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ABA Group Cars, owner of the Lao and Pack brands, has been based in Barcelona since its founding in 1916

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ABA Group Cars, owner of the Lao and Pack brands, has been based in Barcelona since its founding in 1916. But by 2019, only 17 per cent of the cars it sold were bought in Spain. In recent years, China has become ABA’s fastest-growing market, accounting for 14 per cent of ABA’s global sales volume in 2019. India, Russia and eastern Europe have also become key markets. Despite rising sales revenues, ABA was conscious that its profits were often severely eroded by changes in exchange rates. The company’s own calculations in its annual reports suggest that the negative effect of exchange rates totalled €1.1bn between 2005 and 2019.

ABA did not want to pass on its exchange rate costs to consumers through price increases. Its rival KARS had done this at the end of the 2018s in the US and sales had plunged.

1- What approaches could ABA take to manage its exposure to foreign exchange? Explain the implications of each approach for the Company. (33 points)

2-If the company decided to transfer its production to foreign markets, what pros and cons would it have? (33 points)

3- The CFO of ABA wants to know the evolution of the euro / dollar exchange rate since the appearance of the euro in 2001. In this sense, what has been the annual percentage change in the euro-dollar exchange rate for each year since the introduction of the euro? Include some picture evolution. Use only official sources for this. (33 points)

COURSE CODE: BCO224 COURSE NAME: FINANCIAL MARKETS Task brief & rubrics Task: 48 h Final Timed Assignment ABA Group Cars, owner of the Lao and Pack brands, has been based in Barcelona since its founding in 1916. But by 2019, only 17 per cent of the cars it sold were bought in Spain. In recent years, China has become ABA’s fastest-growing market, accounting for 14 per cent of ABA’s global sales volume in 2019. India, Russia and eastern Europe have also become key markets. Despite rising sales revenues, ABA was conscious that its profits were often severely eroded by changes in exchange rates. The company’s own calculations in its annual reports suggest that the negative effect of exchange rates totalled €1.1bn between 2005 and 2019. ABA did not want to pass on its exchange rate costs to consumers through price increases. Its rival KARS had done this at the end of the 2018s in the US and sales had plunged. 1- What approaches could ABA take to manage its exposure to foreign exchange? Explain the implications of each approach for the Company. (33 points) 3-If the company decided to transfer its production to foreign markets, what pros and cons would it have? (33 points) 3- The CFO of ABA wants to know the evolution of the euro / dollar exchange rate since the appearance of the euro in 2001. In this sense, what has been the annual percentage change in the euro-dollar exchange rate for each year since the introduction of the euro? Include some picture evolution. Use only official sources for this. (33 points) Formalities: • • • • • • Individual Wordcount: Max one page per each question Cover, Table of Contents, References and Appendix are excluded of the total wordcount. Font: Arial 12,5 pts. Text alignment: Justified. The in-text References and the Bibliography have to be in Harvard’s citation style. Submission: Week 13 – Via Moodle (Turnitin). Deadline for submission is Sunday 9th May 2021, 23,59 CEST. This time controlled assignment must be available on Moodle 48 hours before the submission deadline Weight: This task is a 40% of your total grade for this subject. It assesses the following learning outcomes: • • • • To validate that you know the Fundamentals of Financial Markets To be able to manage official Foreign Exchanges Websites . To demonstrate that you know how to manage currency risk To validate that you apply some risk instruments in Foreign Exchange Markets. Rubrics Application (25%) Student applies fully relevant knowledge from the topics delivered in class. Good 80-89 Student demonstrates good understanding of the task and mentions some relevant concepts and demonstrates use of the relevant vocabulary. Student applies mostly relevant knowledge from the topics delivered in class. Critical Thinking (35%) Student critically assesses in excellent ways, drawing outstanding conclusions from relevant authors. Student critically assesses in good ways, drawing conclusions from relevant authors and references. Communication (20%) Student communicates their ideas extremely clearly and concisely, respecting word count, grammar and spellcheck Student communicates their ideas clearly and concisely, respecting word count, grammar and spellcheck Knowledge & Understanding (20%) Exceptional 90-100 Student demonstrates excellent understanding of key concepts and uses vocabulary in an entirely appropriate manner. Fair 70-79 Student understands the task and provides minimum theory and/or some use of vocabulary. Student applies some relevant knowledge from the topics delivered in class. Misunderstanding may be evident. Student provides some insights but stays on the surface of the topic. References may not be relevant. Student communicates their ideas with some clarity and concision. It may be slightly over or under the wordcount limit. Some misspelling errors may be evident. Marginal fail 60-69 Student understands the task and attempts to answer the question but does not mention key concepts or uses minimum amount of relevant vocabulary. Student applies little relevant knowledge from the topics delivered in class. Misunderstands are evident. Student makes little or none critical thinking insights, does not quote appropriate authors, and does not provide valid sources. Student communicates their ideas in a somewhat unclear and unconcise way. Does not reach or does exceed wordcount excessively and misspelling errors are evident. Answers: Summary Table Question Start here Answer 1: 1- Explanation 2-Major Conclusion Answer 2: 1- Explanation 2-Major Conclusion Answer 3: 1- Explanation 2-Major Conclusion Major Conclusion (copy paste your major conclusion for each question here) 1 Grade (Points) 33 2 33 3 33 Student Grade