Managerial Economics & Business Strategy (Mcgraw-hill Series Economics)
Managerial Economics & Business Strategy (Mcgraw-hill Series Economics)
9th Edition
ISBN: 9781259290619
Author: Michael Baye, Jeff Prince
Publisher: McGraw-Hill Education
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Chapter 12, Problem 23PAA
To determine

To know: The reason for compromising the market’s integrity and investors trust.

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Prosecutors representing the Securities and Exchange Commission recently announced criminal charges against 13 individuals for engaging in insider trading. According to the SEC’s director of enforcement, a trading ring acting on inside information “compromises the markets’ integrity and investors’ trust.” Explain why.
During the 2007-2009 period, the US government made its most dramatic interventions in financial markets since the 1930s. It has been argued that the current crisis could redraw the boundaries between government and markets. For some, “freer and more flexible markets will still do more for the world economy than the heavy hand of government” whereas for others “big banking crises are ultimately solved by early and decisive government action and financial regulation.” Evaluate these positions.
How BMW Dealt with Exchange Rate Risk BMW Group, owner of the BMW, Mini and Rolls-Royce brands, has been based in Munich since its founding in 1916. But by 2011, only 17 per cent of the cars it sold were bought in Germany. In recent years, China has become BMW's fastest-growing market, accounting for 14 per cent of BMW's global sales volume in 2011. India, Russia and Eastern Europe have also become key markets. The Challenge Despite rising sales revenues, BMW 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 2.4bn between 2005 and 2009. BMW did not want to pass on its exchange rate costs to consumers through price increases. Its rival Porsche had done this at the end of the 1980s in the US and sales had plunged. The Strategy BMW took a two-pronged approach to managing its foreign exchange exposure. One strategy was to use a "natural…
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