Summarize this:

Biological, Chemical, & Other Non-Nuclear Threats

Biological, chemical and other non-nuclear threats, such as cyber and drone attacks, constitute a class of weapons that may not cause as much mass physical destruction as nuclear weapons can, but can result in significant mass effects on, and/or mass disruptions to, a targeted populace. Weapons experts still debate whether these non-nuclear weapons can truly be considered weapons of mass destruction; however, certain types of biological weapons, such as weaponized smallpox or anthrax, could in principle harm millions of people depending on the scenario and the extent of the population’s exposure to the biological weapons. Chemical weapons under almost all circumstances would not result in massive harm to millions of people. Nonetheless, from a cost perspective, chemical weapons and even biological weapons are considerably less expensive than nuclear weapons. Still, chemical and biological weapons could have similar deterrent effects as nuclear weapons. Thus, from the viewpoint of many nation-states, chemical and biological weapons are so-called poor man’s nuclear weapons.

The Challenges of Reducing and Detecting These Threats

Addressing these threats is difficult because the weapons can be manufactured in ways that use civilian technology and materials. Furthermore, manufacturing them does not typically require large observable infrastructures to be established, thus making it hard to detect their production. While chemical and biological weapons are banned internationally via the Chemical Weapons Convention and Biological and Toxin Weapons Convention with the vast majority of nations as adherents, the world has witnessed that certain states, for example, Syria still have chemical weapons as well as suspected biological weapons. As of late 2013 through early 2014, the Syrian government has promised to dismantle its chemical weapons program.

FAS has had a long history in bringing leading chemical and biological experts to analyze these threats, educate policymakers and the public, and make recommendations to reduce the risks. For instance, FAS in recent years has created the Virtual Biosecurity Center (VBC) to provide a platform for education. FAS has also convened legal, scientific, and political experts in workshops such as a January 2014 workshop on bio-forensics to examine state-level options for response to biological threats or attacks. FAS seeks to further this work in chemical weapons assessments, as well. In particular, FAS has had expert analysis during the early phases of the chemical weapons crisis in Syria.

Other Non-Nuclear Threats

Weapons technologies other than nuclear, biological, and chemical weapons will most likely increasingly pose challenges for international security. For example, the increasing use of drones for both surveillance and armed attacks by the United States and a growing number of additional countries might lead to global and regional arms races in drone use or might result in asymmetric means of targeted opponents striking back. In addition, cyber-attacks as demonstrated by the use of Stuxnet to destroy and disable about 1,000 uranium enrichment centrifuges in Iran have raised concern about counter-cyber-attacks against the United States and its allies. Also in this threat area, we at FAS will investigate the use of prompt global strike advanced conventional weapons to achieve strategic purposes or to target terrorists and other non-state actors. FAS is expanding its network of experts to assess these and other non-nuclear threats can are present or could emerge in the future.

Mentari Inc. is a conglomerate company that has four subsidiaries located in Brunei, Malaysia, United Kingdom, and Switzerland. The exchange rates available for the company are MYR2.9000/BND, GBP0.4000/BND and BND1.2500/CHF. The following is the inter- subsidiary payments matrix for Mentari Inc in multiple currencies.

1. Convert all the cash flows into Brunei Dollar (BND) and fill in the table cells below to show the intersubsidiary payments matrix for Mentari Group. If the transaction cost is 2%, how much the company needs to pay (in BND) if they decided not to do any netting?

Transaction cost in BND with no netting:                                     

2. Perform multilateral netting by filling up the table below. If the transaction cost is 2%, how much the company needs to pay (in BND) if they decided to do multilateral netting?

Transaction cost in BND with multilateral netting:                                       

Suppose that the United Kingdom has no restriction on capital flows and wants to keep the value of GBP stable (i.e., no currency appreciation or depreciation). Under this framework, the United Kingdom also wants to adopt an expansionary monetary policy (i.e., lowering its interest rate) to stimulate its economy. Will the monetary policy be successful? Why? What would be the likely outcomes if the United Kingdom actually lowers its interest rate?

In this chapter, we examined the difference in educational attainment between first- and second-generation Hispanic Americans and Asian Americans based on the proportion of each group with a bachelor’s degree. We present additional data from the Pew Research Center’s 2013 report, measuring the percentage of each group that owns a home (Frankfort-Nachmias, & Leon-Guerrero, 2018, p. 231).

First-Generation Hispanic Americans (N = 899), 43% own a home Second-Generation Hispanic Americans (N = 351), 50% own a home First-Generation Asian Americans (N = 2,684), 58% own a home Second-Generation Asian Americans (N = 566), 51% own a home Source: Pew Research Center, Second-Generation Americans: A Portrait of the Adult Children of Immigrants. Pew Research Center, Washington, D.C. February 7, 2013. http://www.pewsocialtrends.org/2013/02/07/second-generation-americans/

Test whether there is a significant difference in the proportion of homeowners between first- and second-generation Hispanic Americans. Set alpha at 0.05. Test whether there is a significant difference in the proportion of homeowners between first- and second-generation Asian Americans. Set alpha at 0.01. Reference: Frankfort-Nachmias, C., & Leon-Guerrero, A. (2018). Social statistics for a diverse society (8th ed.). Thousand Oaks, CA: SAGE Publications, Inc.

Question 1 3 Points Is there a significant difference between first-and second-generation Hispanic American populations? Yes No

Question 2 3 Points What is the difference? -2.33 2.33 0.0198 0.07

Question 3 2 Points Is there a significant difference between first-and second-generation Asian populations? Yes No

Question 4 2 Points What is the difference? 3.50 -3.50 0.0004 0.07 In 2016, the Pew Research Center surveyed 1,799 white and 1,001 black Americans about their views on race and inequality. Pew researchers found “profound differences between black and white adults in their views on racial discrimination, barriers to black progress and the prospects for change.” White and black respondents also disagreed about the best methods to achieve racial equality. For example, 34% of whites and 41% of blacks said that “bringing people of different racial backgrounds together to talk about race” would be a very effective tactic for groups striving to help blacks achieve equality. Test whether the proportion of white respondents who support this tactic is significantly less than the proportion of black respondents.

Question 5 2 Points What is the null hypotheses? π₁ ≠ π₂ π₁ = π₂ μ1 = μ2 μ1 ≠ μ2

Question 6 2 Points What is the research hypotheses? π₁ ≠ π₂ π₁ = π₂ μ1 = μ2 μ1 ≠ μ2

Question 7 2 Points Calculate the Z statistic and test the hypothesis at the 0.05 level. What is the Z Statistic? 3.50 -3.50 0.0004 0.07

Question 8 2 Points What is your decision (step 5 in hypothesis testing)? Do you accept or reject the null hypothesis? Accept Reject We compare the proportion who indicated that it was “very important” to be born in this country to be American for two GSS 2014 groups: respondents (1) born in the United States (native born) and (2) not born in the United States (foreign born). Test the research hypothesis that a higher proportion of native-born respondents than foreign-born respondents indicated being born in the United States was “very important” to be American. Set alpha at 0.05.

Question 9 2 Points Do you accept or reject the null hypothesis? Accept Reject

Question 4 Suppose a study reports that the average price for a gallon of self-serve regular unleaded gasoline is $3.16. You believe that the figure is higher in your area of the country. You decide to test this claim for your area of the United States by randomly calling gasoline stations. Your random survey of 25 stations produces the following prices (all in dollars). Assume gasoline prices for a region are normally distributed. Did the data you obtained provide enough evidence to reject the claim? Use a 1% level of significance. Make sure you clearly state both the null and the alternative hypotheses in full sentences. Following your calculations, clearly state the conclusion in the same manner (do not simply say “accept/reject null”) and explain how you arrived at this conclusion (based on which metrics). 3.27 3.3 3.16 3.15 3.11 3.05 3.54 3.25 3.05 3.11 3.13 3.15 3.27 3.14 3.14 3.2 3.3 3.09 3.05 3.07 3.37 3.34 3.35 3.35 3.1 GB513: Business Analytics 3 of 5 Question 5 Where do CFOs get their money news? According to Robert Half International, 47% get their money news from newspapers, 15% get it from communication/colleagues, 12% get it from television, 11% from the Internet, 9% from magazines, 5% from radio, and 1% do not know. Suppose a researcher wants to test these results. She randomly samples 76 CFOs and finds that 40 of them get their money news from newspapers. Does the test show enough evidence to reject the findings of Robert Half International? Use a = .05. Make sure you clearly state both the null and the alternative hypotheses in full sentences. Following your calculations, clearly state the conclusion in the same manner (do not simply say “accept/reject null”) and explain how you arrived at this conclusion (based on which metrics). Question 6 To answer this question, use the Data Analysis Toolpack in Excel and select “t-Test: Two-Sample Assuming Equal Variances” from the list of available tools. Conduct a hypothesis test using this tool. Explain your answer (how you decided if men spend more or not) and include the output table. Some studies have shown that in the United States, men spend more than women buying gifts and cards on Valentine’s Day. Suppose a researcher wants to test this hypothesis by randomly sampling men and women with comparable demographic characteristics from various large cities across the United States to be in a study. Each study participant is asked to keep a log beginning 1 month before Valentine’s Day and record all purchases made for Valentine’s Day during that 1-month period. The resulting data are shown below. Use these data and a 1% level of significance to test to determine if, on average, men actually do spend significantly more than women on Valentine’s Day. Assume that such spending is normally distributed in the population and that the population variances are equal. Make sure you clearly state both the null and the alternative hypotheses in full sentences. Include the output table; then, clearly state the conclusion in the same manner (do not simply say “accept/reject null”) and explain how you arrived at this conclusion (based on which metrics). Men Women 107.48 125.98 143.61 59.32 90.19 96.35 125.53 80.62 70.79 77.6 83 84.34 129.63 75.21 154.22 68.48 GB513: Business Analytics 4 of 5 93.8 65.84 111.25 126.11 78.6 82.54 89.35 123.5

In the spring of 2009, an article from Bloomberg News summed up the situation that Starbucks was in: “After more than a decade of sensational buzz, Starbucks is struggling nationwide as it faces slowing sales growth and increased competition.” The initial success and later struggles of Starbucks are a familiar pattern for firms in monopolistically competitive markets. When Starbucks began rapidly expanding, CEO Howard Schultz knew that fresh-brewed coffee was widely available in restaurants, diners, and donut shops. He believed, though, that he had a strategy that would differentiate Starbucks from competitors: Starbucks would offer a European espresso bar atmosphere, with large, comfortable chairs, music playing, and groups of friends dropping in and out during the day. From the mid-1990s through the mid-2000s, this strategy worked very well, and Starbucks opened nearly 17,000 stores worldwide. But the profitability of Starbucks attracted competitors. Other nationwide chains, such as Caribou Coffee, Peet’s Coffee, and Diedrich Coffee, and regional chains, such as Dunn Brothers Coffee, provided stores with similar atmospheres, as did many individually owned coffeehouses. In addition, McDonald’s and Dunkin’ Donuts began competing more directly with Starbucks. Dunkin’ Donuts began building more upscale restaurants, and McDonald’s began selling espresso-based coffee drinks for prices considerably below those at Starbucks. Schultz was also worried that in opening thousands of coffeehouses worldwide, Starbucks had made the customers’ experience less distinctive and easier for competitors to copy. Beginning in 2010, Schultz managed a remarkable turnaround, with Starbucks’ sales and profits increasing. Some of the success was attributable to an expansion in overseas markets, where competition was not as strong as in the United States. By 2013, the firm had sales of more than $1 billion in Asia and planned to open thousands of additional stores in China. But the firm’s focus remained on staying one step ahead of its competition in the United States. The revival of Starbucks in the United States was based on several factors: The firm gave customers more freedom to customize drinks; it started a loyalty program that included free refills and other perks for regular customers; it started a mobile payment system that allowed customers to pay with a smartphone; and it provided stores with machines that brewed higher-quality coffees. Stephen Gillett, the firm’s chief information officer, improved in-store Wi-Fi so customers could use it without having to go through a logon screen and could get free access to content from sources such as the Wall Street Journal and USA Today, as well as see exclusive movie trailers. The objective was to keep customers in the store longer so they would buy more coffee. The customer loyalty program, by reducing the average price for frequent customers, helped fight the impression that Starbucks coffee was too expensive to buy a cup every day. By 2015, Starbucks strategy seemed to be working. The firm had expended to 22,000 stores in 66 countries. “Anyone who suggested in ’08 or ’09 that Starbucks was reaching saturation in the U.S. was just flat out wrong.” In a monopolistically competitive industry, maintaining profits in the long run is very difficult. Only by constantly innovating has Starbucks been able to return to profitability after several years of struggling with intense competition from other firms. Question An article in Forbes magazine in 2013 discussed the reasons for the ability of Starbucks to remain profitable despite competition. The author argued the most important reason for the firm’s success was “Right market segmentation. The company has stayed with the upper-scale of the coffee market, competing on comfort rather than convenience....”

a. What does the author mean by “market segmentation”?

b. What does the author mean by the “upper-scale” of the coffee market? Why might it be more difficult for other firms to compete with Starbucks in that segment of the coffeehouse market?

