General Motors Essay

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Homework Feb 28: Case “Foreign Exchange Hedging Strategies at General Motors” Presentation & supporting (excel) files to be sent to my email address (mbetschinger@hse.ru) electronically by March 7, 8 a.m. (Friday morning). Late submissions are not considered. Organizational Issues: • • • I handed out the case in class (Feb 28). This is group work. Work should be evenly distributed. Group size: about 4 students. Answering format: Power point format. So you can answer using bullet points. Use tables/graphs to illustrate your answers. If you do excel calculations, please send me the excel files. A spread sheet is uploaded online with the tables in the appendices. Please note: Yen Exposure is wrong in Exhibit 6 – it is correct in the excel file and in the text (p.13) – a positive 900, not a negative 900. • • Grading includes: • Logic in reasoning • Class discussion General Idea: The case explores how a multinational firm manages its foreign exchange transaction and translation exposures. It also explores how competitive (also called operational or strategic) exposures arise in multinational firms, how they differ from other types of currency exposures, and how they can be measured and managed. Questions Question 1: a. What do you think of GM’s foreign exchange hedging policies? b. How would you advise them about possible changes to their policies? Question 2: a. What would happen to GM’s income statement if the Canadian dollar moved strongly, in either direction? (in the case you find more details of what Feldstein exactly would like to know) b. If GM does deviate from its formal policy for its CAD exposure, how should GM think about whether to use forwards or options for the deviation from the policy? (again, more specifics on what the treasury group would like to know are found in the case) c. Why is GM worried about the ARS exposure? What operational decisions

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