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International Financial Management

14th Edition

Jeff Madura Florida Atlantic University

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Printed in United State of America Print Number: 01 Print Year: 2020

© 2021, 2018 Cengage Learning, Inc.International Financial Management, Fourteenth Edition Jeff Madura

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Copyright 2021 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.

WCN: 02-300

iii

PART 1: The International Financial Environment 1 1 Multinational Financial Management: An Overview 3 2 International Flow of Funds 31 3 International Financial Markets 61 4 Exchange Rate Determination 101 5 Currency Derivatives 131

PART 2: Exchange Rate Behavior 185 6 Government Inf luence on Exchange Rates 187 7 International Arbitrage and Interest Rate Parity 227 8 Relationships among Inf lation, Interest Rates, and Exchange Rates 259

PART 3: Exchange Rate Risk Management 297 9 Forecasting Exchange Rates 299 10 Measuring Exposure to Exchange Rate Fluctuations 325 11 Managing Transaction Exposure 355 12 Managing Economic Exposure and Translation Exposure 393

PART 4: Long-Term Asset and Liability Management 413 13 Direct Foreign Investment 415 14 Multinational Capital Budgeting 435 15 International Corporate Governance and Control 475 16 Country Risk Analysis 501 17 Multinational Capital Structure and Cost of Capital 525 18 Long-Term Debt Financing 551

PART 5: Short-Term Asset and Liability Management 575 19 Financing International Trade 577 20 Short-Term Financing 595 21 International Cash Management 611

Appendix A: Answers to Self-Test Questions 643 Appendix B: Supplemental Cases 656 Appendix C: Using Excel to Conduct Analysis 676 Appendix D: International Investing Project 684 Appendix E: Discussion in the Boardroom 687 Appendix F: Use of Bitcoin to Conduct International Transactions 695 Glossary 698 Index 705

Brief Contents

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v

Preface, xvii

About the Author, xxiii

PART 1: The International Financial Environment 1

1: MuLTInATIonAL FInAncIAL MAnAgEMEnT: An ovERvIEw 3 1-1 Managing the MNC, 4

1-1a How Business Disciplines Are Used to Manage the MNC, 4 1-1b Agency Problems, 4 1-1c Management Structure of an MNC, 6

1-2 Why MNCs Pursue International Business, 8 1-2a Theory of Comparative Advantage, 8 1-2b Imperfect Markets Theory, 8 1-2c Product Cycle Theory, 9

1-3 Methods to Conduct International Business, 10 1-3a International Trade, 10 1-3b Licensing, 10 1-3c Franchising, 10 1-3d Joint Ventures, 10 1-3e Acquisitions of Existing Operations, 11 1-3f Establishment of New Foreign Subsidiaries, 11 1-3g Summary of Methods, 12

1-4 Valuation Model for an MNC, 13 1-4a Domestic Valuation Model, 13 1-4b Multinational Valuation Model, 14 1-4c Uncertainty Surrounding an MNC’s Cash Flows, 17 1-4d How Uncertainty Affects the MNC’s Cost of Capital, 20

1-5 Organization of the Text, 20

2: InTERnATIonAL FLow oF FundS 31 2-1 Balance of Payments, 31

2-1a Current Account, 31 2-1b Financial Account, 32 2-1c Capital Account, 33

2-2 Growth in International Trade, 34 2-2a Events That Increased Trade Volume, 34 2-2b Impact of Outsourcing on Trade, 36 2-2c Trade Volume among Countries, 37 2-2d Trend in U.S. Balance of Trade, 37

2-3 Factors Affecting International Trade Flows, 39 2-3a Cost of Labor, 40 2-3b Inf lation, 40 2-3c National Income, 40

Contents

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vi Contents

2-3d Credit Conditions, 41 2-3e Government Policies, 41 2-3f Exchange Rates, 46

2-4 International Capital Flows, 49 2-4a Factors Affecting Direct Foreign Investment, 49 2-4b Factors Affecting International Portfolio Investment, 50 2-4c Impact of International Capital Flows, 50

2-5 Agencies that Facilitate International Flows, 51 2-5a International Monetary Fund, 52 2-5b World Bank, 53 2-5c World Trade Organization, 53 2-5d International Finance Corporation, 54 2-5e International Development Association, 54 2-5f Bank for International Settlements, 54 2-5g OECD, 54 2-5h Regional Development Agencies, 54

