Exam 21: International Cash Management

The Mexican one-year interest rate is 27 percent, while the U.S. one-year interest rate is 9 percent. If a U.S. firm creates a one-year deposit in Mexico, the Mexican peso would have to ____ against the U.S. dollar by ____ in order to make that investment have an effective yield that is achievable in the U.S.

A subsidiary will normally have a more difficult time forecasting future outflow payments if its purchases are international rather than domestic.

If interest rate parity does not hold, and the forward ____ is greater than the interest rate differential, then covered interest arbitrage is feasible for investors residing in the ____ country.

Which of the following is true?

Assume that Subsidiaries X and Y often trade with each other. Assume that Subsidiary X has excess cash while Subsidiary Y is short on cash. How can Subsidiary X help out Subsidiary Y?

Exhibit 21-2 Moore Corporation would like to simultaneously invest in Malaysian ringgit (MYR) and Romanian leu (ROL) for a three-month period. Moore would like to determine the expected yield and the variance of a portfolio consisting of 40% ringgit and 60% leu. Moore has identified the following information: -Refer to Exhibit 21-2. What is the standard deviation of the portfolio contemplated by Moore Corporation?

Preauthorized payment is an arrangement that allows a corporation to charge a customer's bank account up to some limit.

____ may complicate cash flow optimization.

When investing in a portfolio of foreign currencies, the currencies represented within the portfolio are ideally highly positively correlated.