I need two peer review responses written for 2 separate students, each peer response needs its own new article on forward currency rates, not the ones in the original discussion or a student. The body or content 150 words before the title and references. In the body, don’t just say the same things or say I agree. In the peer review, please just compare their discussion with mine and just say how the material relates and leads to the idea of the need and importance of forward currency rates, and then in text cite something from the new article at least and or the textbook for each. Thank You. This format will work for each….
Peer Review for Anne McCollough – This format
Mark Karwat- FINC 750- Advanced Financial Management
Davenport University- Midland Campus
12-13-24
Topic: Week 7- Discussion Reply- Forward Currency Rates
Anne McCollough- Week 7 Discussion
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Currency forwards help companies manage foreign exchange rate risk by locking in a predetermined exchange rate for a future date. These forwards are customized contracts, commonly between parties doing business in different countries. When companies operate in multiple countries, they often deal with revenues and expenses in different currencies. Forward contracts protect against adverse exchange rate movements that could potentially impact profitability. (Team, 2023) The effectiveness of currency forwards depends on accurately predicting future exchange rate movements. If this is not done carefully one party may benefit while the other potentially faces losses.
Forward rates allow companies to forecast more accurately enabling better strategic decision-making regarding investments, pricing, and resource allocation. Knowing future costs enables a company to set competitive prices without risking reduction of margins due to the changes in currency rates.
An example of currency forward is if a U.S company agrees to purchase machinery 6 months from now from a company in Denmark for the agreed upon price of $1M Danish krone. If the Danish krone appreciates against the US dollar, the cost of that machine in USD could increase significantly. By entering into a forward contract to buy Danish Krones at today’s rate, the company locks in a predictable cost. Locking in this cost protects against exchange rate volatility enabling the cost of the machine to remain predictable and stable.
References
Team, C. (2023, October 13). Currency forward. Corporate Finance Institute.
https://corporatefinanceinstitute.com/resources/foreign-exchange/currency-
forward/
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References
Brigham, E., & Daves, P. (2022). Intermediate Financial Management (14th ed.). Boston, MA: Cengage Learning. In-text citations: (Brigham & Daves, 2022)
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Peer Review for Gloria- This format
Mark Karwat- FINC 750- Advanced Financial Management
Davenport University- Midland Campus
12-13-24
Topic: Week 7- Discussion Reply- Forward Currency Rates
Gloria’s Discussion Forum,
Gloria Gasgonia
Trade globally today, and many companies manage their foreign exchange (FX) risk using forward currency exchange rates as a tool and part of their finance strategy. The idea is that companies can lock in exchange rates for future transactions; thus, the term forward exchange rate. The way I understand exchange rates is that they fluctuate daily. Hence, it makes sense for companies to lock in a rate for future transactions by signing a contract, as it allows companies to predict their financials better, consistent cash flows, and protect profit margins. According to the Corporate Finance Institute, signing contracts to get a predetermined exchange rate for future transactions avoids the risk of unfavorable currency fluctuations. Essentially, the cost and revenue in the international trading stage are consistently valued and used as a forecasting tool (CFI Team, 2024).
One example is the company where I work, which is based in the U.S. and usually exports bearings. Our company is expecting a payment in PLN currency from a customer while entering into a forward contract to sell PLN and buy U.S. dollars at a fixed rate as soon as we receive the payment so we avoid any potential loss due to the PLN relationship to the dollar conversion. Another scenario is importing goods from other countries like Europe and Asia. Let us say we have a payable amount of 1 million EUR in 3 months. If the current exchange rate is 1.20 USD to EUR, then we are due to pay a cost of $1.2 million. We then enter into a contract at the current exchange rate of 1.20 to lock at $1.2 million, even though the exchange rate will be different in the future.
Getting the exchange rates beforehand is essential for planning, budgeting, and capital investments. Moreover, should there be a market expansion or if pricing in the region needs to be assessed, this allows protection against currency volatility (R., 2024). In the end, forward currency exchange rates under contracts allow companies to avoid currency risks due to fluctuations. That is why they are an important tool in planning, primarily since we work in a global market and trade in different currencies.
