Foreign Exchange, Int’l Monetary, and Global Capital Markets

Foreign Exchange, Int’l Monetary, and Global Capital Markets

case for Chapter 10 (9th edition of the textbook) on it – Caterpillar Case.

Please read the case and answer the questions. The questions are unclear on the PDF document, so here they are:

1. In the 1980s a stronger dollar hurt Caterpillar’s competitive position, but in 2008 a stronger dollar did not seem to have the same effect. What had changed?

2. How did Caterpillar use a strategy as a "real hedge" to reduce its exposure to foreign risk? What is the downside of its approach?

3. Explain the difference between transaction exposure and translation exposure using the material in the Caterpillar case to illustrate your answer.

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