3: InTERnATIonAL FInAncIAL MARkETS 61 3-1 Foreign Exchange Market, 61

3-1a History of Foreign Exchange, 62 3-1b Foreign Exchange Transactions, 63 3-1c Foreign Exchange Quotations, 68 3.1d Derivative Contracts in the Foreign Exchange Market, 72

3-2 International Money Market, 73 3-2a Dollar-Denominated Bank Accounts in Europe and Asia, 74 3-2b Money Market Interest Rates among Currencies, 74 3-2c Risk of International Money Market Securities, 75

3-3 International Credit Market, 76 3-3a Syndicated Loans in the Credit Market, 76

3-4 International Bond Market, 76 3-4a Eurobond Market, 77 3-4b Development of Other Bond Markets, 78 3-4c Risk of International Bonds, 78

3-5 International Stock Markets, 79 3-5a Issuance of Stock in Foreign Markets, 79 3-5b Issuance of Foreign Stock in the United States, 79 3-5c How Governance Varies among Stock Markets, 81 3-5d Integration of International Stock Markets and Credit Markets, 82

3-6 International Financial Market Crises, 82 3-6a Contagion Effects, 83

3-7 How Financial Markets Serve MNCs, 85 Appendix 3: Investing in International Financial Markets, 93

4: ExchAngE RATE dETERMInATIon 101 4-1 Measuring Exchange Rate Movements, 101 4-2 Exchange Rate Equilibrium, 102

4-2a Demand for a Currency, 103 4-2b Supply of a Currency for Sale, 104 4-2c Equilibrium Exchange Rate, 105 4-2d Change in the Equilibrium Exchange Rate, 106

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Contents v i i

4-3 Factors That Inf luence Exchange Rates, 108 4-3a Relative Inf lation Rates, 108 4-3b Relative Interest Rates, 110 4-3c Relative Income Levels, 111 4-3d Government Controls, 112 4-3e Expectations, 112 4-3f Interaction of Factors, 113 4-3g Inf luence of Factors across Multiple Currency Markets, 115 4-3h Impact of Liquidity on Exchange Rate Adjustments, 115

4-4 Movements in Cross Exchange Rates, 116 4-5 Capitalizing on Expected Exchange Rate Movements, 118

4-5a Institutional Speculation Based on Expected Appreciation, 118 4-5b Institutional Speculation Based on Expected Depreciation, 119 4-5c Speculation by Individuals, 119 4-5d Carry Trades, 120

5: cuRREncy dERIvATIvES 131 5-1 Forward Market, 131

5-1a How MNCs Use Forward Contracts, 131 5-1b Bank Quotations on Forward Rates, 132 5-1c Premium or Discount on the Forward Rate, 133 5-1d Movements in the Forward Rate over Time, 134 5-1e Offsetting a Forward Contract, 134 5-1f Using Forward Contracts for Swap Transactions, 135 5-1g Non-deliverable Forward Contracts, 135

5-2 Currency Futures Market, 136 5-2a Contract Specifications, 136 5-2b Trading Currency Futures, 137 5-2c Credit Risk of Currency Futures Contracts, 138 5-2d Comparing Currency Futures and Forward Contracts, 138 5-2e How MNCs Use Currency Futures, 139 5-2f Speculation with Currency Futures, 140

5-3 Currency Options Market, 142 5-3a Currency Options Exchanges, 142 5-3b Over-the-Counter Currency Options Market, 142

5-4 Currency Call Options, 142 5-4a Factors Affecting Currency Call Option Premiums, 143 5-4b How MNCs Use Currency Call Options, 144 5-4c Speculating with Currency Call Options, 145

5-5 Currency Put Options, 148 5-5a Factors Affecting Currency Put Option Premiums, 149 5-5b How MNCs Use Currency Put Options, 149 5-5c Speculating with Currency Put Options, 150

5-6 Other Forms of Currency Options, 152 5-6a Conditional Currency Options, 152 5-6b European Currency Options, 154

