International Business 15th Edition

Daniels Solutions Manual

Visit to download the full and correct content document: https://testbankdeal.com/dow
nload/international-business-15th-edition-daniels-solutions-manual/
More products digital (pdf, epub, mobi) instant
download maybe you interests ...

International Business 15th Edition Daniels Test Bank

https://testbankdeal.com/product/international-business-15th-
edition-daniels-test-bank/

International Business 16th Edition Daniels Solutions

Manual

https://testbankdeal.com/product/international-business-16th-
edition-daniels-solutions-manual/

International Business 14th Edition Daniels Solutions

Manual

https://testbankdeal.com/product/international-business-14th-
edition-daniels-solutions-manual/

International Business 14th Edition Daniels Test Bank

https://testbankdeal.com/product/international-business-14th-
edition-daniels-test-bank/
International Business 16th Edition Daniels Test Bank

https://testbankdeal.com/product/international-business-16th-
edition-daniels-test-bank/

International Monetary Financial Economics 1st Edition

Daniels Solutions Manual

https://testbankdeal.com/product/international-monetary-
financial-economics-1st-edition-daniels-solutions-manual/

International Monetary Financial Economics 1st Edition

Daniels Test Bank

https://testbankdeal.com/product/international-monetary-
financial-economics-1st-edition-daniels-test-bank/

International Economics 15th Edition Pugel Solutions

Manual

https://testbankdeal.com/product/international-economics-15th-
edition-pugel-solutions-manual/

International Economics 15th Edition Robert Carbaugh

Solutions Manual

https://testbankdeal.com/product/international-economics-15th-
edition-robert-carbaugh-solutions-manual/
 PART FOUR
WORLD FINANCIAL ENVIRONMENT

CHAPTER EIGHT
GLOBAL FOREIGN-EXCHANGE MARKETS

OBJECTIVES

• Learn the fundamentals of foreign exchange

• Identify the major characteristics of the foreign-exchange market and how
governments control the flow of currencies across national borders
• Describe how the foreign-exchange market works
• Examine the different institutions that deal in foreign exchange
• Understand why companies deal in foreign exchange

CHAPTER OVERVIEW

The foreign-exchange market consists of all those players who buy and sell foreign-
exchange instruments for business, speculative, or personal purposes. Primarily, foreign
exchange is used to settle international trade, licensing, and investment transactions.
Chapter Eight explains in detail basic concepts (such as rates, instruments, and
convertibility) and explores the major characteristics of the foreign-exchange markets.
The chapter includes a discussion of the foreign-exchange trading process that focuses on
both the over-the-counter and the exchange-traded markets, i.e., banks, securities
exchanges, electronic brokerages, and the respective roles they play.

CHAPTER OUTLINE

OPENING CASE: Going Down to the Wire in the Money-Transfer Market

This case describes Western Union’s international money transfer services and the
increasing competition the company is facing from banks. Western Union has been
particularly successful in attracting business from Mexican emigrants in the United States
who send part of their paycheck home to support their families. Western Union charges
relatively high fees and uses its own exchange rates that are usually significantly lower
than the market rate. Banks have been introducing their own money transfer services,
many with lower fees and better exchange rates than Western Union. Due to many
Mexicans’ distrust of banks, however, Western Union continues to enjoy large profit
margins and a large market share in the money transfer business.

Questions

Copyright ©2015 Pearson Education, Inc.

86
8-1 The United Arab Emirates, of which Dubai is a member, is one of the Gulf
Cooperation Council members. How does it compare with other GCC countries in
terms of total population and non-immigrant population as a percentage of total
population? How important do you think migration and therefore capital
remittances are for each of the countries in the GCC?

While 30 percent of the Saudi Arabian population is expatriate, in Bahrain it is 26

percent. Expatriates account for 80 percent of the population in the United Arab
Emirates, while they constitute 27 percent in Qatar, 63 percent in Kuwait, and 62
percent in Oman. The large-scale recruitment of an expatriate work force is justified
by the need for executing huge development projects in the fast-growing GCC
countries. Another factor was the willingness of expatriate workers to undertake
hazardous jobs with lower wages that Gulf citizens refuse to do. (LO: 2, Learning
Outcome: To identify the major characteristics of the foreign-exchange market and
how governments control the flow of currencies across national borders, AACSB:
Dynamics of the Global Economy)

8-2 Should the U.S. government regulate the exchange rate that financial
institutions charge Mexican migrant workers for sending money back to
Mexico? Why or why not?

Many people use the word “remittance” when they refer to sending money from the
United States to other countries. Federal law defines “remittance transfers” to
include most electronic money transfers from consumers in the United States through
“remittance transfer providers” to recipients abroad, including friends, family
members, or businesses. Remittance transfers are commonly known as “international
wires,” “international money transfers,” or “remittances.”

