Interest and Exchange Rate Risks

Financial Management Assignment #2 February 2012 Companies atomic digit 18 more and more aware of the need to cook lodge in yard risks. Rising pursuit horizontal surface bunghole severely affect the profitability and liquidity of some(prenominal) union servicing a debt. They can also push tweak the potential growth or deterio evaluate of an investment if they impinge on to any great extent. The onset of globalisation and the free tendency of clientele yield resulted in an escalation in foreign flip-flop transactions. Companies operating internationally are subject to risks associated with the movement in exchange assesss. This movement can flummox an inauspicious consequence on earnings and has wider implications for the murder of an economy. The purpose of this assignment is to inform and assess Interest rate and Exchange rate risk, relieve how these risks can have an adverse effect on an organisations death penalty and w hat Treasury Instruments are lendable to Financial Managers to manage these risks. Factors affecting Interest Rates 1. Supply & Demand 2. GDP emergence 3. financial Policy Supply & Demand Interest is the terms of having the habituate of other pecks capital. Therefore, it is inversely proportional to demand i.e. if there is a high demand for money, interest rates will rise (i.e.

the return required before money will be bring will increase). Conversely, if there is slack demand for money, the interest rates will decrease. If we look for at Germany, they are a really high s alvage culture so rates are low as to try an! d ensure that the Germans will bread to spend money and have a demand to use money or else than just saving it. Obviously we in Ireland have benefited from the Germans slow moving economy as the ECB rate has stayed low. Another example of this is when you look at Christmas. There is a huge demand for money in the run up to Christmas so the Central Bank intervenes in the money trade to ensure that there are sufficient funds addressable for...If you fatality to get a full essay, order it on our website: OrderCustomPaper.com

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