FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 18: International Financial Management

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 41

Multiple Choice

Review LaterAdd Note

Review Later

You just bought a pair of shoes for $129.If an identical pair of shoes sells for €105 in France,what should be the $/€ exchange rate if the purchasing power parity holds?

A) .8140
B) 1.2286
C) 1.2905
D) .5968

Correct Answer

verified

Show Answer

Question 42

Multiple Choice

Review LaterAdd Note

Review Later

You checked the €/$ exchange rate today and you found that one Dollar cost you €0.8214.When you checked the three months (90 day) €/$ forward exchange rate one dollar was trading at €0.8026.What is the annualized forward premium (discount) for the Euro?

A) 9.4%
B) -9.4%
C) 2.35%
D) -2.35%

Correct Answer

verified

Show Answer

Question 43

Multiple Choice

Review LaterAdd Note

NARRBEGIN: Smith Int'l Investment Smith Enterprises International Investment Smith Enterprises is considering opening a new manufacturing plant in France.The cost of the new plant will be €25 million and the plant is expected to generate after tax cash flows of €10 million at the end of each year for the next 4 years.After that the plant will be worthless.The current €/$ exchange rate is €0.8166/$.The expected rate of inflation for the U.S is 2.5% per year.The risk free rate in the U.S.is 4% and the risk free rate in France is 6%. -Refer to Smith Enterprises International Investment.What is the NPV of the investment in €-terms,if the required rate of return is 15%.

Which of the following may prevent purchasing power parity from holding across different countries?

NARRBEGIN: Smith Int'l Investment Smith Enterprises International Investment Smith Enterprises is considering opening a new manufacturing plant in France.The cost of the new plant will be €25 million and the plant is expected to generate after tax cash flows of €10 million at the end of each year for the next 4 years.After that the plant will be worthless.The current €/$ exchange rate is €0.8166/$.The expected rate of inflation for the U.S is 2.5% per year.The risk free rate in the U.S.is 4% and the risk free rate in France is 6%. -Refer to Smith Enterprises International Investment.What is the cost of the manufacturing plant in U.S.dollars?

The exchange rate between the U.S.dollar and the Japanese Yen is $.008072/¥.If the exchange rate changes to $0.0080069/¥ then you could say

This risk that exchange rate movements will adversely impact reported financial results on a firm's financial statements

You checked the €/$ exchange rate a week ago and you found that one Dollar cost you €0.8214.When you checked the €/$ exchange rate again yesterday one dollar was trading at €0.8026.By how much did the value of the Dollar appreciate (depreciate) ?

Purchasing Power Parity implies that if the law of one price holds at all times then

The system where a country pegs its currency to that of another currency is called

Let the expected inflation in the United Sates be 4% and the expected inflation in Costa Rica is 7.8 %; Also suppose that the United States one-year,risk-free rate is 5% what must the risk-free rate in Costa Rica be to maintain interest rate parity?

A coffee table in Canada sells for C$134.The same coffee table sells for $92 in the United States.The expected inflation rate for the next year in Canada is 10% and the expected one year inflation rate for the United States is 8%.What must the exchange rate be currently for Purchasing Power Parity to hold now,and what must the exchange rate change to in order for Purchasing Power Parity to hold in one year.

Which type of institution is in a unique position to bear exchange rate risk by creating a natural hedge?

A system in which a country's currency is pegged to the value of another currency like the U.S.dollar,is called a

If the spot rate for Marsian Spotlets (MRS) is 4 per U.S.Dollar (USD) and the one-year risk-free rate of return in the U.S.is 4%,then what should the risk free rate on Mars be if the 1-year forward rate be for MRS/USD is 5?

Which of the following describes taking a position in a currency to increase risk?

You checked the €/$ exchange rate a week ago and you found that one Dollar cost you €0.8214.When you checked the €/$ exchange rate again yesterday one dollar was trading at €0.8026.By how much did the value of the Euro appreciate (depreciate) ?

Suppose that a United States firm is considering an investment that will yield cash flows in Canadian dollars.The projects cash flows will be the following: Initial cost = C$-1,000,000,Year 1 = C$550,000,Year 2 = C$340,000,Year 3 = C$125,000.The U.S.firm plans to evaluate the project by discounting the cash flows at the Canadian cost of capital of 7% and then converting the NPV back to U.S.dollars at the current spot rate which is $0.8213/C$.What is the NPV of the project in U.S.dollars?

Assuming that current currencies are currently in equilibrium and the exchange rate for the Costa Rican Colon is CRC/$ = 511.53 and that the U.S.expects inflation over the next year to be 4% While in Costa Rican there is an expectation of 7.8%; what must the exchange rate be in one year? (CRC/$)

The adoption of the euro was a result of the ____ Treaty.