Your focus country Brazil for both parts of this assignment is the country that you used for Country Report #1.

To obtain background information about your country, Brazil you may use any published works or web sites. Some possible sources are noted toward the end of the assignment.

You must develop your own answers to the questions and use your own words when writing out the answers to the questions.

In your written report, you do not need to use footnotes/endnotes (except for citations attached to any direct quotations as stated above). As a part of your written submission, include an appendix with a list of all sources that you used and found helpful as you prepared to write your answers.

The basic text of your answers should be in 12-point Times New Roman font, with single-spaced lines, and with an extra line space between different paragraphs and between different answers. You may attach or insert tables, charts, or other similar items that are referenced from your text if these enhance your answers. You may also attach one or more appendixes if these are directly relevant and necessary to your answers.

There is a mandatory length limit. The submission should be no more than 5 pages of text. The limit of no more than 5 pages of text only counts text, it does not include any tables, charts, or similar items included with the text, and it does not include appendixes. I expect that many submissions will have about 3 to 4 pages of text (not counting tables, charts, similar items, and appendixes).

Please make sure that your first and last names are included in the file name(s), and that your name also appears on the first page of the document (or each of the documents) containing your answers.

PART ONE (30 points)

You are a U.S. investor who calculates your income and wealth in U.S. dollars. Currently you have no assets or liabilities denominated in your focus country’s currency. On the day that you begin to research your answers to this part, you are considering an uncovered international financial investment into a debt security denominated in your country’s local currency, rather than investing in a comparable U.S. dollar-denominated debt security.

The foreign debt security that you are considering should be one that is issued by your country’s national government (or by a high-grade domestic bank or a high-grade corporate issuer based in your country), and the U.S. debt security should be one that is issued by the U.S. federal government (or by a comparable high-quality U.S. organization). You know that you will hold the investment to maturity.

The two debt securities should have the same or similar maturities—specifically, a maturity in the range one to two years. You will need to find source(s) that provide yields-to-maturity (what we have called “interest rates”) for the appropriate debt securities.

A. What are the key factors that you will consider in your analysis of whether or not to make an uncovered international financial investment into the debt security of your country? Using actual information about these factors:

• Which of these factors appear to be favorable for making the uncovered international investment? Explain.

• Which of these factors appear to be unfavorable for making the uncovered international investment? Explain.

• Which of these factors are approximately neutral? Explain.

B. To conclude your answer to this part, indicate whether or not you would make this uncovered international financial investment. Explain why you would or would not make the investment.

Notes:

1) In your answers to this part, apply concepts and tools from the course that are relevant to the analysis.

2) Most of the evaluation of your answers to this part will focus on question A (your discussion of key factors), and less on question B (the decision).

PART TWO (30 points)

A. What is your country’s current exchange rate policy? What are the key features of this policy?

B. Your country’s government is considering switching to a different exchange rate policy (or a different government policy toward the foreign exchange market). You have been asked to provide a report that identifies the different exchange rate policy and examines the cases for and against the country to shift to this different exchange rate policy. Specifically:

• If the country did switch its exchange rate policy, what do you think is the best alternative policy for your country to adopt?

• Make the case that the country would benefit from shifting to this different exchange rate policy.

• To anticipate the opposition to this policy shift, you have also been asked to identify and explain the major argument against the country adopting this different exchange rate policy. What is this argument against the different exchange rate policy?

Notes:

1) In your answers to this part, apply concepts and tools from the course that are relevant to the analysis.

2) Most of the evaluation of your answers to this part will focus on question B (your discussion of your report), and less on question A (the country’s current exchange rate policy).

General Notes on Information Sources for This Assignment

There are many possible sources of information and data for your research to complete this assignment. You may find information from various web sites (such as those for multilateral organizations, the central bank or national government of your country, and so forth). If you use a web site, be sure to consider whether or not the information from the site is reliable.

Your focus country Brazil for both parts of this assignment is the...