Exam 31: International Corporate Finance

Financial Accounting Standard Board Statement Number 52 requires that most assets and liabilities be translated at the current exchange rate. Gains and losses are recorded:

The idea that commodities have the same value no matter where they are purchased or what currency is used is known as _____ parity.

Assume that $1 can buy you either ¥107 or £.55. If a TV in London costs £500,what will that identical TV cost in Tokyo if absolute purchasing power parity exists?

You want to invest in a riskless project in Sweden. The project has an initial cost of SKr2.1 million and is expected to produce cash inflows of SKr810,000 a year for 3 years. The project will be worthless after the first 3 years. The expected inflation rate in Sweden is 2 percent while it is 5 percent in the U.S. A risk-free security is paying 6 percent in the U.S. The current spot rate is $1 = SKr7.55. What is the net present value of this project in Swedish krona using the foreign currency approach? Assume that the international Fisher effect applies.

Today,you can get either 140 Canadian dollars or 1,140 Mexican pesos for 100 U.S. dollars. Last year,100 U.S. dollars was worth 139 Canadian dollars and 1,160 Mexican pesos. Which one of the following statements is correct given this information?

Assume that the Euro is selling in the spot market for $1.10. Simultaneously,in the 3-month forward market the Euro is selling for $1.12. Which one of the following statements correctly describes this situation?

Assume that you can buy 245 Canadian dollars with 100 British pounds. How much profit can you earn on a triangle arbitrage given the following rates if you start out with 100 U.S. dollars?

Which of the following conditions must exist for absolute purchasing power parity to hold? I. The goods are identical II. The goods have equal economic values III. Transaction costs are equal to zero IV. There are no trade barriers

You are planning a trip to Australia. Your hotel will cost you A$150 per night for five nights. You expect to spend another A$2,000 for meals,tours,souvenirs,and so forth. How much will this trip cost you in U.S. dollars given the following exchange rates?

The changes in the relative economic conditions between countries are referred to as the:

A security issued in the United States that represents shares of a foreign stock and allows that stock to be traded in the United States is called a(n):

The spot rate for the British pound currently is £.55 per $1. The one-year forward rate is £.58 per $1. A risk-free asset in the U.S. is currently earning 3 percent. If interest rate parity holds,approximately what rate can you earn on a one-year risk-free British security?

In the spot market,$1 is currently equal to £.55. The expected inflation rate in the U.K. is 4 percent and in the U.S. 3 percent. What is the expected exchange rate two years from now if relative purchasing power parity exists?

Which of the following statements are correct concerning the foreign exchange market? I. The trading floor of the foreign exchange market is located in London,England. II. The foreign exchange market is the world's largest financial market. III. The four primary currencies that are traded in the foreign exchange market are the U.S. dollar,the British pound,the Canadian dollar,and the euro. IV. Importers and exporters are key players in the foreign exchange market.

The price of one country's currency expressed in terms of another country's currency is:

The camera you want to buy costs $399 in the U.S. If absolute purchasing power parity exists,the identical camera will cost _____ in Canada if the exchange rate is C$1 = $.7349.

The cross rate is the:

A foreign subsidiary can remit funds to a parent in the following form(s):

The current spot rate for the Norwegian krone is $1 = NKr6.83. The expected inflation rate in Norway is 3 percent and in the U.S. 2 percent. A risk-free asset in the U.S. is yielding 4.5 percent. What real rate of return should you expect on a risk-free Norwegian security?

Assume that ¥107.62 equal $1. Also assume that 7.5415Skr equal $1. How many Japanese yen can you acquire in exchange for 6,200 Swedish krona?