Appendix 5A: currency option Pricing, 165

Appendix 5B: currency option combinations, 169

Part 1 Integrative Problem: The International Financial Environment, 183

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viii Contents

PART 2: Exchange Rate Behavior 185

6: govERnMEnT InFLuEncE on ExchAngE RATES 187 6-1 Exchange Rate Systems, 187

6-1a Fixed Exchange Rate System, 187 6-1b Freely Floating Exchange Rate System, 189 6-1c Managed Float Exchange Rate System, 190 6-1d Pegged Exchange Rate System, 191 6-1e Dollarization, 197 6-1f Black Markets for Currencies, 197

6-2 A Single European Currency, 197 6-2a Monetary Policy in the Eurozone, 198 6-2b Impact on Firms in the Eurozone, 198 6-2c Impact on Financial Flows in the Eurozone, 199 6-2d Impact of a Eurozone Country Crisis on Other Eurozone Countries, 199 6-2e Impact of a Country Abandoning the Euro, 201

6-3 Direct Intervention, 202 6-3a Reasons for Direct Intervention, 202 6-3b The Direct Intervention Process, 203 6-3c Direct Intervention as a Policy Tool, 205 6-3d Speculating on Direct Intervention, 206

6-4 Indirect Intervention, 208 6-4a Government Control of Interest Rates, 208 6-4b Government Use of Foreign Exchange Controls, 209

Appendix 6: government Intervention during the Asian crisis, 217

7: InTERnATIonAL ARBITRAgE And InTEREST RATE PARITy 227 7-1 Locational Arbitrage, 227

7-1a Gains from Locational Arbitrage, 228 7-1b Realignment Due to Locational Arbitrage, 228

7-2 Triangular Arbitrage, 229 7-2a Gains from Triangular Arbitrage, 230 7-2b Realignment Due to Triangular Arbitrage, 232

7-3 Covered Interest Arbitrage, 233 7-3a Covered Interest Arbitrage Process, 233 7-3b Realignment Due to Covered Interest Arbitrage, 234 7-3c Arbitrage Example When Accounting for Spreads, 236 7-3d Covered Interest Arbitrage by Non-U.S. Investors, 236 7-3e Comparing Different Types of Arbitrage, 237

7-4 Interest Rate Parity (IRP), 238 7-4a Derivation of Interest Rate Parity, 238 7-4b Determining the Forward Premium, 239 7-4c Graphic Analysis of Interest Rate Parity, 241 7-4d Does Interest Rate Parity Hold?, 244 7-4e Considerations When Assessing Interest Rate Parity, 244

7-5 Variation in Forward Premiums, 245 7-5a Forward Premiums across Maturities, 245 7-5b Changes in Forward Premiums over Time, 246

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Contents i x

8: RELATIonShIPS AMong InFLATIon, InTEREST RATES, And ExchAngE RATES 259

8-1 Purchasing Power Parity (PPP), 259 8-1a Interpretations of Purchasing Power Parity, 259 8-1b Derivation of Purchasing Power Parity, 261 8-1c Using PPP to Estimate Exchange Rate Effects, 262 8-1d Graphic Analysis of Purchasing Power Parity, 263 8-1e Testing the Purchasing Power Parity Theory, 266 8-1f Why Deviations from PPP Exist, 267

8-2 International Fisher Effect, 268 8-2a Deriving a Country’s Expected Inf lation Rate, 268 8-2b Estimating the Expected Exchange Rate Movement, 270 8-2c Implications of the International Fisher Effect, 270 8-2d Derivation of the International Fisher Effect, 272 8-2e Graphic Analysis of the International Fisher Effect, 275 8-2f Testing the International Fisher Effect, 276 8-2g Limitations of IFE Theory, 277 8-2h Comparison of IRP, PPP, and IFE Theories, 277

Part 2 Integrative Problem: Exchange Rate Behavior, 288 Midterm Self-Exam, 289

PART 3: Exchange Rate Risk Management 297

9: FoREcASTIng ExchAngE RATES 299 9-1 Why Firms Forecast Exchange Rates, 299 9-2 Forecasting Techniques, 301

9-2a Technical Forecasting, 301 9-2b Fundamental Forecasting, 301 9-2c Market-Based Forecasting, 305 9-2d Mixed Forecasting, 307

