please lable and answer all questions.
Posted: Tue Jan 18, 2022 12:58 pm
please lable and answer all questions.
5. Purchasing power parity The law of one price The theory of purchasing power parity (PPP) states that in the long-run exchange rates between two countries adjusts so that the price of an identical good is the same when expressed in the same currency. pair of headphones sells for $40.11 in the United States. The exchange rate between the U.S. dollar and the Swiss franc (SFr) is $0.8145 per Swiss franc. Assuming that PPP holds true, how much does the same pair of headphones cost in Switzerland? O SFr 59.09 O SFr 49.24 O SFr 54.16 O SFr 41.85 Suppose the price of the pair of headphones in Switzerland was actually SFr 39.39. Assuming no transaction costs, transportation costs, or import restrictions, PPP predicts that the demand would in Switzerland.
6. Inflation, interest rates, and exchange rates Relative inflation rates affect interest rates, exchange rates, the overall economic health of a country, and the operations and profitability of multinational companies. Consider the following statement: Countries with lower inflation rates will have lower interest rates. Based on your understanding of the relationship between relative inflation rates and exchange rates, identify whether the preceding statement is valid or invalid. The statement is valid, because the nominal interest rate is the sum of the real interest rate plus inflation, so lower inflation rates would result in lower interest rates. The statement is invalid, because the nominal interest rate is independent of the inflation rate. by the losses If companies borrow from countries with low interest rates, the potential gains from the interest savings will likely be from currency appreciation. The currency of a country with a higher inflation rate than Japan's inflation rate will over time against the yen.
7. International capital budgeting One of the important components of multinational capital budgeting is to analyze the cash flows generated from subsidiary companies. Consider this case: Sacramone Products Co. is a U.S.-based firm evaluating a project in Mexico. You have the following information about the project: • The project requires a 170,000 peso investment today and is expected to generate cash flows of 63,400 pesos at the end of the next three years. • The current U.S. exchange rate with the Mexican peso is 12.012 pesos per U.S. dollar, and the exchange rate is expected to remain constant. • The firm's WACC is 9%, and the project is of average risk. What is the dollar-denominated net present value (NPV) of this project? O-$712.96 O-$792.18 0-$831.79 O $752.57 There are three major types of international credit markets. Read the following statement and then indicate which type of international credit market is being described Gayawage Corp., a U.S.-based company, issued dollar-denominated bonds in China and India to finance a multinational project. O Eurocredit O Eurobond O Foreign bond
- Please Lable And Answer All Questions 1 (107.94 KiB) Viewed 45 times
6. Inflation, interest rates, and exchange rates Relative inflation rates affect interest rates, exchange rates, the overall economic health of a country, and the operations and profitability of multinational companies. Consider the following statement: Countries with lower inflation rates will have lower interest rates. Based on your understanding of the relationship between relative inflation rates and exchange rates, identify whether the preceding statement is valid or invalid. The statement is valid, because the nominal interest rate is the sum of the real interest rate plus inflation, so lower inflation rates would result in lower interest rates. The statement is invalid, because the nominal interest rate is independent of the inflation rate. by the losses If companies borrow from countries with low interest rates, the potential gains from the interest savings will likely be from currency appreciation. The currency of a country with a higher inflation rate than Japan's inflation rate will over time against the yen.
7. International capital budgeting One of the important components of multinational capital budgeting is to analyze the cash flows generated from subsidiary companies. Consider this case: Sacramone Products Co. is a U.S.-based firm evaluating a project in Mexico. You have the following information about the project: • The project requires a 170,000 peso investment today and is expected to generate cash flows of 63,400 pesos at the end of the next three years. • The current U.S. exchange rate with the Mexican peso is 12.012 pesos per U.S. dollar, and the exchange rate is expected to remain constant. • The firm's WACC is 9%, and the project is of average risk. What is the dollar-denominated net present value (NPV) of this project? O-$712.96 O-$792.18 0-$831.79 O $752.57 There are three major types of international credit markets. Read the following statement and then indicate which type of international credit market is being described Gayawage Corp., a U.S.-based company, issued dollar-denominated bonds in China and India to finance a multinational project. O Eurocredit O Eurobond O Foreign bond