References
CFI Team. (2024). Currency Forward. CFI. Retrieved December 10, 2024, from https://corporatefinanceinstitute.com/resources/foreign-exchange/currency-forward/
R., J. (2024, October 12). Understanding Currency Forwards: A Guide. Market Bulls. Retrieved December 10, 2024, from https://market-bulls.com/currency-forwards/
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References
Brigham, E., & Daves, P. (2022). Intermediate Financial Management (14th ed.). Boston, MA: Cengage Learning. In-text citations: (Brigham & Daves, 2022)
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FINC 750 Forum Peer Responses Grading Rubric
Timely Contributions
Excellent
16 -20 points
Average
12 -15 points
Below Average
8 -11 points
None
0 points
Answered discussion question and 2 or more contributions
Answered discussion question and 1-2 contributions
Answered discussion question and/or 1 contribution
No contributions
Quality of
Contribution
& Demonstration
of Knowledge
Clearly understands concepts and incorporates them in discussion
Always advances discussion
Always includes examples and real-life applications
Includes at least 1 reference outside of textbook
Meets minimum length requirement
Response addresses a different topic than initial discussion post
Understands concepts and incorporates them in discussion
Often/sometimes advances discussion
Often/sometimes includes examples and real-life applications
Includes at least 1 reference outside of textbook
May not meet minimum length requirement
Not evident concepts are understood and are not incorporated in discussion
Responses are copied, have little to do with concepts and don’t advance discussion
Examples and real-life applications are not included
Does not include a reference outside of textbook
Does not meet minimum length requirement
Response addresses a same topic as initial discussion post
NA
Advancing discussion with substantive responses: For this class, substantive means that your message has substance, that it helps further the discussion of course content. Substantive messages will often include contributions of additional ideas and sources, insights or questions about classmates’ comments, connections to the course readings, and ways of applying the lessons from the course, and so on.
The discussion question response must be at least 150 words with one supporting reference not including the textbook. Peer responses must be between 150 and 250 words, the response must include at least one supporting reference not including the textbook. Shorter responses that ask for clarification, compliment the author of another post, or answer a question may be posted, but they will not count as a substantial contribution.
Short comments, such as “Good idea” or “I agree,” do not constitute substantive posts on their own. Neither do comments that are unrelated to the topics at hand (for example, “I saw that movie, too!”). If you say you agree about something, please explain why you agree, and add an additional insight or question.
My original discussion forum on Forward Currency Rates
Mark Karwat- FINC 750- Advanced Financial Management
Davenport University- Midland Campus
12-10-24
Topic: Week 7- Discussion Forum-Forward Currency Rates
Forward exchange rates mean the rate that is fixed for the conversion of foreign currency on a particular future date, which forms a tool to hedge against the fluctuating currency. This aids in making organizations minimize risks and factor in uncertainty, which equals increased control as necessary for the achievement of strategic plans, especially under conditions of international business (Brigham & Daves, 2022).
For instance, let’s think of a company based in the United States that sells imported goods from Europe. Thus, as a threat, if the euro greatly strengthens against the dollar, importing products may become higher, thus eroding profit margins. Through a forward contract, the company is able to agree with the sellers today on the exchange rate that he or she will be using to make a transaction in the future, avoiding the risk of changes in the rate. This guarantees greater stability in the prices, budgets, and profitability kinds, and it is perfectly in line with the company’s objective to be affordable and financially sustainable in the global economy.
Further, forward rates are useful in strategic planning, considering that they improve the ability of firms to forecast their cash flows and costs (Jiang et al., 2021). For instance, a large organization planning for venturing into emerging markets will use forward contracts to lock in specific exchange rates for converting profits or financing overseas operations.
This has been pictured by the business giant Apple Inc. that uses forward contracts, particularly in relation to revenues and expenses in different currencies. In their reports they said that this reduces the effect of currency volatility; thus, Apple can hence concentrate on product innovation and new market penetration without experiencing huge financial upheavals.
Notably, forward currency exchange rates are a powerful financial instrument that allows companies to reduce risks that are connected with fluctuations of currency rates, strengthen business activities, and achieve various strategic goals successfully.
Thanks, Mark
References
Brigham, E. & Daves, P. (2022). Intermediate Financial Management (14th Edition). Boston, Massachusetts: Cengage Learning.
Jiang, Z., Krishnamurthy, A., & Lustig, H. (2021). Foreign safe asset demand and the dollar exchange rate. The Journal of Finance, 76(3), 1049-1089. https://doi.org/10.1111/jofi.13003
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