International financial management - Essay Example

Forward contracts can be traded on recognized markets, whilst futures contracts can not Ans-9) (a). Enter into a 90-day forward contract to sell US Dollars for Euros Ans-10) (e). Insufficient data given to enable the calculation to be made Section B Q1 a) The political risk refers to the scenario where the economic yield would be influenced and undergoes due to the uncertain changes in political environment that cause volatility in the state (MCKELLAR, Robert, 2012, pp. 36). Any uncertain circumstances directly impact the investment returns that could be ranging from switching the governments, change in regulation bodies, amendments in foreign policy or military state of affairs (OVERHOLT, William H.

, 1982, pp.74 ). It is a common consensus that political risk cannot be measured but it can be assessed. This particular statement is quite right as political risk cannot be measured, because there is no method or tool available from which one can assess the level and proportion of risk found under political uncertainty (BRINK, Charlotte H, 2004,pp. 152). Political uncertainty has a definite has a definite effect over the long and short term strategy of the companies as a whole and this particular component is quite essential for the companies as far as generating net income is concerned (HOWELL, Llewellyn D.

, 2002, pp. 84). Number of time, it has been assessed that political problem is like to initiate soon but there is no tool which could be used in the assessment of the same. If we talk about United States of America (USA), then it is found that the internal politics of the company is quite safe and the proportion of any sort of political risk is quite minimal, while the external threats are quite high like the War on Terror (WOT) and the terrorist attack like 9/11 (THEODORE HARVEY MORAN, Gerald Thomas West, 2005, pp. 142). Analysts, even the individuals assessed this particular problem in total, but this particular problem cannot be measured quantifiably because of unavailability of any sophisticated method and tool of the same (HARMS, Philipp, 2000, pp. 186). b) Political risk can also be referred as “geopolitical risk” a factor, because of the longer the time span of the investment.

On account of the inadequate sample size or case study in order to confer the political risks of the individual countries is disreputably difficult to enumerate (HANS SIEGWART, Ivo G. Caytas, Julian I. Mahari, 1989, pp. 69). Hardly any of the political risk could be indemnified alongside by means of international institutions or other government agencies. As a result of political risks may directly have an effect on return on investment, and also restricted to eliminate the withdrawal of funds from investment capacity (O'LEARY, Michael Kent, 2004, pp. 37). Alternatively to this, there are many anti political risk strategies which are being considered to minimize the explicit threats and by implementing these strategies will cause greatly to meet the expectation and demands of overseas projects, find management and different contracts (WAGNER, Daniel, 1999, pp. 102). There are number of forms of political risk that could affect over the productivity of a company