Certain federal protections apply if you send money abroad. Under federal law, many
money transmitters, banks, and credit unions and possibly other types of financial
services companies qualify as “remittance transfer providers.” They must generally
provide consumers certain information before they make remittance transfers. This
includes information about:
• The exchange rate

• Fees and taxes they collect from you

• Fees charged by the company’s agents abroad and certain other institutions
involved in the transfer process

• The amount of money expected to be delivered, not including foreign taxes or

certain fees charged to the recipient

• If appropriate, a statement that additional foreign taxes and fees may be deducted
from the remittance transfer

Copyright ©2015 Pearson Education, Inc.

87
 You also must receive information about when the money will be available,
instructions on your right to cancel transfers, what to do in case of an error, and how
to submit a complaint.

Regarding the right to cancel: After paying, you will typically have 30 minutes (and
sometimes more) to cancel the transaction at no charge, unless the transfer has
already been picked up or deposited into the recipient’s account.

With these current regulations in place, an argument could be made that no

additional regulations be required. (LO: 2, Learning Outcome: To identify the
major characteristics of the foreign-exchange market and how governments
control the flow of currencies across national borders, AACSB: Dynamics of the
Global Economy)

TEACHING TIPS: Carefully review the PowerPoint slides for Chapter Eight and
select those you find most useful for enhancing your lecture and class discussion. For
additional visual summaries of key chapter points, also review the figures, tables,
and maps in the text. Students can check currency prices by visiting the Web site
http://finance.yahoo.com.

I. INTRODUCTION
A. What is Foreign Exchange?
Foreign exchange is money denominated in the currency of another nation or
group of nations, i.e., it is a financial instrument issued by countries other than
one’s own. An exchange rate is the price of one currency expressed in terms of
another, i.e., the number of units of one currency needed to buy a unit of
another.
B. Players on the Foreign-Exchange Market
The foreign-exchange market is made up of several players. The Bank of
International Settlements (BIS), a Swiss-based central banking institution,
divides the market into three major players: reporting dealers, other financial
institutions, and non-financial institutions. Reporting dealers are also known as
money center banks and include large banks such as Deutsche Bank and HSBC.
Other financial institutions include commercial banks other than money center
banks (local and regional banks), hedge funds, pension funds, money market
funds, currency funds, mutual funds, and specialized foreign-exchange trading
companies. Non-financial customers include governments and companies.
C. Some Aspects of the Foreign-Exchange Market
The foreign-exchange market is comprised of two major segments. The over-
the-counter market (OTC) includes commercial banks, investment banks, and
other financial institutions—this is where most foreign-exchange activity occurs.
The exchange-traded market includes certain securities exchanges (e.g., the
Chicago Mercantile Exchange and NASDAQ OMX) where particular types of
foreign-exchange instruments (such as futures and options) are traded.
1. Some Traditional Foreign-Exchange Instruments. Several types of
foreign exchange instruments are available for trading. In addition, several

Copyright ©2015 Pearson Education, Inc.

88
 types of transactions may occur. Spot transactions involve the exchange of
currency “on the spot,” or technically, transactions that are settled within
two business days after the date of agreement to trade. The spot rate is the
exchange rate quoted for transactions that require the immediate delivery of
foreign currency, i.e., within two business days. Outright forward
transactions involve the exchange of currencies beyond two days following
the date of agreement at a set rate known as the forward rate. In an FX swap
(a simultaneous spot and forward transaction), one currency is swapped for
another on one date and then swapped back on a future date. In fact, the
same currency is bought and sold simultaneously, but delivery occurs at two
different times.
a. Currency swaps deal with interest-bearing financial instruments (such
as bonds) and involve the exchange of principal and interest payments.
An option is a foreign-exchange instrument that guarantees the
purchaser the right (but does not impose an obligation) to buy or sell a
certain amount of foreign currency at a set exchange rate within a
specified amount of time. A futures contract is a foreign-exchange
instrument that specifies an exchange rate, an amount, and a maturity
date in advance of the exchange of the currencies, i.e., it is an
agreement to buy or sell a particular currency at a particular price on a
particular future date.
2. Size, Composition, and Location of the Foreign-Exchange
Market. The Bank for International Settlements (BIS) estimated in 2010
that $4 trillion in foreign exchange was traded each day. This was a 20%
increase over the 2007 survey. One reason for the increase in trading
activity is likely due to the growing importance of foreign exchange as an
alternative asset and the larger emphasis on hedge funds (a fund, usually
used by wealthy individuals and institutions, which is allowed to use
aggressive trading strategies unavailable to mutual funds).
a. Using the U.S. Dollar on the Foreign-Exchange Market. The
U.S. dollar remains the most important currency in the foreign-
exchange market [See Table 8.1], comprising one side (buy or sell) of
84.9 percent of all foreign currency transactions worldwide in 2010.
This is because the dollar:
• is an investment currency in many capital markets
• is held as a reserve currency by many central banks
• is a transaction currency in many international commodity
markets
• serves as an invoice currency in many contracts
• is often used as an intervention currency when foreign
monetary authorities wish to influence their own exchange
rates
b. Frequently Traded Currency Pairs. Nonetheless, the largest
foreign-exchange market is in the United Kingdom, which is
strategically situated between Asia and the Americas, followed by the
United States, Japan, and Singapore. Four of the most commonly

Copyright ©2015 Pearson Education, Inc.

