Hedging Currency Risks at Aifs Case Questions

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Session 4 CASE Questions

Innocents Abroad: Currencies and International Stock Returns

The goal of this case is to help Sandra Meyer develop a presentation to address Henry Bosse’s concerns about international investments. The general idea is to demonstrate to Henry the benefits of international diversification, if any. To achieve this goal, you need to have a view on 1) the impact of foreign exchange (FX) rates on the return and risk of international investments, and 2) the impact of having more assets on the return and risk of the investment portfolio To form views on these two points, answer the following questions: I. The impact of FX rates on the risk and return of foreign investments 1a) Using data in Appendix A, calculate the
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Questions 1) Should PDVSA use traditional (internal) finance or project (external) finance to fund the Petrozueta development?


Why use project financing?


Identify and assess the project operating risks: 3.1 Analyze the pre-completion risks 3.2 Analyze the post-completion risks 3.3 Analyze the sovereign risks, including, macro-economic, political and legal risks


Identify and assess the project financial risks


Provide a qualitative assessment of how much leverage should the project have


Does Petrozuata’s financing strategy make sense?


Which rating do you think Petrozuata’s bonds will

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