9-3 Assessment of Forecast Performance, 309 9-3a Measurement of Forecast Error, 309 9-3b Forecast Errors among Time Horizons, 309 9-3c Forecast Errors among Currencies, 310 9-3d Comparing Forecast Errors among Forecast Techniques, 310 9-3e Graphic Evaluation of Forecast Bias, 311 9-3f Statistical Test of Forecast Bias, 313 9-3g Shifts in Forecast Bias over Time, 313

9-4 Accounting for Uncertainty Surrounding Forecasts, 313 9-4a Sensitivity Analysis Applied to Fundamental Forecasting, 314 9-4b Interval Forecasts, 314

10: MEASuRIng ExPoSuRE To ExchAngE RATE FLucTuATIonS 325 10-1 Relevance of Exchange Rate Risk, 325 10-2 Transaction Exposure, 326

10-2a Estimating “Net” Cash Flows in Each Currency, 328 10-2b Transaction Exposure of an MNC’s Portfolio, 329 10-2c Transaction Exposure Based on Value at Risk, 331

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x Contents

10-3 Economic Exposure, 334 10-3a Exposure to Foreign Currency Depreciation, 335 10-3b Exposure to Foreign Currency Appreciation, 336 10-3c Measuring Economic Exposure, 336

10-4 Translation Exposure, 339 10-4a Determinants of Translation Exposure, 339 10-4b Exposure of an MNC’s Stock Price to Translation Effects, 341

11: MAnAgIng TRAnSAcTIon ExPoSuRE 355 11-1 Policies for Hedging Transaction Exposure, 355

11-1a Hedging Most of the Exposure, 355 11-1b Selective Hedging, 355

11-2 Hedging Exposure to Payables, 356 11-2a Forward or Futures Hedge on Payables, 356 11-2b Money Market Hedge on Payables, 357 11-2c Call Option Hedge on Payables, 358 11-2d Comparison of Techniques for Hedging Payables, 360 11-2e Evaluating Past Decisions on Hedging Payables, 363

11-3 Hedging Exposure to Receivables, 363 11-3a Forward or Futures Hedge on Receivables, 364 11-3b Money Market Hedge on Receivables, 364 11-3c Put Option Hedge on Receivables, 364 11-3d Comparison of Techniques for Hedging Receivables, 367 11-3e Evaluating Past Decisions on Hedging Receivables, 370 11-3f Summary of Hedging Techniques, 370

11-4 Limitations of Hedging, 371 11-4a Limitation of Hedging an Uncertain Payment, 371 11-4b Limitation of Repeated Short-Term Hedging, 371

11-5 Alternative Methods to Reduce Exchange Rate Risk, 373 11-5a Leading and Lagging, 373 11-5b Cross-Hedging, 374 11-5c Currency Diversification, 374

Appendix 11: nontraditional hedging Techniques, 388

12: MAnAgIng EconoMIc ExPoSuRE And TRAnSLATIon ExPoSuRE 393 12-1 Managing Economic Exposure, 393

12-1a Assessing Economic Exposure, 393 12-1b Restructuring to Reduce Economic Exposure, 394 12-1c Limitations of Restructuring Intended to Reduce Economic Exposure, 398

12-2 A Case Study on Hedging Economic Exposure, 398 12-2a Savor Co.’s Assessment of Economic Exposure, 398 12-2b Using a Financing Strategy to Hedge Economic Exposure, 400

12-3 Managing Exposure to Fixed Assets, 400 12-4 Managing Translation Exposure, 401

12-4a Hedging Translation Exposure with Forward Contracts, 401 12-4b Limitations of Hedging Translation Exposure, 402

Part 3 Integrative Problem: Exchange Risk Management, 411

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Contents x i

PART 4: Long-Term Asset and Liability Management 413

13: dIREcT FoREIgn InvESTMEnT 415 13-1 Motives for Direct Foreign Investment, 415

13-1a Revenue-Related Motives, 415 13-1b Cost-Related Motives, 416 13-1c Comparing Benefits of DFI among Countries, 418

13-2 Benefits of International Diversification, 418 13-2a Diversification Analysis of International Projects, 420

13-3 Host Government Impact on DFI, 422 13-3a Incentives to Encourage DFI, 422 13-3b Barriers to DFI, 422

13-4 Assessing the Feasibility of Potential DFI, 424 13-4a A Case Study of Assessing Potential DFI, 424 13-4b Evaluating DFI Opportunities That Pass the First Screen, 426

14: MuLTInATIonAL cAPITAL BudgETIng 435 14-1 Subsidiary versus Parent Perspective, 435

14-1a Tax Differentials, 435 14-1b Restrictions on Remitted Earnings, 436 14-1c Exchange Rate Movements, 436 14-1d Summary of Factors That Distinguish the Parent Perspective, 436

14-2 Input for Multinational Capital Budgeting, 437 14-3 Multinational Capital Budgeting Example, 439

14-3a Background, 439 14-3b Analysis, 440

14-4 Other Factors to Consider, 442 14-4a Exchange Rate Fluctuations, 442 14-4b Inf lation, 445 14-4c Financing Arrangement, 446 14-4d Blocked Funds, 448 14-4e Uncertain Salvage Value, 450 14-4f Impact of Project on Prevailing Cash Flows, 451 14-4g Host Government Incentives, 451 14-4h Real Options, 452

14-5 Adjusting Project Assessment for Risk, 452 14-5a Risk-Adjusted Discount Rate, 452 14-5b Sensitivity Analysis, 453 14-5c Simulation, 456

Appendix 14: Incorporating International Tax Law in Multinational capital Budgeting, 468

15: InTERnATIonAL coRPoRATE govERnAncE And conTRoL 475 15-1 International Corporate Governance, 475

15-1a Governance by Board Members, 475 15-1b Governance by Institutional Investors, 476 15-1c Governance by Shareholder Activists, 476

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xii Contents

15-2 International Corporate Control, 477 15-2a Motives for International Acquisitions, 477 15-2b International Acquisition Process, 477 15-2c Barriers to International Corporate Control, 478 15-2d Model for Valuing a Foreign Target, 478

15-3 Factors Affecting Target Valuation, 480 15-3a Target-Specific Factors, 480 15-3b Country-Specific Factors, 481

15-4 A Case Study of Valuing a Foreign Target, 482 15-4a International Screening Process, 482 15-4b Estimating the Target’s Value, 483 15-4c Uncertainty Surrounding the Target’s Valuation, 484 15-4d Changes in Market Valuation of the Target over Time, 485

15-5 Disparity in Foreign Target Valuations, 486 15-5a Expected Cash Flows of the Foreign Target, 486 15-5b Exchange Rate Effects on Remitted Earnings, 486 15-5c Required Return of Acquirer, 487

15-6 Other Corporate Control Decisions, 487 15-6a International Partial Acquisitions, 487 15-6b International Acquisitions of Privatized Businesses, 488 15-6c International Divestitures, 488

15-7 Corporate Control Decisions as Real Options, 490 15-7a Call Option on Real Assets, 490 15-7b Put Option on Real Assets, 491

16: counTRy RISk AnALySIS 501 16-1 Country Risk Characteristics, 501

16-1a Political Risk Characteristics, 501 16-1b Financial Risk Characteristics, 504

16-2 Measuring Country Risk, 505 16-2a Techniques for Assessing Country Risk, 506 16-2b Deriving a Country Risk Rating, 507 16-2c Comparing Risk Ratings among Countries, 509

16-3 Incorporating Risk in Capital Budgeting, 510 16-3a Adjustment of the Discount Rate, 510 16-3b Adjustment of the Estimated Cash Flows, 510 16-3c Analysis of Existing Projects, 513

16-4 Preventing Host Government Takeovers, 514 16-4a Use a Short-Term Horizon, 514 16-4b Rely on Unique Supplies or Technology, 514 16-4c Hire Local Labor, 514 16-4d Borrow Local Funds, 514 16-4e Purchase Insurance, 515 16-4f Use Project Finance, 515

17: MuLTInATIonAL cAPITAL STRucTuRE And coST oF cAPITAL 525 17-1 Components of Capital, 525

17-1a Retained Earnings, 525 17-1b Sources of Debt, 526 17-1c External Sources of Equity, 527

17-2 The MNC’s Capital Structure Decision, 528 17-2a Inf luence of Corporate Characteristics, 529

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Contents x i i i

17-2b Inf luence of Host Country Characteristics, 529 17-2c Response to Changing Country Characteristics, 530

17-3 Subsidiary versus Parent Capital Structure Decisions, 531 17-3a Impact of Increased Subsidiary Debt Financing, 531 17-3b Impact of Reduced Subsidiary Debt Financing, 531 17-3c Limitations in Offsetting a Subsidiary’s Leverage, 532

17-4 Multinational Cost of Capital, 532 17-4a MNC’s Cost of Debt, 532 17-4b MNC’s Cost of Equity, 532 17-4c Estimating an MNC’s Cost of Capital, 533 17-4d Comparing Costs of Debt and Equity, 533 17-4e Cost of Capital for MNCs versus Domestic Firms, 534 17-4f Cost-of-Equity Comparison Using the CAPM, 536

17-5 Cost of Capital Across Countries, 537 17-5a Country Differences in the Cost of Debt, 538 17-5b Country Differences in the Cost of Equity, 540

18: Long-TERM dEBT FInAncIng 551 18-1 Debt Denomination Decisions of Foreign Subsidiaries, 551

18-1a Foreign Subsidiary Borrows Its Local Currency, 551 18-1b Foreign Subsidiary Borrows Dollars, 553

18-2 Debt Denomination Analysis: A Case Study, 553 18-2a Analyzing Debt Denomination Alternatives, 554

18-3 Strategies to Hedge Foreign Financing, 555 18-3a Using Currency Swaps, 555 18-3b Using Parallel Loans, 556

18-4 Debt Maturity Decision, 559 18-4a Assessment of the Yield Curve, 559 18-4b Financing Costs of Loans with Different Maturities, 560

18-5 Fixed-Rate versus Floating-Rate Debt Decision, 561 18-5a Financing Costs of Fixed-Rate versus Floating-Rate Loans, 561 18-5b Hedging Interest Payments with Interest Rate Swaps, 562

Part 4 Integrative Problem: Long-Term Asset and Liability Management, 573

PART 5: Short-Term Asset and Liability Management 575

19: FInAncIng InTERnATIonAL TRAdE 577 19-1 Payment Methods for International Trade, 577

19-1a Prepayment, 577 19-1b Letters of Credit, 578 19-1c Drafts, 580 19-1d Consignment, 581 19-1e Open Account, 581 19-1f Impact of the Credit Crisis on Payment Methods, 581

19-2 Trade Finance Methods, 581 19-2a Accounts Receivable Financing, 582 19-2b Factoring, 582 19-2c Letters of Credit, 583 19-2d Banker’s Acceptances, 583 19-2e Medium-Term Capital Goods Financing (Forfaiting), 586 19-2f Countertrade, 586

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xiv Contents

19-3 Agencies that Facilitate International Trade, 587 19-3a Export-Import Bank of the United States, 587 19-3b Private Export Funding Corporation, 589 19-3c Overseas Private Investment Corporation, 589

20: ShoRT-TERM FInAncIng 595 20-1 Sources of Foreign Financing, 595

20-1a Internal Short-Term Financing, 595 20-1b External Short-Term Financing, 596

20-2 Financing with a Foreign Currency, 596 20-2a Motive for Financing with a Foreign Currency, 597 20-2b Potential Cost Savings from Financing with a Foreign Currency, 597 20-2c Risk of Financing with a Foreign Currency, 598 20-2d Hedging the Foreign Currency Borrowed, 599 20-2e Reliance on the Forward Rate for Forecasting, 600 20-2f Use of Probability Distributions to Enhance the Financing Decision, 601

20-3 Financing with a Portfolio of Currencies, 602

21: InTERnATIonAL cASh MAnAgEMEnT 611 21-1 Multinational Working Capital Management, 611

21-1a Subsidiary Expenses, 611 21-1b Subsidiary Revenue, 612 21-1c Subsidiary Dividend Payments, 612 21-1d Subsidiary Liquidity Management, 612

21-2 Centralized Cash Management, 612 21-2a Accommodating Cash Shortages, 613

21-3 Optimizing Cash Flows, 614 21-3a Accelerating Cash Inf lows, 614 21-3b Minimizing Currency Conversion Costs, 614 21-3c Managing Blocked Funds, 616 21-3d Managing Intersubsidiary Cash Transfers, 617

21-4 Investing Excess Cash, 617 21-4a Benefits of Investing in a Foreign Currency, 617 21-4b Risk of Investing in a Foreign Currency, 618 21-4c Hedging the Investment in a Foreig

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