Quiz Ch 17 – Inflation Rate Impact on Exchange Rates
Fundamentals of Financial Management, Concise
Brigham and Houston
09th Edition
If U.S. inflation is higher than in Britain, what is the likely impact on the British pound against the U.S. dollar?
Quiz Ch 17 – Interest Rate Parity and Currency Premiums/Discounts
Fundamentals of Financial Management, Concise
Brigham and Houston
09th Edition
Considering the premium on the Japanese yen and the discount on the British pound in the 6-month forward market, which of the following statements is CORRECT if interest rate parity holds among the three countries?
Quiz Ch 17 – Interest Rate Parity and Exchange Rates
Fundamentals of Financial Management, Concise
Brigham and Houston
09th Edition
Under the assumption of interest rate parity, which statement is MOST ACCURATE?
Quiz Ch 17 – T/F Cost of Capital Variation in Foreign vs. Domestic Projects
Fundamentals of Financial Management, Concise
Brigham and Houston
09th Edition
True or false: The cost of capital for a foreign project can differ from that of an equivalent domestic project due to potential variations in the level of risk associated with foreign projects.
Quiz Ch 17 – T/F Factors Influencing Risk in Foreign Investments
Fundamentals of Financial Management, Concise
Brigham and Houston
09th Edition
True or false: In assessing the risk of foreign investment, greater risk can stem from factors like exchange rate and political risk, while lower risk can be attributed to international diversification.
Quiz Ch 17 – T/F Foreign Currency Depreciation and Inflation Differential
Fundamentals of Financial Management, Concise
Brigham and Houston
09th Edition
True or false: On average, a foreign currency is expected to depreciate against the U.S. dollar by a percentage rate roughly equivalent to the difference between its inflation rate and that of the United States.
Quiz Ch 17 – T/F Forward Currency Pricing Relative to Spot Rate
Fundamentals of Financial Management, Concise
Brigham and Houston
09th Edition
True or false: When an investor can acquire more units of foreign currency per dollar in the forward market compared to the spot market, the forward currency is considered to be trading at a discount to the spot rate.
Quiz Ch 17 – T/F Forward Currency Pricing Relative to Spot Rate
Fundamentals of Financial Management, Concise
Brigham and Houston
09th Edition
True or false: A forward currency is at a premium when a dollar buys less of it compared to the spot market.
Quiz Ch 17 – T/F Hedging Exchange Rate Exposure through Forward Currencies
Fundamentals of Financial Management, Concise
Brigham and Houston
09th Edition
True or false: Individuals and corporations can employ forward currency contracts as a hedging strategy for their exchange rate exposure. This essentially involves selling the currency expected to gain value while purchasing the currency expected to lose value.