Question

2. Why was Volkswagen so vulnerable to the change in the value of the Euro against...

2. Why was Volkswagen so vulnerable to the change in the value of the Euro against the US Dollar relative to the US Dollar?

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Over time, Euro/Dollar exchange rate is rising, signifying an appreciation of Euro with respect to dollars. Volkswagen is based out of Germany whose domestic currency is Euro. When domestic currency appreciates, domestically-produced exportable goods become costlier in global market and less competitive. Export demand, therefore, falls. In this case, export sales of Volkswagen outside Germany (and other EU countries) will decrease, lowering sales and profit of Volkswagen.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
1. What is hedging? Explain how Volkswagen's failure to fully protect itself against foreign exchange fluctuations...
1. What is hedging? Explain how Volkswagen's failure to fully protect itself against foreign exchange fluctuations had a negative effect on the company? What can Volkswagen and other companies learn from this experience? 2. Why was Volkswagen so vulnerable to the change in the value of the Euro against the US Dollar relative to the US Dollar? 3. In 2015 and 2016 strong dollar affected several US companies. Please see the one of the examples in the following links (2015...
Why has the euro depreciated so much against the U.S. dollar in recent years?
Why has the euro depreciated so much against the U.S. dollar in recent years?
The C$ recently quoted against $0.9850/C$ suddenly changes to $0.9725/C$. What is the percentage change in...
The C$ recently quoted against $0.9850/C$ suddenly changes to $0.9725/C$. What is the percentage change in the value of C$? The bid and ask quotes of spot US dollar are C$1.0450/$ and C$ 1.0475/$ respectively. The corresponding bid-ask quote for C$ in terms U.S dollar are? The $/Euro exchange is Euro1=$1.38 and the $/Euro= $0.9450. What’s the cross-rate exchange C$/Euro Rate?
Suppose that, given the current uncertainty in the US market, an appreciation of the euro against...
Suppose that, given the current uncertainty in the US market, an appreciation of the euro against the dollar is expected in the next year: Select one: this would lead to an appreciation of the dollar today this would lead to an appreciation of the euro today this would not affect today's exchange rate
In which of the following scenarios does the firm benefit from the Euro (EUR) depreciating against...
In which of the following scenarios does the firm benefit from the Euro (EUR) depreciating against the US Dollar (USD)? A. A US firm expects to receive 10 million Euros in one month B. A US corporation needs to make a principal payment on a 2 million Euro loan next week. C. None of the above D. All of the above E. A US firm is planning to sell a machine to a European supplier next year
Suppose you are focusing on the $ vs. euro relation. Today’s exchange rate is €0.909/$ or...
Suppose you are focusing on the $ vs. euro relation. Today’s exchange rate is €0.909/$ or $1.10/€. What would you expect about the value of $ against euro if the future change in the inflation in US turns out to be higher than that in Euro zone? Why? (10 pts)
Investors expect that the exchange rate between the euro and the US dollar will change from...
Investors expect that the exchange rate between the euro and the US dollar will change from 1 euro = $1.22 to 1 euro = $1.15. Show what investors (European or US investors) make arbitrage profits. Assume that the interest rate for both markets is 6%. You may choose any amount for the initial investment.
Right now, the US dollar is relatively close in value to the euro ($1.10 = 1...
Right now, the US dollar is relatively close in value to the euro ($1.10 = 1 e). There is some speculation that we may be seeing some inflation in the United States in the near future. If the rate of inflation stays the same in the European Union and increases in the US, what can we expect will happen to the exchange rate between the Euro and the US dollar? Moreover, suppose that central banks neither in the United States...
You are given the following information on American options for the Euro against the US dollar,...
You are given the following information on American options for the Euro against the US dollar, unless otherwise stated Compute the profit or loss for each alternative. Provide computational support for your final answers. Type of Option Maturity (days) Strike Price $/Euro) Option premium (% of strike price) Spot rate, $/Euro (on day) Profit/loss CALL 45 1.4000 4 1.5000 (44) PUT (European) 75 1.7000 7 1.6500 (72) CALL (European) 75 1.8500 6 1.9500 (75)
According to a textbook for relative PPP “It asserts that prices and exchange rates change in...
According to a textbook for relative PPP “It asserts that prices and exchange rates change in a way that preserves the ratio of each currency’s domestic and foreign purchasing powers. If the U.S. price level rises by 10 percent over a year while Europe’s rises by only 5 percent, for example, relative PPP predicts a 5 percent depreciation of the dollar against the euro. The dollar’s 5 percent depreciation against the euro just cancels the 5 percent by which U.S....
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT