Real World Applications 8

Let’s use a hypothetical manufacturing company, Daewoo, for the assignment. Daewoo is an American automobile manufacturing company that makes cars in the U.S. and sells in the U.K. market. Assume that a majority of its revenue comes from the U.K. market. Read the attached article, and answer the following questions.

• Monetary Policy: Did the Bank of England increase or decrease interest rates? What is the purpose of the policy move, and what is its risk? How would it impact Daewoo’s profits? What should the company do?

The Bank of England increased it’s interest rates. Noted rates raised a half percentage this pas Thursday to 2.25% which is the highest it has been since 2008. The purpose of the policy move is benefit the company in the long run and make sure it keeps going uohill. Some risks are the company experiencing a downfall financially and their plan not working in their favor.

• Foreign Exchange Risk: Is the British Pound increasing or decreasing in value against the U.S. Dollar? What would that mean for Daewoo’s profits? What should the company do?

The britih pound is rising in value against the U.S. dollar. Stated it rose 9.9 percent in August from a year earlier. This does not support Daewoo’s in profiting well and I believe The Bank of Endland should put their contigency plan into action under their medium/severe categories.

What if Daewoo made cars in the U.K. to sell in the U.S. market? How would your answer above change? Elaborate.

If Daewoo made cars in the U.K. to sell in the U.S. market my answer would change to his profits would be increasing as the U.K. dollar is less than the U.S. dollar.

Place your answer here