15 May Kingdom of Saudi Arabia Ministry of Education Saudi Electronic University

College of Administrative and Financial Sciences

Assignment 3

FIN 406 (2nd Term 2021-2022)

Deadline: 22/05/2022 @ 23:59

For Instructor’s Use only

Instructions – PLEASE READ THEM CAREFULLY

· This assignment is an individual assignment.

· The Assignment must be submitted only in WORD format via allocated folder.

· Assignments submitted through email will not be accepted.

· Students are advised to make their work clear and well presented, marks may be reduced for poor presentation. This includes filling your information on the cover page.

· Students must mention question number clearly in their answer.

· Late submission will NOT be accepted.

· Avoid plagiarism, the work should be in your own words, copying from students or other resources without proper referencing will result in ZERO marks. No exceptions.

· All answered must be typed using Times New Roman (size 12, double-spaced) font. No pictures containing text will be accepted and will be considered plagiarism).

Submissions without this cover page will NOT be accepted.

You are required to provide a critical analysis of the following question in 1000 words. Use evidence and recent research results to support your answer. You should refer to the wider literature and real-life examples.

Should companies hedge their exposures to foreign exchange risk? Discuss both views critically and state your recommendation. Use relevant research results to support your answer.

In this assessment, the following learning outcomes will be covered:

LO 1. Demonstrate comprehensive knowledge of exchange rate systems and the interaction between exchange rates, interest rates and inflation

LO 2. Appreciate the types of risks faced by investors and multinational companies

LO 3. Apply and critically evaluate alternative techniques for managing foreign exchange risks

Answer: