Quiz Ch 17 – T/F Composition of Exchange Rate Quotations
Fundamentals of Financial Management, Concise
Brigham and Houston
09th Edition
True or false: Exchange rate quotes encompass both direct and indirect quotations as part of their composition.
True or false: Exchange rate quotes encompass both direct and indirect quotations as part of their composition.
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.
True or false: To calculate a currency cross rate, one determines the exchange rate between two currencies by utilizing a third currency as the reference point.
True or false: In multinational financial management, financial analysts must take into account the impacts of shifting currency values.
True or false: Political risk, as it is rarely negotiable, CANNOT be accounted for in multinational corporate financial analysis.
True or false: A Eurodollar refers to a U.S. dollar that has been deposited in a bank located outside of the United States.
True or false: The prevailing system in the United States and most other major industrialized nations involves the use of floating exchange rates.
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.
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.
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.