A United Kingdom firm is planning to hedge an import payment of USD 10 million dollars due in 9 months (i.e. the firm will expect to pay the US $10 million in 9 months-time). The spot rate is 1 UK = 1.25 USD. Note: UK = UK pounds. USD = US Dollars. The 9-month forward rate is 1 UK = 1.2575 USD. The nine-month interest rate for borrowing (and lending) in the United Kingdom (UK) is 1.00% p.a. and in the United States (US) is 2.60% p.a. respectively. All interest rates are continuously compounded rates. Required: What is the best way for the company to hedge its future USD payment or cash outflow? Of the two possible alternative options to hedge the USD payment how much better off in UK pounds are you under the best option at time t = 9 months hence? Assume the firm can borrow or lend UK pounds and / or US dollars at the interest rates quoted above and also transact at the quoted spot and forward rates. If necessary state any other assumptions you make.

a. option one .. option two .. b. How much better off in UK pounds are you under the best option at time t = 9 months hence?

A movie theater company wants to see if there is a difference in the average movie ticket sales in San Diego and Portland per week. They sample 20 sales from San Diego and 20 sales from Portland over a week. Test the claim using a 5% level of significance. Assume the variances are unequal and that movie sales are normally distributed.

Choose the correct decision and summary based on the p-value.

• A. Do not reject H_0. There is evidence that the average movie ticket sales in San Diego and Portland per week differ.
• B. Reject H₀. There is no evidence that the average movie ticket sales in San Diego and Portland per week differ.
• C. Reject H₀. There is evidence that the average movie ticket sales in San Diego and Portland per week differ.
• D. Do not reject H₀. There is no evidence that the average movie ticket sales in San Diego and Portland per week differ.

A movie theater company wants to see if there is a difference in the average movie ticket sales in San Diego and Portland per week. They sample 20 sales from San Diego and 20 sales from Portland over a week. Test the claim using a 5% level of significance. Assume the variances are unequal and that movie sales are normally distributed.

Choose the correct decision and summary based on the p-value.

• A.

  Do not reject H_0. There is evidence that the average movie ticket sales in San Diego and Portland per week differ.

• B.

  Reject H₀. There is no evidence that the average movie ticket sales in San Diego and Portland per week differ.

• C.

  Reject H₀. There is evidence that the average movie ticket sales in San Diego and Portland per week differ.

• D.

  Do not reject H₀. There is no evidence that the average movie ticket sales in San Diego and Portland per week differ.

Please assist with the following question:

A home theater in a box is the easiest and cheapest way to provide surround sound for a home entertainment center. A sample of prices is shown here (Consumer Reports Buying Guide, 2004). The prices are for models with a DVD player and for models with a DVD player.

1

1. Compute the mean price for models with a DVD player and the mean price for models without a DVD player. What is the additional price paid to have a DVD player included in a home theater unit?

2. Compute the range, variance, and standard deviation for the two samples. What does this information tell you about the prices for models with and without a DVD player?

MLB Salaries:

A movie theater company wants to see if there is a difference in the average movie ticket sales in San Diego and Portland per week. They sample 20 sales from San Diego and 20 sales from Portland over a week. Test the claim using a 5% level of significance. Assume the variances are unequal and that movie sales are normally distributed.

Choose the correct decision and summary based on the p-value.

• A.

  Do not reject H_0. There is evidence that the average movie ticket sales in San Diego and Portland per week differ.

• B.

  Reject H₀. There is no evidence that the average movie ticket sales in San Diego and Portland per week differ.

• C.

  Reject H₀. There is evidence that the average movie ticket sales in San Diego and Portland per week differ.

• D.

  Do not reject H₀. There is no evidence that the average movie ticket sales in San Diego and Portland per week differ.

. Wal-Mart’s Foreign Expansion Wal-Mart, the world’s largest retailer, has built its success on a strategy of everyday low prices, and highly efficient operations, logistics, and information systems that keeps inventory to a minimum and ensures against both overstocking and understocking. The company employs some 2.1 million people, operates 4,200 stores in the United States and 3,600 in the rest of the world, and generates sales of almost $400 billion (as of fiscal 2008). Approximately $91 billion of these sales were generated in 15 nations outside of the United States. Facing a slowdown in growth in the United States, Wal-Mart began its international expansion in the early 1990s when it entered Mexico, teaming up in a joint venture with Cifra, Mexico’s largest retailer, to open a series of supercenters that sell both groceries and general merchandise. Initially the retailer hit some headwinds in Mexico. It quickly discovered that shopping habits were different. Most people preferred to buy fresh produce at local stores, particularly items like meat, tortillas and pan dulce which didn’t keep well overnight (many Mexicans lacked large refrigerators). Many consumers also lacked cars, and did not buy in large volumes as consumers in the United States did. WalMart adjusted its strategy to meet the local conditions, hiring local managers who understood Mexican culture, letting those managers control merchandising strategy, building smaller stores that people could walk to, and offering more fresh produce. At the same time, the company believed that it could gradually change the shopping culture in Mexico, educating consumers by showing them the benefits of its American merchandising culture. After all, Wal-Mart’s managers reasoned, people once shopped at small stores in the United States, but starting in the 1950s they increasingly gravitated towards large stores like WalMart. As it built up its distribution systems in Mexico, Wal-Mart was able to lower its own costs, and it passed these on to Mexican consumers in the form of lower prices. The customization, persistence, and low prices paid off. Mexicans started to change their shopping habits. Today Wal-Mart is Mexico’s largest retailer and the country is widely considered to be the company’s most successful foreign venture. Next Wal-Mart expanded into a number of developed nations, including Britain, Germany and South Korea. There its experiences have been less successful. In all three countries it found itself going head to head against well-established local rivals who had nicely matched their offerings to local shopping habits and consumer preferences. Moreover, consumers in all three countries seemed to have a preference for higher quality merchandise and were not as attracted to Wal-Mart’s discount strategy as consumers in the United States and Mexico. After years of losses, Wal-Mart pulled out of Germany and South Korea in 2006. At the same time, it continued to look for retailing opportunities elsewhere, particularly in developing nations where it lacked strong local competitors, where it could gradually alter the shopping culture to its advantage, and where its low price strategy was appealing. Recently, the centerpiece of its international expansion efforts has been China. Wal-Mart opened its first store in China in 1996, but initially expanded very slowly, and by 2006 had only 66 stores. What Wal-Mart discovered, however, was that the Chinese were bargain hunters, and open to the low price strategy and wide selection offered at Wal-Mart stores. Indeed, in terms of their shopping habits, the emerging Chinese middle class seemed more like Americans than Europeans. But to succeed in China, Wal-Mart also found it had to adapt its merchandising and operations strategy to mesh with Chinese culture. One of the things that Wal-Mart has learned is that Chinese consumers insist that food must be freshly harvested, or even killed in front of them. Wal-Mart initially offended Chinese consumers by trying to sell them dead fish, as well as meat packed in Styrofoam and cellophane. Shoppers turned their noses up at what they saw as old merchandise. So Wal-Mart began to display the meat uncovered, installed fish tanks into which shoppers could plunge fishing nets to pull out their evening meal, and began selling live turtles for turtle soup. Sales soared. Wal-Mart has also learned that in China, success requires it to embrace unions. Whereas in the United States Wal-Mart has vigorously resisted unionization, it came to the realization that in China unions don’t bargain for labor contracts. Instead, they are an arm of the state, providing funding for the Communist Party and (in the government’s view) securing social order. In mid- 2006 Wal-Mart broke with its long standing antagonism to unions and agreed to allow unions in its Chinese stores. Many believe this set the stage for Wal-Mart’s most recent move, the purchase in December 2006 of a 35 percent stake in the Trust-Mart chain, which has 101 hypermarkets in 34 cities across China. Now Wal-Mart has proclaimed that China lies at the center of its growth strategy. By early 2009 Wal-Mart had some 243 stores in the country, and despite the global economic slowdown, the company insists that it will continue to open new stores in China at a “double digit rate.”

Case Discussion Questions

1. Do you think Wal-Mart could translate its merchandising strategy wholesale to another country and succeed? If not, why not?

2. Why do you think Wal-Mart was successful in Mexico?

3. Why do you think Wal-Mart failed in South Korea and Germany? What are the differences between these countries and Mexico?

4. What must Wal-Mart do to succeed in China? Is it on track?

Choose the study design that best fits the following description: Incidence rates of early stage prostate cancer in the United States were compared in every consecutive year from 2005 to 2012. It was discovered that incidence rates had decreased along with PSA testing, following the 2008 U.S. Preventive Services Task Force recommendation against PSA testing for average risk older men

a) Cross Sectional Study

b) Prospective Cohort Study

c) Ecologic Study

d) Case Control Study

e) Randomized Clinical Trial

f) Retrospective Cohort Study

Discuss the pros and cons of international trade.

In the 2016 presidential campaign, Donald Trump said that the United States should reconsider its trade agreements, including the North American Free Trade Agreement (NAFTA).

To complete the Discussion activity, write a post that answers the following questions:

• Find out why President Trump proposed renegotiating NAFTA. Provide two arguments for doing so.
  • Analyze these arguments using the concepts of absolute advantage, opportunity cost, and comparative advantage.
  • Do you think comparative advantage and absolute advantage are the best reasons for seeking trade with others? Why or why not?

13. Suppose the Federal Reserve increases the U.S. money supply in an effort to prevent the U.S. economy from slipping further into recession.

a. According to the Quantity Theory of Money, what will the increased money supply do to the price of goods in the United States in the long run, all else equal?

b. According the theory of PPP, what will happen to the exchange value of the U.S. dollar as a result, all else equal? In particular, would you expect the dollar to appreciate or depreciate against foreign currencies?

c. According to PPP, what will happen to the real cost paid by foreigners for U.S. products?