國際金融與國際財務管理chap

1、1220Short-Term FinancingChapter ObjectivesThis chapter will:A. Identify sources of short-term financing for MNCsB. Explain how MNCs determine whether to use foreign financingC. Illustrate the possible benefits of financing with a portfolio of currencies23Sources of Foreign FinancingInternal short-te

2、rm financingAn MNC should have an internal system that consistently monitors the amount of short-term financing by all subsidiaries.External short-term financingShort-term notesCommercial paperBank loansAccess to funding during the credit crisisMNCs had limited access to short-term funding.4Financin

3、g With a Foreign CurrencyMNCs borrow the currency that matches future cash inflowsIf they have a net receivables position in foreign currency, they may borrow in that currency to hedge their receivablesComparison of interest rates among currencies5Exhibit 20.1 Comparison of Interest Rates among Coun

4、tries (as of January 2009)56Determining the Effective Financing RateThe actual of “effective” financing rate will differ from the quoted rate based on:The interest rate charged by the bank.The movement in the borrowed currencys value over the time of the loan.where rf = effective financing rate S =

5、spot rate if = interest rate of the foreign currency7Criteria Considered in the Financing DecisionInterest Rate Parity: if interest rate parity exists, the currency will exhibit a forward premium that offsets the differential between its interest rate and the home interest rate.The Forward Rate as a

6、 Forecast: If the forward rate is an unbiased predictor of the future spot rate, then the effective financing rate of a foreign currency will on average be equal to the domestic financing rate.Exchange Rate Forecasts: the firm can use exchange rate forecast in conjunction with foreign interest rate

7、to forecast the effective financing rate.8Financing with a Portfolio of CurrenciesFinancing with a Portfolio of CurrenciesVariance (risk) may be higherIf low interest rates prevail, probability of lower financing costs are possiblePortfolio Diversification EffectsWith diversification of currencies, lower financing costs are possible but currencies used must not be highly correlated Repeated Financing with a Currency Portfolio Solving the variance of a portfolios effective