89
 traded currency pairs involve the U.S. dollar, with the top two pairs
being the euro/dollar (EUR/USD) and the dollar/yen (USD/JPY).

DOES GEOGRAPHY MATTER?

Foreign-Exchange Trades and Time Zones

Even though the U.S. dollar is the most widely traded currency in the world, some trading
centers outside the U.S. are very important in the global currency trade. London, for
example, is a major trading center because it is close to the major capital markets in
Europe and is in a time zone that straddles the other major markets in Asia and the U.S.
Despite the fact that the currency market is a 24-hour market, the heaviest volumes of
trade are concentrated in the hours when Asia and Europe are open or when Europe and
the U.S. are open. Also, prices tend to be better when markets are active and liquid. [See
Map 8.1 and Fig 8.3]

II. MAJOR FOREIGN-EXCHANGE MARKETS

A. The Spot Market
The spot market consists of players who conduct those foreign-exchange
transactions that occur “on the spot,” or technically, within two business days
following the date of agreement to trade. Foreign-exchange traders always quote
a bid (buy) and offer (sell) rate. The bid is the rate at which traders buy foreign
exchange; the offer is the rate at which traders sell foreign exchange. The
spread is the difference between the bid and offer rates, i.e., it is the profit
margin of the trade.
1. Direct and Indirect Quotes. Exchanges can be quoted in American
terms, i.e., a direct quote that gives the value in dollars of a unit of foreign
currency, or European terms, i.e., an indirect quote that gives the value in
foreign currency of one U.S. dollar. The base currency, or the denominator,
is the quoted, underlying, or fixed currency; the terms currency is the
numerator. Most large newspapers quote exchange rates daily, listing both
spot and forward rates. The spot rates listed are usually the selling rates for
interbank transactions (transactions between banks) of $1 million or more.
B. The Forward Market
The forward market consists of those players who conduct foreign-exchange
transactions that occur at a set rate beyond two business days following the date
of agreement to trade. The forward rate is the rate quoted today for the future
delivery of a foreign currency. A forward contract is entered into whereby the
customer agrees to buy (or sell) over the counter a specified amount of a specific
currency at a specified price on a specific date in the future.
1. Forward Discounts and Premiums. The difference between the spot
and forward rates is either the forward discount (the forward rate, i.e., the
future delivery price, is lower than the spot rate) or the forward premium
(the forward rate is higher than the spot rate). Spot and forward rates can be
seen in Table 8.2.
C. Options

Copyright ©2015 Pearson Education, Inc.

90
 An option is a foreign-exchange instrument that guarantees the right, but does
not impose an obligation, to buy or sell a foreign currency within a certain time
period or on a specific date at a specific exchange rate (called the strike price).
Options can be purchased over the counter from a commercial or investment
bank or on an exchange. The writer of the option will charge a fee, known as the
premium. An option is more flexible, but also more expensive, than a forward
contract.
D. Futures
A foreign currency future resembles a forward contract because it specifies an
exchange rate sometime in advance of the actual exchange of the currency.
However, a future is traded on an exchange, not OTC. While a forward contract
is tailored to the amount and time frame the customer needs, futures contracts
have preset amounts and maturity dates. The futures contract is less valuable to a
firm than a forward contract, but it may be useful for small transactions or
speculation.

III. THE FOREIGN-EXCHANGE TRADING PROCESS

When a firm needs foreign exchange, it typically goes to its commercial bank. If the
bank is large enough, it may have its own foreign-exchange traders. A smaller bank,
dealing either on its own account or for a client, can trade foreign exchange directly
with another bank or through a foreign exchange broker, who matches the best bid
and offer quotes of interbank traders. The foreign-exchange process can be seen in
Figure 8.6.
A. Banks and Exchanges
At one time, only big money center banks could deal directly in foreign
exchange. Now, with the advent of electronic trading, smaller regional banks
can hook up to Reuters or Bloomberg and deal directly in the interbank market.
In spite of these developments, the greatest volume of foreign-exchange activity
still takes place with the big money center banks.
1. Top Foreign-Exchange Dealers. Top banks in the interbank market are
so ranked because of their abilities to:
• trade in specific market locations
• engage in major currencies
• engage in cross-trades
• deal in specific currencies
• handle derivatives (forwards, options, futures, and swaps)
• conduct key market research
A large firm may use more than one bank to conduct its foreign-exchange
dealings, given their particular strategic capabilities. In addition to the OTC
market, there are a number of exchanges where particular types of foreign-
exchange instruments (such as futures and options) are traded.
a. CME Group. The Chicago Mercantile Exchange (CME) offers
futures and options contracts in numerous foreign currencies. CME
uses two electronic trading platforms to trade different commodities,
including currency: CME Globex and CME Clearport.

Copyright ©2015 Pearson Education, Inc.

