Baker Case and Wb

Baker case

1-

Revenue in BRL 104,338.30

Exchange rate (feb ’06) 0.4636 BRL/$

=45574.96944

R. Exchange rate (jun ’06) 0.4368 BRL/$

= 45574.97

There is a loss of 2796.27 usd

2-

They could increase the price in order to try and cover the risk, or asking them to pay in USD. Another option could be hedging (money market or fwd)

3-

New quantity requested 1815 units

*86.23

=156502 BRL

0.4234 expected in Sept ’06

=66262.94

/(1+2.145)

=64871.32 PV

4-

BRL 3 month forward (sell)

156502 BRL

*0.4227 BRL/$

= 66153.3954

/1.021452

=62115.86 PV

Money market borrow 146950.234 BRL

6.5% / 3 month

= 146950.234 BRL

*0.4368 BRL/$

= 64187.86

5-

The one that gives the company the most profit would be the money market, so it’s the one they should choose

6-

There could be losses in the process of changing rates in the market; the money market is risk free because the spot rate does not change but in the forward there is.

1. Which institutions are part of the world bank?

• •

The African Development Bank

• • The Asian Development Bank

• • The European Bank for Reconstruction and Development

• • The Inter-American Development Bank Group

• •

The European Commission (EC) and The European Investment Bank (EIB)

• • International Fund for Agricultural Development (IFAD)

• • The Islamic Development Bank (IDB)

• •