Exam 19: International Corporate Finance

Purchasing Power Parity If the current spot rate between the U.S. dollar and the Swedish krona was $1 = 7.5423 krona, and if the inflation rate in the United States was 5 percent and in Sweden it was 2 percent, then what would be the expected spot rate in one year?

Interest Rate Parity Assume the spot rate between the U.S. dollar and the Taiwan dollar is $1 = TWD32.456. If the interest rate in the United States is 4 percent and in Taiwan is 3 percent, then what should be the one-month forward exchange rate?

Which of these is a political and economic union of 27 European countries?

Risks inherent in making investments in foreign countries include _____________.

Exchange Rate Quote Convert the following direct quote to a dollar indirect quote: 1 Danish Krone = $0.1755

Which of these is a company that operates production and/or sales facilities in multiple countries?

Exchange Rate Quote Convert the following indirect quote to a dollar direct quote: $1 = 3.8249 Saudi Arabian Riyal

Which of these is defined as the possibility that the spot currency exchange rate will change and reduce the value of foreign assets and cash flows?

Convert the following direct quote to dollar indirect quote: 1 Danish Krone = $0.1991.

Convert each of the following indirect quotes to dollar direct quotes: - $1 = 3.95 Saudi Arabian Riyal - $1 = 41.45 Philippine Peso - $1 = 0.58 Latvian Lat $1 equals:

Exchange Rate Quote Convert the following indirect quote to a dollar direct quote: $1 = 15,990 Vietnam Dong

Purchasing Power Parity If the current spot rate between the U.S. dollar and the Netherland Antilles Guilder was $1 = 1.68 Guilder, and if the inflation rate in the United States was 1 percent and in the Netherland Antilles it was 6 percent, then what would be the expected spot rate in one year?

If the price of silver in England is £6.25 per ounce, what is the expected price of silver in the United States if the spot exchange rate is $1 = £0.55?

Over the past decade, China has acquired hundreds of billions of U.S. dollars due to the trade imbalance between the two countries. The Chinese government has used many of these dollars to purchase Treasury bonds. What would be the effect if China suddenly decided to sell the majority of these Treasury bonds and exchange the dollars for pesos?

Which of the following is an economic principle that states all identical goods in different markets must have the same price?

Interest Rate Parity If the spot rate between the U.S. dollar and the New Zealand dollar is $1 = NZD1.5215, and if the interest rate in the United States is 8 percent and in New Zealand is 4 percent, then what should be the three-month forward exchange rate?

China's exchange rate is pegged to _______________.

All of the following are political risks to the assets and cash flows of multinational corporations except ____________.

Triangular Arbitrage The U.S. dollar spot exchange rate with the Australian dollar is $1 = AU$1.2835. The U.S. dollar and euro exchange rate is $1 = €0.7605. If the cross-rate between the euro and Australian dollar is €1 = AU$1.610 then show that an arbitrage is possible. What positions should be taken to profit from the mispricing?

Exchange Rate Risk A U.S. firm is expecting cash flows of 5 million Mexican pesos and 10 million Indian rupees. The current spot exchange rates are: $1 = 11.255 pesos and $1 = 44.864 rupees. If these cash flows are not received for one year and the expected spot rates at that time will be $1 = 10.080 pesos and $1 = 44.125 rupees, then what is the difference in dollars received that was caused by the delay?