International Finance

Explore how to calculate the real exchange rate by adjusting the nominal rate for inflation to compare real purchasing power and the effects of inflation differentials.

Explore how real exchange rates arise from nominal exchange rates and inflation differentials, showing how the dollar and yen move in real terms and affect cross-currency cash flows.

Explore relative purchasing power parity and how inflation differentials drive future exchange rates, with forecasts under PPP and the role of real exchange rates deflated for inflation.

Explore how interest rate parity links forward rates to nominal rate differentials and how the unbiased forward rates hypothesis predicts future spot rates, including covered and uncovered parity.

Explore money market hedges, forwards, and futures to hedge translation, transaction, and operating exposure, locking in cash flows while evaluating costs.

Explore how firms raise money internationally through cross-border equity and debt, including euro bonds and euro currency loans, and how hedging tools manage foreign exchange and interest risk.

Enhance returns per unit of risk via international diversification, shifting the efficient frontier and reducing firm specific and domestic market risks through global exposure and currency considerations.

Master the international cost of capital by calculating a project-level wacc from the cost of equity and debt, including beta, after-tax debt costs, and currency effects.

Explore capital budgeting and basic valuation by analyzing project cash flows, cost of capital, NPV and adjusted NPV, including financial side effects, growth options, and international considerations.

Explore country and political risk in international finance, detailing expropriation, nationalization, contract repudiation, exchange controls, and how to measure risk and adjust cash flows, probabilities, and discount rates.