Why do you think the Ford-Mazda partnership has been so successful, while many others (including those at the beginning of the case) haven’t been? Case Study - A Successful Partnership at Ford-Mazda. Please anwers the question in minimun 200 words.

Case for Analysis:

A Successful Partnership at Ford-Mazda

While international joint ventures among auto manufacturers make great sense, often they don’t make great profits. For example, for many years, auto giant General Motors bailed out loss-plagued Isuzu, in which at one point it owned a 49 percent stake. The list of cross cultural disappointments goes on: Chrysler-Mitsubishi, Daimler-Chrysler, and Fiat-Nissan have all produced as much rancor as rewards.

Ford-Mazda is the exception. Their marriage has weathered disagreements over specific projects, trade disputes between Japan and the United States, and even allegations by the Big Three that Mazda and other Japanese rivals were dumping minivans in the United States. The alliance, founded when Ford stepped in to rescue the struggling Japanese carmaker in 1979, has stood firm for over 30 years. With Ford owning 11 percent of Mazda, the two companies have cooperated on several new vehicles and exchanged valuable expertise—Ford in international marketing and finance, Mazda in manufacturing and product development.

Ford and Mazda have worked jointly on several auto models; usually Ford would do most of the styling and Mazda would make key engineering contributions. Jointly worked cars include the Ford Escort and Mercury Tracer models, the subcompact Festiva, the sporty Ford Probe and Mercury Capri, and the Tribute and Explorer SUVs. The Ford-aided Mazdas are the MX-6, 323, Protégé, and Navajo. In all, approximately one of every four Ford cars sold in the United States has benefitted from some degree of Mazda involvement everything from manufacturing methods to steering designs whereas two of every five Mazdas has some Ford influence. The Ford-Mazda relationship extends beyond U.S. borders. In 2010, a joint venture between Ford and Mazda in Thailand began producing passenger cars export to several Asian countries. Ford and Mazda can call on some hard-learned principles for managing a successful strategic alliance, many of which would apply to ties in any industry. The secrets to the Ford-Mazda success are

Keep top management involved. The boss must set a tone for the relationship. Otherwise, middle managers will resist ceding partial control of a project to a partner.

Meet often, and often informally. Meetings should be at all levels and should include time for socializing. Trust can’t be built solely around a boardroom table.

Use a matchmaker. A third party can mediate disputes, suggest new ways of approaching the partner, and offer an independent sounding board.

Maintain your independence. Independence helps both parties hone the areas of expertise that made them desirable partners in the first place.

Allow no “sacrifice deals.” Every project must be viable for each partner. Senior management must see that an overall balance is maintained.

Appoint a monitor. Someone must take primary responsibility for monitoring all aspects of the alliance.

Anticipate cultural differences. Differences may be corporate or national. Stay flexible and try to place culturally sensitive executives in key posts.

Underlying these principles is the idea that benign neglect is no basis for a partnership. Or, as Ford president Phillip E. Benton Jr. stated, “There’s a lot of hard work in making it work.”

Assignment 2

CHAPTER 5

INTERNATIONAL PARITY RELATIONSHIPS AND

FORECASTING FOREIGN EXCHANGE RATES

PROBLEMS

PROBLEMS

1. Suppose that the treasurer of General Electric has an extra cash reserve of $10,000,000 to invest for six months. The six-month interest rate is 8 percent per annum in the United States and 7 percent per annum in France. Currently, the spot exchange rate is $1.40/€ and the six-month forward exchange rate is $1.44/€. The treasurer of General Electric does not wish to bear any exchange risk. Where should he/she invest to maximize the return?

2. While you were visiting Frankfurt, you purchased a BMW for €50,000, payable in three months. You have enough cash in U.S. dollars at your bank in New York City, which pays 0.35% interest per month, compounding monthly, to pay for the car. Currently, the spot exchange rate is $1.35/€ and the three-month forward exchange rate is $1.30/€. In Frankfurt, the money market interest rate is 2.0% for a three-month investment. There are two alternative ways of paying for your BMW.