91
 b. NASDAQ OMX. In 2008, The Philadelphia Stock Exchange
merged with NASDAQ OMX. They formed the third largest
options market in the U.S. and a new hybrid of trading both
traditional floor trading and online trading.
c. NYSE Liffe. The London International Futures and Options
Exchange (LIFFE) still trades the U.S. dollar/euro and euro/U.S.
dollar options contract, even though it was purchased by Euronext,
which merged with the NYSE.

IV. HOW COMPANIES USE FOREIGN EXCHANGE

Companies enter the foreign-exchange market to facilitate their regular business
transactions and/or to speculate.
A. Business Purposes (I): Cash Flow Aspects of Imports and Exports
When a company must move money to pay for purchases or receives money for
sales, it has an option on the documents it can use, the currency of
denomination, and the degree of protection it can ask for.
1. Commercial Bills of Exchange. In order for these transactions to take
place, a number of documents are needed, including a draft and a letter of
credit. A draft or commercial bill of exchange is an instrument in which
one party directs another to make a payment. If the exporter demands
payment to be made immediately, the draft is called a sight draft. If the
payment is to be made later, it is called a time draft.
2. Letters of Credit. With a bill of exchange, it is always possible the
importer will not be able to make the payment to the exporter. A letter of
credit (L/C) obligates the buyer’s bank to honor the draft. There are still
risks with an L/C. It must adhere to all the conditions in the document in
order to be valid. A letter of credit may also be confirmed by another bank
and is called a confirmed letter of credit.
B. Business Purposes (II): Other Financial Flows
Companies also deal in foreign exchange for other transactions, such as the
receipt or payment of dividends or the receipt or payment of loans and interest.
1. Speculation. Sometimes companies deal in foreign exchange for profit.
Speculation involves buying (or selling) a currency based on the
expectation it will gain (or lose) in strength against other currencies.
Although speculation offers the chance to profit, it also contains an element
of risk. Profit-seekers may engage in arbitrage, i.e., they may purchase
foreign currency on one market for immediate resale on another market (in
a different country) in order to profit from a price discrepancy. Interest
arbitrage involves investing in debt instruments (such as bonds) in
different countries in order to maximize profits by capturing interest-rate
and exchange-rate differentials.

POINT—COUNTERPOINT: Is it OK to Speculate on Currency?

POINT: Currency speculation is not illegal, nor is it necessarily bad. Speculators are
merely trying to make a profit by trading based on market trends. Currency speculation

Copyright ©2015 Pearson Education, Inc.

92
allows investors to diversify their portfolios from traditional stocks and bonds, which are
themselves forms of speculative investment.

COUNTERPOINT: There are plenty of opportunities for a trader, whether in foreign

exchange or securities, to make money illegally or contrary to company policy. Nicholas
Leeson, a 28-year-old trader for British bank Barings PLC was chief dealer for the bank
in Singapore. Leeson had no checks and balances on his trading and made big bets on
stock index futures assuming that the Tokyo stock market would rise. After the January
17, 1995 earthquake in Kobe, Japanese stocks plunged and Leeson had to come up with
cash to cover the margin call. With lax internal controls, Leeson was able to make
numerous questionable and illegal transactions to illicitly generate the cash needed to
cover his positions. These actions resulted in huge losses in excess of $1 billion for
Barings, putting the company into bankruptcy. Since the collapse of Barings, measures
have been put into place in banks to prohibit such consequences, yet the occurrence of
and potential for negative outcomes from rogue trading continue to exist. Another recent
example, Jerome Kerviel of the French bank Societe Generale shows the ongoing risk for
banks to lose significant amounts of money.

LOOKING TO THE FUTURE:

Where Are Foreign-Exchange Markets Headed?

The speed at which transactions are processed and information is transmitted globally
will continue to lead to greater efficiencies and more opportunities in foreign-exchange
markets. Companies’ costs of trading foreign exchange should come down and they
should gain faster access to more currencies. Government exchange restrictions should
diminish as currency markets are liberalized. As the euro continues to solidify its
position in Europe, it will reduce exchange-rate volatility and should lead to the euro
taking some of the pressure off the dollar so that it is no longer the only major vehicle
currency in the world. The growth of Internet trades in currency will take away some of
the market share of dealers and allow more entrants in the foreign-exchange market.
Internet trade will also increase currency price transparency and increase the ease of
trading.

CLOSING CASE: Do Yuan to Buy Some Renminbi?

The yuan is the official currency of China. It has been historically fixed and controlled
by the Chinese government, but that may be changing. As China becomes a greater
global exporter and economic powerhouse, critics are claiming that the currency is being
undervalued and manipulated in an attempt to protect domestic markets. There are
additional levels of complexity impacting China as the nation must deal not only with
economic competition, but also internal political and social pressures. As China
continues to loosen capital controls, there is great fear that the government may lose
control of inflation and interest rates, thereby causing a great deal of labor and social
unrest, while negatively impacting China’s competitive advantages. There are currently

Copyright ©2015 Pearson Education, Inc.

