FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 21: International Financial Management

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 31

Multiple Choice

Review LaterAdd Note

Review Later

Suppose hockey skates sell in Canada for 105 Canadian dollars,and 1 Canadian dollar equals 0.9423 US dollars.If absolute purchasing power parity (PPP) holds,what is the price of hockey skates in the United States?

A) $63.00
B) $74.55
C) $85.88
D) $98.94

E) A) and B)
F) All of the above

Correct Answer

verified

Show Answer

Question 32

Multiple Choice

Review LaterAdd Note

Review Later

Suppose one British pound can purchase 2.12 US dollars today in the foreign exchange market,and currency forecasters predict that the US dollar will depreciate by 22.0% against the pound over the next 30 days.How many dollars will a pound buy in 30 days?

A) 2.59
B) 2.63
C) 1.74
D) 2.04

E) A) and B)
F) C) and D)

Correct Answer

verified

Show Answer

Question 33

True/False

Review LaterAdd Note

On average,foreign currency will depreciate against the Canadian dollar at a percentage rate approximately equal to the amount by which its inflation rate exceeds that of Canada.

Suppose that currently 1 British pound equals 1.98 Canadian dollars and 1 Canadian dollar equals 1.04 Swiss francs.What is the cross exchange rate between the pound and the franc?

Blenman Corporation,based in Canada,arranged a 2-year,$1,000 loan to fund a project in Mexico.The loan is denominated in Mexican pesos,carries a 10.0% nominal rate,and requires equal semiannual payments.The exchange rate at the time of the loan was 10.1366 pesos per dollar,but it dropped to 9.5511 pesos per dollar before the first payment came due.The loan was not hedged in the foreign exchange market.Thus,Blenman must convert Canadian dollars into Mexican pesos to make its payments.If the exchange rate remains at 9.5511 pesos per dollar through the end of the loan period,what effective interest rate will Blenman end up paying on the loan?

The cost of capital may be different for a foreign project than for an equivalent domestic project because foreign projects may be more or less risky.

The threat of expropriation creates an incentive for the multinational firm to minimize inventory holdings in certain countries and to bring in goods only as needed.

The interest rate paid on Eurocurrency deposits depends on the particular bank's lending rate and on rates available on its domestic money market instruments.

Individuals and corporations can buy or sell forward currencies to hedge their exchange rate exposure.Essentially,the process involves simultaneously selling the currency expected to appreciate in value and buying the currency expected to depreciate.

Credit policy for international firms is generally more risky due in part to the additional consideration of exchange rates and also due to uncertainty regarding the creditworthiness of many foreign customers.

If a dollar will buy fewer units of a foreign currency in the forward market than in the spot market,then the foreign currency is said to be selling at a premium to the spot rate.

If Canada is running a deficit trade balance with China,then in a free market we would expect the value of the Chinese yuan to depreciate against the Canadian dollar.

If one Swiss franc can purchase 0.966 Canadian dollars,how many Swiss francs can one Canadian dollar buy?