Essay Use of Derivatives in Toyota

1264 Words Nov 1st, 2009 6 Pages
INTERNATIONAL FINANCIAL MARKETS *“USE OF DERIVATIVES IN A CHOSEN COMPANY*” {draw:a} TABLE OF CONTENTS {text:list-item} {text:list-item} {text:list-item} {text:list-item} {text:list-item} {text:list-item} {text:list-item} {text:list-item} {text:list-item} {text:list-item} {text:list-item} {text:list-item} {text:list-item} {text:list-item} {text:list-item} 10. 11. 12. 13.REFERENCES AND BIBLIOGRAPHY TOYOTA MOTOR CORPORATION 1. INTRODUCTION *2. FOREIGN EXCHANGE RISK IN *TOYOTA {draw:frame} http://www.indexmundi.com/xrates/graph.aspx?c1=JPY&c2=USD&days=5475 2.2 *De*rivative products used by for foreign exchange risk Translation Risk …show more content…
As a result, interest expense on debt, net of pay float swaps was lower in fiscal 2008. Total interest expense in 2008, 2007, 2006 are respectively $2,956 $4,151 $2,662(Toyota,2008).We can see from the interest rate expense figures that the interest rate expenses have fallen drastically in fiscal year 2008 as a result of effectiveness of the Toyota’s interest rate derivative strategy. {text:list-item} Forward rate agreement Toyota could enter into forward rate agreement to mitigate interest rate risk. FRA is an OTC agreement in which certain interest rate could be applied to certain principal during a particular period of time in future(Hull,J,C,p.100). Future rate agreement *4. COMMODITY PRICE RISK IN *TOYOTA 4.1 Impact of Commodity P*rice *Risk on operation Commodity price risk is mainly caused due to the fluctuation in the prices of the commodities .Commodities such as non-ferrous alloys e.g. aluminium, precious metals like palladium, platinum, rhodium and ferrous alloys which are used by Toyota in production of motor vehicles are susceptible to variation in the prices. This is the main cause of commodity price risk(Toyota,2008). {draw:frame} http://www.lme.co.uk/aluminium_graphs.asp 4.2 Derivative products used for Commodity Price risk Toyota does not use derivative products for commodity price risk management but controls the price risk in the sudden hike of prices of materials such

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