93
platforms in place to increase the circulation of the yuan, but those platforms are
currently limited and severely restricted.

Questions

8-3 Why is it important for the yuan to become a major world currency?

China is now a leader in international world trade, a major exporter, and currently
holds the largest foreign exchange reserve in the world. The nation has one of the
highest GDPs in the world, and is increasing its economic power. The sheer size,
volume, and magnitude of China’s economic activity may also be arguments for the
yuan to become a major world currency. (LO: 1, Learning Outcome: To learn the
fundamentals of foreign exchange, AASCB: Analytical Skills)

8-4 What needs to take place for the yuan to be listed right along with the U.S. dollar and
the euro as global currencies?

The Chinese government will need to further loosen controls and restrictions to
promote the free trade and exchange of the currency in international markets. There
will also be a need for further development of trading platforms and banking
initiatives to promote the circulation and exchange of the currency. (LO: 2, Learning
Outcome: To identify the major characteristics of the foreign-exchange market and
how governments control the flow of currencies across national borders, AACSB:
Dynamics of the Global Economy)

8-5 Why is the Chinese government so hesitant to open up the yuan to market forces to
determine its value inside and outside of China?

The major concerns of the Chinese government revolve around the impact of market
forces upon inflation and interest rates within the country. Consequences of
inflation and higher interest rates may create labor and social unrest, as well as
political complications and a loss of economic competitiveness. (LO: 2, Learning
Outcome: To identify the major characteristics of the foreign-exchange market and
how governments control the flow of currencies across national borders, AACSB:
Dynamics of the Global Economy)

8-6 What roles do foreign banks like HSBC and electronic platforms like Thomson
Reuters and ICAP play in helping the yuan move closer to becoming a global
currency?

These entities have the ability to create platforms and markets to stimulate and
expedite currency trading. Consequently, these entities can increase the circulation
of the yuan. Further, these actors will be instrumental in allowing the yuan to be
exchanged in a floating exchange system against the world’s other leading

Copyright ©2015 Pearson Education, Inc.

94
 currencies. (LO: 4, Learning Outcome: To examine the different institutions that
deal in foreign exchange, AACSB: Analytical Skills)

8-7 By the end of 2013, the Bank for International Settlements will have issued its next
triennial survey on foreign exchange. Look up the report on the bis.org Web site.
What are the major differences in that survey from what is reported in the 2010
survey in the chapter?

Trading in foreign-exchange markets averaged $5.3 trillion per day in April 2013.
This is up from $4.0 trillion in April 2010 and $3.3 trillion in April 2007. (LO: 3,
Learning Outcome: To describe how the foreign-exchange market works, AACSB:
Reflective Thinking)

ADDITIONAL EXERCISES: The Foreign-Exchange Market

Exercise 8.1. Many students will have had experience with foreign currency
conversion. Ask them to describe the differences they have encountered in rates
quoted at the airport, in hotels and banks, and on the street. Then ask students to
describe their experiences using credit cards and ATM cards in particular foreign
countries. How were the transactions reported on their statements? Were they
charged processing fees? (LO: 3, Learning Outcome: To describe how the foreign-
exchange market works, AACSB: Reflective Thinking)

Exercise 8.2. Take copies of the most recent editions of The Wall Street Journal
and the Financial Times to class. Explain to students where to find foreign-exchange
rates, forward rates, cross rates, commodity prices, etc. Select the home countries of
various students in your class. Use the forward rates to engage the students in a
discussion as to which currencies appear to be stronger. Explore the possible
underlying reasons for a given currency’s strength or weakness. (LO: 1, Learning
Outcome: To learn the fundamentals of foreign exchange, AACSB: Analytical
Skills)

Exercise 8.3. More than 150 currencies exist today. Some countries share a
common currency (e.g., those that participate in the euro), while certain countries
peg their currencies to others (e.g., Chile’s currency is pegged to the U.S. dollar).
Many nations, however, maintain their own independent currencies. Ask students to
debate the potential for additional regional currencies such as the euro. If they
support the concept, should those currencies necessarily be tied to regional economic
blocs? (LO: 2, Learning Outcome: To identify the major characteristics of the
foreign-exchange market and how governments control the flow of currencies across
national borders, AACSB: Communication Abilities)

Exercise 8.4. Have the students assume the role of CFO of a mid-sized U.S.
company that exports to Europe. The company has received a contract to supply
components to a European manufacturer with an agreed-upon sales price of €4

Copyright ©2015 Pearson Education, Inc.

95
million due in 90 days. Should the CFO do anything to hedge against possible
fluctuations in the dollar/euro exchange rate? If so, what? If not, why not? (LO: 5,
Learning Outcome: To understand why companies deal in foreign exchange,
AACSB: Analytical Skills)

Exercise 8.5. Go to a trading Web site like www.forex-markets.com or an

information site like finance.yahoo.com/currency and demonstrate the charting,
conversion calculators, and other research and information tools available for foreign
exchange. (LO: 1, Learning Outcome: To learn the fundamentals of foreign
exchange, AACSB: Use of Information Technology)

Copyright ©2015 Pearson Education, Inc.

