Exam 20: International Corporate Finance

Assume the current spot rate for the Norwegian krone is $1 = NKr7.0305.The expected inflation rate in Norway is 2.6 percent,and in the United States its 1.3 percent.A risk-free asset in the U.S.is yielding 2.2 percent.What risk-free rate of return should you expect on a Norwegian security?

Assume the direct quote for the Swedish krona is 0.1360 while it is 1.0462 for the Swiss franc.What is the cross-rate between the Swedish krona and the Swiss franc?

The expected inflation rate in Finland is 3.67 percent while it is 2.45 percent in the United States.A risk-free asset in the United States is yielding 3.21 percent.What real rate of return should you expect on a risk-free Finnish security?

Assume the international Fisher effect exists and the inflation rate in the U.S.exceeds the inflation rate in Canada.What can we state for certain given this information?

Which one of these statements related to the foreign exchange market is correct?

You are planning a trip to Australia.The hotel will cost you A$182 per night for 7 nights.You expect to spend another A$4,100 for meals,tours,and other expenses.How much will this trip cost you in U.S.dollars if the direct quote is 0.8507?

An agreement to trade currencies based on the exchange rate today for settlement within two business days is called a(n)________ trade.

The cross rate is the

Assume you borrow $5,000 today,exchange the $5,000 into yen,and then invest the yen for 30 days,at which time you need to pay an invoice to a Japanese supplier.In essence,you have

Assume the current spot rate is Can$.9892 and the 1-year forward rate is Can$.9901.The nominal risk-free rate in Canada is 3.8 percent while it is 3.9 percent in the U.S.If you use covered interest arbitrage,how much extra profit can you earn over that which you would earn if you invested $100 in the U.S.for one year?

A sweater you desire costs Can$68.What will the same sweater cost in the United States if the indirect quote is 1.1417 and purchasing power parity exists?

According to the unbiased forward rate theory,the current 90-day forward rate should fairly accurately predict the

Assume that ¥118.62 equal $1.Also assume that 7.4518Skr equal $1.How many Japanese yen can you acquire in exchange for 2,500 Swedish krona?

Which two countries use the krone as their home currency?

Which one of these statements is correct?

Assume a currency is less expensive in the forward market than in the spot market relative to the U.S.dollar.When this occurs,the currency is said to be selling at

International bonds issued in a single country and denominated in that country's currency are called

The international Fisher effect may not hold if

A fancy new coat costs SKr989.90.Assume you can exchange SKr1 for $.1402 and €1 for $1.1806.How much will the identical coat cost in euros if absolute purchasing power parity exists?

You want to invest in a project in Canada.The project has an initial cost of Can$318,000 and is expected to produce cash inflows of C$126,000 a year for 3 years.The project will be worthless after 3 years.The expected inflation rate in Canada is 3.2 percent.The applicable interest rate in Canada is 12.7 percent.Assume the current spot rate is Can$1 = $1.12.What is the net present value of this project in U.S.dollars using the foreign currency approach?