FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 21: International Corporate Finance

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 31

Multiple Choice

Review LaterAdd Note

Review Later

Assume you just returned from some extensive traveling throughout the Americas. You started your trip with $20,000 in your pocket. You spent 3.1 million pesos while in Chile and 548,200 pesos in Colombia. Then on the way home, you spent 47,500 pesos in Mexico. Assume the exchanges rates you encountered were $1 = Ps562 in Chile; $1 = Ps1,928 in Colombia; and $.0767 = Ps in Mexico. How many dollars did you have left by the time you returned to the U.S.?

A) $11,113
B) $10,556
C) $4,117
D) $4,244
E) $8,575

F) A) and D)
G) A) and C)

Correct Answer

verified

Show Answer

Question 32

Multiple Choice

Review LaterAdd Note

Review Later

You have £100. A friend of yours wants to exchange C$175 for your £100. What will be your profit or loss in pounds if you accept your friend's offer assuming you can exchange C$1 for $.9134 and exchange £1 for $1.7240?

A) £7.28 loss
B) £3.29 loss
C) £2.51 loss
D) £1.20 profit
E) £2.51 profit

F) A) and B)
G) B) and E)

Correct Answer

verified

Show Answer

Question 33

Multiple Choice

Review LaterAdd Note

Assume $1 is currently equal to A$1.2924 in the spot market. Also assume the expected inflation rate in Australia is 2.8 percent as compared to 2.4 percent in the U.S. What is the expected exchange rate one year from now if relative purchasing power parity exists?

Which one of the following types of operations would be subject to the most political risk if the operation were conducted outside of a firm's home country?

Which one of the following statements is correct?

You are considering a project in South Africa which has an initial cost of R385,000. The project is expected to return a one-time payment of R428,900 four years from now. The risk-free rate of return is 3.5 percent in the U.S. and 2.4 percent in South Africa. The inflation rate is 4 percent in the U.S. and 3 percent in South Africa. Currently, you can buy R10.48 for $1. How much will the payment of R428,900 be worth in U.S. dollars four years from now?

Assume a firm has $5 million of overseas profits that are invested in U.S. financial assets. These profits have not been repatriated. Given this, the firm is prohibited from using any of the $5 million to:

Triangle arbitrage:

Currently, $1 will buy C$1.1028 while $1.2334 will buy €1. What is the exchange rate between the Canadian dollar and the euro?

Assume that an item costs $100 in the U.S. and the exchange rate between the U.S. and Canada is: $1 = C$1.27. Which one of the following concepts supports the idea that the item that sells for $100 in the U.S. is currently selling in Canada for $127?

Assume €1 = $1.1364 and $1 = S$1.2408. A new coat costs S$213 in Singapore. How much will the identical coat cost in euros if absolute purchasing power parity exists?

You want to invest in a project in Canada that has an initial cost of C$812,000 and is expected to produce cash inflows of C$340,000 a year for three years. The project will be worthless after the three years. The expected inflation rate in Canada is 4 percent while it is only 3 percent in the U.S. The applicable interest rate for the project in Canada is 12 percent. Assume the current spot rate is C$1 = $.7874. What is the net present value of this project in Canadian dollars?

Where does most of the trading in Eurobonds occur?

Which one of the following statements is correct concerning the foreign exchange market?

Assume the spot rate on the Canadian dollar is C$1.0926, the risk-free nominal rate in the U.S. is 3.8 percent and 4.1 percent in Canada. Which one of the following four-year forward rates best establishes the approximate interest rate parity condition?

Which one of the following is a suggested method of reducing a U.S. importer's short-run exposure to exchange rate risk?

Assume the spot rate on the pound is £.5920 and the 6-month forward rate is £.5929. Also assume interest rate parity holds and the current six-month risk-free rate in the United States is 3.1 percent. What must the six-month risk-free rate be in Great Britain?

You are analyzing a project with an initial cost of £130,000. The project is expected to return £20,000 the first year, £50,000 the second year, and £90,000 the third and final year. There is no salvage value. The current spot rate is £.6211. The nominal risk-free return is 5.5 percent in the U.K. and 6 percent in the U.S. The return relevant to the project is 14 percent in the U.S. Assume that uncovered interest rate parity exists. What is the net present value of this project in U.S. dollars?

Assume the spot rate on the Canadian dollar is C$1.2648, the risk-free nominal rate in the U.S. is 3.3 percent, and the risk-free nominal rate in Canada is 3.8 percent. What one-year forward rate will create interest rate parity?

The interest rate parity approximation formula is: