International Finance

Running head: INTERNATIONAL FINANCE
International Finance
Name of the Student:
Name of the University:
Author’s Note:

1INTERNATIONAL FINANCE
Table of Contents
In Response to Question 1..........................................................................................................2
In Response to Question 2..........................................................................................................3
In Response to Question 3..........................................................................................................4
In Response to Question 4..........................................................................................................5
In Response to Question 5..........................................................................................................6
In Response to Question 6..........................................................................................................7
In Response to Question 7..........................................................................................................7
Reference....................................................................................................................................9

2INTERNATIONAL FINANCE
In Response to Question 1
The exchange rate followed by China is a Semi-Fixed Exchange rate where the
movement of the currency is limited as the movement of the Yuan Currency is primarily
fixed and the movement if the currency is limited to about 2% price range movement. The
value of the Chinese Yuan Currency is pegged to various other basket of currencies in the
international global market and the movement of the currency is limited on a daily basis. It is
the Central Bank of China which decides upon the movement of these currency. The key
advantage of having such a exchange rate is that there is a price stability maintained in the
market. The key drawback of having such a policy is that the government would have
restrictions on the policy followed by them (Chaboud et al. 2014).
The exchange rate followed in Australia is the floating exchange rate where the value
of the exchange rate is significantly dependent on the daily demand and supply and the
market forces acting in the forex market. The key advantage of having such a floating
exchange rate is that it reflects the current macroeconomic condition of the economy. The
key demerit of having such a exchange rate policy is that the exchange rate becomes very
volatile in the economy whereby investors can suffer from major forex risk associated with

3INTERNATIONAL FINANCE
depreciating of the currency. The exchange rate followed by the China may affect the
business both either positively or negatively as large changes in the currency would only be
possible when the Central Bank of China let the same. The appreciation of Yuan Currency in
respect to the AUD dollar would positively improve the financial condition of the company
but the same would not be very frequent because of the fixed peg system followed by the
Chinese Central Bank.
In Response to Question 2
The profit earned from Bell Beijing from the operations in the Australia will be taxed
in the China and will further be not taxable in the Australian Economy because of the tax