
organisation to minimise the level of risk exposure from the currency market. Moreover,
from the relevant evaluation, it can be detected that gathering the loan from United Kingdom
would eventually help the subsidiary for minimising the level of exposure in the currency risk
factors and other alternations, which might be conducted on future interest rates. The
reduction in the risk parameters would ensure the organisation to continue its activity without
incurring additional levels of expenses on the risk exposure.
However, the interest rate comparison directly reduces the level of exposure in the
current risk composition of the currency market, which might negatively affect the financial
viability of an investment. The organisation tends to use loans, which has the lowest level of
interest rates, as it aims in reduce the total cash outflow. However, the organisation needs to
accommodate additional factors such as the risk on currency conversion rate that needs to be
taken into consideration, while making relevant decisions regarding the loan requirements.
Therefore, the additional level of exchange rate risk, volatility and unpredictable nature of the
currencies is directly reflecting on the financial performance of the organisation (Cairncross,
2016).