(a) Keep the funds at your bank in the U.S. and buy €50,000 forward.

(b) Buy a certain euro amount spot today and invest the amount in Germany for three months so that the maturity value becomes equal to €50,000.

Evaluate each payment method. Which method would you prefer? Why?

3. Currently, the spot exchange rate is $1.50/£ and the three-month forward exchange rate is $1.53/£. The three-month interest rate is 8.0% per annum in the U.S. and 5.8% per annum in the U.K. Assume that you can borrow as much as $1,500,000 or £1,000,000.

a. Determine whether the interest rate parity is currently holding.

b. If the IRP is not holding, how would you carry out covered interest arbitrage? Show all the steps and determine the arbitrage profit.

c. Explain how the IRP will be restored as a result of covered arbitrage activities.

4. Suppose that the current spot exchange rate is €0.80/$ and the three-month forward exchange rate is €0.7813/$. The three-month interest rate is 8 percent per annum in the United States and 5.40 percent per annum in France. Assume that you can borrow up to $1,000,000 or €800,000.

a. Show how to realize a certain profit via covered interest arbitrage, assuming that you want to realize profit in terms of U.S. dollars. Also determine the size of your arbitrage profit.

b. Assume that you want to realize profit in terms of euros. Show the covered arbitrage process and determine the arbitrage profit in euros.

5. In the issue of October 23, 1999, the Economist reports that the interest rate per annum is 5.93% in the United States and 70.0% in Turkey. Why do you think the interest rate is so high in Turkey? Based on the reported interest rates, how would you predict the change of the exchange rate between the U.S. dollar and the Turkish lira?

8. Suppose that the current spot exchange rate is €1.50/₤ and the one-year forward exchange rate is €1.58/₤. The one-year interest rate is 6.0% in euros and 5.2% in pounds. You can borrow at most €1,000,000 or the equivalent pound amount, i.e., ₤666,667, at the current spot exchange rate.

1. Show how you can realize a guaranteed profit from covered interest arbitrage. Assume that you are a euro-based investor. Also determine the size of the arbitrage profit.
2. Discuss how the interest rate parity may be restored as a result of the above

      transactions.

3. Suppose you are a pound-based investor. Show the covered arbitrage process and

      determine the pound profit amount

Considering the calculations you have done so far, you need to attend to a number of import and export transactions for goods that companies in the United States expressed interest in.

The first transaction is for the import of good quality wines from Australia, since a retail liquor trading chain customer in the United States, for who you have been doing imports over the past five years has a very large order this time. The producer in Australia informed you that the current cost of the wine that you want to import is AUD$2,500,000. The producer in Australia will only ship goods in three months’ time due to seasonal differences but payment will have to be conducted six months from now.

The second transaction is for the export of 3d printers manufactured in the U.S.A. The country where it will be exported to is Canada. The payment of CAD 2,500,000 for the export to Canada will be received nine months from now.

You consider different transaction hedges, namely forwards, options and money market hedges.

You are provided with the following quotes from your bank, which is an international bank with branches in all the countries:

Forward rates:

Bank applies 360 day-count convention to all currencies (for this assignment apply 360 days in all calculations).

Annual borrowing and investment rates for your company:

Bank applies 360 day-count convention to all currencies. Explanation – e.g. 3 month borrowing rate on $ = 2.687%. This is the annual borrowing rate for 3 months. If you only borrow for 3 months the interest rate is actually 2.687%/4 = 0.67175% (always round to 5 decimals when you do calculations). Furthermore, note that these are the rates at which your company borrows and invests. The rates are not borrowing and investment rates from a bank perspective.

Option prices:

Bank applies 360 day-count convention to all currencies. (Students also have to apply 360 days in all calculations). Option premium calculations should include time value calculations based on US $ annual borrowing interest rates for applicable time periods e.g. 3 month $ option premium is subject to 2.687%/4 interest rate.)

a. Calculate the cost of money market hedges for the imports from Australia (Complete Table 3 on the separate answer sheet)

Table 3: Australia import cost with money market hedge:

Review the Point/Counterpoint at the end of Chapter 45. Do you agree with the Yes or No groups? Why?