Reading 17: The Exchange Rate and Balance of Payments - LO company, banking, searching, investment, class

mayanfang1

Q1. David Kirk, CFA, is an analyst on the global equities desk for a large investment banking company in New York. Kirk is searching for investment opportunities in companies that operate in relatively economically undeveloped countries. He is currently researching possible investments in businesses located in Wayland, a small emerging country located in Eastern Europe. Wayland has significant coal deposits within its borders, and is a leading producer in the region. Kirk’s interest in the country stems from the fact that Wayland has recently emerged an as independent nation after centuries of rule by a larger country. Wayland is in the early stages of government formation, although many of its elected leaders are experienced, having served under the previous government.

Kirk is not a risk-averse investor, but realizes that opportunities in Wayland may have some unique features. For example, the government of Wayland is considering putting some type of trade restrictions in place to protect the country’s leading industry, the production of coal. Government officials want to ensure that the industry, which is quasi-governmental, is shielded from lower cost importers from surrounding countries. At the same time, the government wants to encourage growth and development in other industries so that in the future, the country’s economy is not dependent upon one industry. Kirk wants to explore the short- and long-term implications of any trade restrictions the government may enact.

Also, Kirk plans on performing a thorough analysis of the government of Wayland’s anticipated approach toward monetary policy. With an expected increase in international trade, the country’s central bank must more carefully manage the country’s balance of payments accounts. The current exchange rate for W$, the national currency of Wayland, is W$125/

mayanfang1

答案和详解如下：

Q1. David Kirk, CFA, is an analyst on the global equities desk for a large investment banking company in New York. Kirk is searching for investment opportunities in companies that operate in relatively economically undeveloped countries. He is currently researching possible investments in businesses located in Wayland, a small emerging country located in Eastern Europe. Wayland has significant coal deposits within its borders, and is a leading producer in the region. Kirk’s interest in the country stems from the fact that Wayland has recently emerged an as independent nation after centuries of rule by a larger country. Wayland is in the early stages of government formation, although many of its elected leaders are experienced, having served under the previous government.

Kirk is not a risk-averse investor, but realizes that opportunities in Wayland may have some unique features. For example, the government of Wayland is considering putting some type of trade restrictions in place to protect the country’s leading industry, the production of coal. Government officials want to ensure that the industry, which is quasi-governmental, is shielded from lower cost importers from surrounding countries. At the same time, the government wants to encourage growth and development in other industries so that in the future, the country’s economy is not dependent upon one industry. Kirk wants to explore the short- and long-term implications of any trade restrictions the government may enact.

Also, Kirk plans on performing a thorough analysis of the government of Wayland’s anticipated approach toward monetary policy. With an expected increase in international trade, the country’s central bank must more carefully manage the country’s balance of payments accounts. The current exchange rate for W$, the national currency of Wayland, is W$125/

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