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You are a U.S. dollar based corporation with a project in Great Britain that will cost you £1 000000 The project will provide free cash flow

You are a U.S. dollar based corporation with a project in Great Britain that will cost you £1,000,000. The project will provide free cash flow of £500,000 for the next 3 years. If the pound denominated discount rate for this project is 12% and the spot rate is .5600£/$, then what is the dollar denominated NPV for the project? Round to the nearest $10.

a.$358,780

b.$200,920

c.$112,510

d.none of the above

79.You are trying to determine the appropriate risk-adjusted rate, in U.S. dollars for a project in Britain. You know that the correct risk-adjusted discount rate in pounds is 15% and the risk-free rate in pounds is 9%. If the risk-free rate in dollars is 5%, then what is the correct risk-adjusted discount rate in dollars? Round to the nearest .01%

a.10.80%

b.5.50%

c.0.48%

d.none of the above

80.You are trying to determine the appropriate risk-adjusted rate, in Venus sun-dollars for a project on Venus. You know that the correct risk-adjusted discount rate in U.S. dollars is 15% and the risk-free rate in dollars is 8%. If the risk-free rate in sun-dollars is 5%, then what is the correct risk-adjusted discount rate in dollars? Round to the nearest .01%

a.11.81%

b.6.48%

c.1.39%

d.none of the above

81.Which of the following statements is true?

a.The foreign exchange market is a physical marketplace located in New York.

b.The foreign exchange market is the world's largest financial market.

c.Prices for floating currencies are set by global supply and demand.

d.Both (b) and (c) are true.

e.all of the above are true.

82.Which of the following is the practice of trading an asset for the purpose of reducing or eliminating the risk associated with some other asset?

a.Speculating

b.Hedging

c.Put-call parity

d.Insurance

e.Fixed exchange rate

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

a.Speculating

b.Hedging

c.Put-call parity

d.Insurance

e.Fixed exchange rate

84.Which of the following statements is true?

a.Speculators do irreparable harm in general to the foreign exchange market.

b.Speculators help make the foreign currency market more liquid and more efficient.

c.Speculators help make the foreign currency market less liquid and less efficient.

d.Governments that attempt to maintain a fixed exchange rate must generally intervene less frequently than those that have floating exchange rates.

85.The equilibrium relationship that predicts that the real interest rate will be the same in every country is:

a.The Fisher Effect

b.Real Interest Rate Parity

c.Forward-Spot Parity

d.Interest Rate Parity

e.Both (a) and (b)

86.If a firm operates strictly in one country and has cash flows in only one currency then:

a.it can easily avoid any sort of exchange rate risk.

b.it will still face exchange rate risk if it produces a good or service that competes with imports in the home market.

c.it will still face exchange rate risk if it uses an imported product or service in production.

d.All of the above

e.Both (b) and (c)

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

a.National banks

b.Multinational corporations

c.Large corporations

d.International banks

88.Yen-denominated bonds issues by non-Japanese corporations are known as:

a.Yankee bonds

b.Samurai bonds

c.Eurobonds

d.Japanese bonds

e.Tokyo bonds

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

a.Versailles

b.Maastricht

c.GATT

d.NAFTA

e.Mercosur

Feb 13 2020 View more View Less

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