96
Another random document with
no related content on Scribd:
THE FULL PROJECT GUTENBERG LICENSE
 PLEASE READ THIS BEFORE YOU DISTRIBUTE OR USE THIS WORK

To protect the Project Gutenberg™ mission of promoting the

free distribution of electronic works, by using or distributing this
work (or any other work associated in any way with the phrase
“Project Gutenberg”), you agree to comply with all the terms of
the Full Project Gutenberg™ License available with this file or
online at www.gutenberg.org/license.

Section 1. General Terms of Use and

Redistributing Project Gutenberg™
electronic works
1.A. By reading or using any part of this Project Gutenberg™
electronic work, you indicate that you have read, understand,
agree to and accept all the terms of this license and intellectual
property (trademark/copyright) agreement. If you do not agree to
abide by all the terms of this agreement, you must cease using
and return or destroy all copies of Project Gutenberg™
electronic works in your possession. If you paid a fee for
obtaining a copy of or access to a Project Gutenberg™
electronic work and you do not agree to be bound by the terms
of this agreement, you may obtain a refund from the person or
entity to whom you paid the fee as set forth in paragraph 1.E.8.

1.B. “Project Gutenberg” is a registered trademark. It may only

be used on or associated in any way with an electronic work by
people who agree to be bound by the terms of this agreement.
There are a few things that you can do with most Project
Gutenberg™ electronic works even without complying with the
full terms of this agreement. See paragraph 1.C below. There
are a lot of things you can do with Project Gutenberg™
electronic works if you follow the terms of this agreement and
help preserve free future access to Project Gutenberg™
electronic works. See paragraph 1.E below.
1.C. The Project Gutenberg Literary Archive Foundation (“the
Foundation” or PGLAF), owns a compilation copyright in the
collection of Project Gutenberg™ electronic works. Nearly all the
individual works in the collection are in the public domain in the
United States. If an individual work is unprotected by copyright
law in the United States and you are located in the United
States, we do not claim a right to prevent you from copying,
distributing, performing, displaying or creating derivative works
based on the work as long as all references to Project
Gutenberg are removed. Of course, we hope that you will
support the Project Gutenberg™ mission of promoting free
access to electronic works by freely sharing Project
Gutenberg™ works in compliance with the terms of this
agreement for keeping the Project Gutenberg™ name
associated with the work. You can easily comply with the terms
of this agreement by keeping this work in the same format with
its attached full Project Gutenberg™ License when you share it
without charge with others.

1.D. The copyright laws of the place where you are located also
govern what you can do with this work. Copyright laws in most
countries are in a constant state of change. If you are outside
the United States, check the laws of your country in addition to
the terms of this agreement before downloading, copying,
displaying, performing, distributing or creating derivative works
based on this work or any other Project Gutenberg™ work. The
Foundation makes no representations concerning the copyright
status of any work in any country other than the United States.

1.E. Unless you have removed all references to Project

Gutenberg:

1.E.1. The following sentence, with active links to, or other

immediate access to, the full Project Gutenberg™ License must
appear prominently whenever any copy of a Project
Gutenberg™ work (any work on which the phrase “Project
Gutenberg” appears, or with which the phrase “Project
Gutenberg” is associated) is accessed, displayed, performed,
viewed, copied or distributed:

This eBook is for the use of anyone anywhere in the United

States and most other parts of the world at no cost and with
almost no restrictions whatsoever. You may copy it, give it
away or re-use it under the terms of the Project Gutenberg
License included with this eBook or online at
www.gutenberg.org. If you are not located in the United
States, you will have to check the laws of the country where
you are located before using this eBook.

1.E.2. If an individual Project Gutenberg™ electronic work is

derived from texts not protected by U.S. copyright law (does not
contain a notice indicating that it is posted with permission of the
copyright holder), the work can be copied and distributed to
anyone in the United States without paying any fees or charges.
If you are redistributing or providing access to a work with the
phrase “Project Gutenberg” associated with or appearing on the
work, you must comply either with the requirements of
paragraphs 1.E.1 through 1.E.7 or obtain permission for the use
of the work and the Project Gutenberg™ trademark as set forth
in paragraphs 1.E.8 or 1.E.9.

1.E.3. If an individual Project Gutenberg™ electronic work is

posted with the permission of the copyright holder, your use and
distribution must comply with both paragraphs 1.E.1 through
1.E.7 and any additional terms imposed by the copyright holder.
Additional terms will be linked to the Project Gutenberg™
License for all works posted with the permission of the copyright
holder found at the beginning of this work.

1.E.4. Do not unlink or detach or remove the full Project

Gutenberg™ License terms from this work, or any files
containing a part of this work or any other work associated with
Project Gutenberg™.
 1.E.5. Do not copy, display, perform, distribute or redistribute
this electronic work, or any part of this electronic work, without
prominently displaying the sentence set forth in paragraph 1.E.1
with active links or immediate access to the full terms of the
Project Gutenberg™ License.

