This document presents solutions to a foreign exchange assignment, addressing key aspects of international finance. The solutions cover factors influencing currency values, including interest rates, inflation, and balance of payments. It also explores financing strategies for foreign subsidiaries, such as internal funds, equity, and debt, and compares the costs of borrowing from domestic versus foreign sources. Furthermore, the assignment delves into risk mitigation techniques for foreign exchange exposure, including the use of future and forward contracts, swaps, and options, as well as strategies like selling goods in the loan currency country and using Masala Bonds. References from Alpari Limited, Trading Economics, and other sources support the analysis.
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