1.E.6. You may convert to and distribute this work in any binary,
compressed, marked up, nonproprietary or proprietary form,
including any word processing or hypertext form. However, if
you provide access to or distribute copies of a Project
Gutenberg™ work in a format other than “Plain Vanilla ASCII” or
other format used in the official version posted on the official
Project Gutenberg™ website (www.gutenberg.org), you must, at
no additional cost, fee or expense to the user, provide a copy, a
means of exporting a copy, or a means of obtaining a copy upon
request, of the work in its original “Plain Vanilla ASCII” or other
form. Any alternate format must include the full Project
Gutenberg™ License as specified in paragraph 1.E.1.

1.E.7. Do not charge a fee for access to, viewing, displaying,

performing, copying or distributing any Project Gutenberg™
works unless you comply with paragraph 1.E.8 or 1.E.9.

1.E.8. You may charge a reasonable fee for copies of or

providing access to or distributing Project Gutenberg™
electronic works provided that:

• You pay a royalty fee of 20% of the gross profits you derive from
the use of Project Gutenberg™ works calculated using the
method you already use to calculate your applicable taxes. The
fee is owed to the owner of the Project Gutenberg™ trademark,
but he has agreed to donate royalties under this paragraph to
the Project Gutenberg Literary Archive Foundation. Royalty
payments must be paid within 60 days following each date on
which you prepare (or are legally required to prepare) your
periodic tax returns. Royalty payments should be clearly marked
as such and sent to the Project Gutenberg Literary Archive
Foundation at the address specified in Section 4, “Information
 about donations to the Project Gutenberg Literary Archive
Foundation.”

• You provide a full refund of any money paid by a user who

notifies you in writing (or by e-mail) within 30 days of receipt that
s/he does not agree to the terms of the full Project Gutenberg™
License. You must require such a user to return or destroy all
copies of the works possessed in a physical medium and
discontinue all use of and all access to other copies of Project
Gutenberg™ works.

• You provide, in accordance with paragraph 1.F.3, a full refund of

any money paid for a work or a replacement copy, if a defect in
the electronic work is discovered and reported to you within 90
days of receipt of the work.

• You comply with all other terms of this agreement for free
distribution of Project Gutenberg™ works.

1.E.9. If you wish to charge a fee or distribute a Project

Gutenberg™ electronic work or group of works on different
terms than are set forth in this agreement, you must obtain
permission in writing from the Project Gutenberg Literary
Archive Foundation, the manager of the Project Gutenberg™
trademark. Contact the Foundation as set forth in Section 3
below.

1.F.

1.F.1. Project Gutenberg volunteers and employees expend

considerable effort to identify, do copyright research on,
transcribe and proofread works not protected by U.S. copyright
law in creating the Project Gutenberg™ collection. Despite
these efforts, Project Gutenberg™ electronic works, and the
medium on which they may be stored, may contain “Defects,”
such as, but not limited to, incomplete, inaccurate or corrupt
data, transcription errors, a copyright or other intellectual
property infringement, a defective or damaged disk or other
medium, a computer virus, or computer codes that damage or
cannot be read by your equipment.

1.F.2. LIMITED WARRANTY, DISCLAIMER OF DAMAGES -

Except for the “Right of Replacement or Refund” described in
paragraph 1.F.3, the Project Gutenberg Literary Archive
Foundation, the owner of the Project Gutenberg™ trademark,
and any other party distributing a Project Gutenberg™ electronic
work under this agreement, disclaim all liability to you for
damages, costs and expenses, including legal fees. YOU
AGREE THAT YOU HAVE NO REMEDIES FOR NEGLIGENCE,
STRICT LIABILITY, BREACH OF WARRANTY OR BREACH
OF CONTRACT EXCEPT THOSE PROVIDED IN PARAGRAPH
1.F.3. YOU AGREE THAT THE FOUNDATION, THE
TRADEMARK OWNER, AND ANY DISTRIBUTOR UNDER
THIS AGREEMENT WILL NOT BE LIABLE TO YOU FOR
ACTUAL, DIRECT, INDIRECT, CONSEQUENTIAL, PUNITIVE
OR INCIDENTAL DAMAGES EVEN IF YOU GIVE NOTICE OF
THE POSSIBILITY OF SUCH DAMAGE.

1.F.3. LIMITED RIGHT OF REPLACEMENT OR REFUND - If

you discover a defect in this electronic work within 90 days of
receiving it, you can receive a refund of the money (if any) you
paid for it by sending a written explanation to the person you
received the work from. If you received the work on a physical
medium, you must return the medium with your written
explanation. The person or entity that provided you with the
defective work may elect to provide a replacement copy in lieu
of a refund. If you received the work electronically, the person or
entity providing it to you may choose to give you a second
opportunity to receive the work electronically in lieu of a refund.
If the second copy is also defective, you may demand a refund
in writing without further opportunities to fix the problem.

1.F.4. Except for the limited right of replacement or refund set

forth in paragraph 1.F.3, this work is provided to you ‘AS-IS’,
WITH NO OTHER WARRANTIES OF ANY KIND, EXPRESS
OR IMPLIED, INCLUDING BUT NOT LIMITED TO
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR
ANY PURPOSE.

1.F.5. Some states do not allow disclaimers of certain implied

warranties or the exclusion or limitation of certain types of
damages. If any disclaimer or limitation set forth in this
agreement violates the law of the state applicable to this
agreement, the agreement shall be interpreted to make the
maximum disclaimer or limitation permitted by the applicable
state law. The invalidity or unenforceability of any provision of
this agreement shall not void the remaining provisions.

1.F.6. INDEMNITY - You agree to indemnify and hold the

Foundation, the trademark owner, any agent or employee of the
Foundation, anyone providing copies of Project Gutenberg™
electronic works in accordance with this agreement, and any
volunteers associated with the production, promotion and
distribution of Project Gutenberg™ electronic works, harmless
from all liability, costs and expenses, including legal fees, that
arise directly or indirectly from any of the following which you do
or cause to occur: (a) distribution of this or any Project
Gutenberg™ work, (b) alteration, modification, or additions or
deletions to any Project Gutenberg™ work, and (c) any Defect
you cause.

Section 2. Information about the Mission of

Project Gutenberg™
Project Gutenberg™ is synonymous with the free distribution of
electronic works in formats readable by the widest variety of
computers including obsolete, old, middle-aged and new
computers. It exists because of the efforts of hundreds of
volunteers and donations from people in all walks of life.

Volunteers and financial support to provide volunteers with the

assistance they need are critical to reaching Project
Gutenberg™’s goals and ensuring that the Project Gutenberg™
collection will remain freely available for generations to come. In
2001, the Project Gutenberg Literary Archive Foundation was
created to provide a secure and permanent future for Project
Gutenberg™ and future generations. To learn more about the
Project Gutenberg Literary Archive Foundation and how your
efforts and donations can help, see Sections 3 and 4 and the
Foundation information page at www.gutenberg.org.

Section 3. Information about the Project

Gutenberg Literary Archive Foundation
The Project Gutenberg Literary Archive Foundation is a non-
profit 501(c)(3) educational corporation organized under the
laws of the state of Mississippi and granted tax exempt status by
the Internal Revenue Service. The Foundation’s EIN or federal
tax identification number is 64-6221541. Contributions to the
Project Gutenberg Literary Archive Foundation are tax
deductible to the full extent permitted by U.S. federal laws and
your state’s laws.

The Foundation’s business office is located at 809 North 1500

West, Salt Lake City, UT 84116, (801) 596-1887. Email contact
links and up to date contact information can be found at the
Foundation’s website and official page at
www.gutenberg.org/contact

Section 4. Information about Donations to

the Project Gutenberg Literary Archive
Foundation
Project Gutenberg™ depends upon and cannot survive without
widespread public support and donations to carry out its mission
of increasing the number of public domain and licensed works
that can be freely distributed in machine-readable form
accessible by the widest array of equipment including outdated
equipment. Many small donations ($1 to $5,000) are particularly
important to maintaining tax exempt status with the IRS.

The Foundation is committed to complying with the laws

regulating charities and charitable donations in all 50 states of
the United States. Compliance requirements are not uniform
and it takes a considerable effort, much paperwork and many
fees to meet and keep up with these requirements. We do not
solicit donations in locations where we have not received written
confirmation of compliance. To SEND DONATIONS or
determine the status of compliance for any particular state visit
www.gutenberg.org/donate.

While we cannot and do not solicit contributions from states

where we have not met the solicitation requirements, we know
of no prohibition against accepting unsolicited donations from
donors in such states who approach us with offers to donate.

International donations are gratefully accepted, but we cannot

make any statements concerning tax treatment of donations
received from outside the United States. U.S. laws alone swamp
our small staff.

Please check the Project Gutenberg web pages for current

donation methods and addresses. Donations are accepted in a
number of other ways including checks, online payments and
credit card donations. To donate, please visit:
www.gutenberg.org/donate.

Section 5. General Information About Project

Gutenberg™ electronic works
Professor Michael S. Hart was the originator of the Project
Gutenberg™ concept of a library of electronic works that could
be freely shared with anyone. For forty years, he produced and
distributed Project Gutenberg™ eBooks with only a loose
network of volunteer support.

Project Gutenberg™ eBooks are often created from several

printed editions, all of which are confirmed as not protected by
copyright in the U.S. unless a copyright notice is included. Thus,
we do not necessarily keep eBooks in compliance with any
particular paper edition.

Most people start at our website which has the main PG search
facility: www.gutenberg.org.

This website includes information about Project Gutenberg™,

including how to make donations to the Project Gutenberg
Literary Archive Foundation, how to help produce our new
eBooks, and how to subscribe to our email newsletter to hear
about new eBooks.