Exam 25: Present Value of an Annuity of 1 at Compound Interest

The risk of an investment in a Eurodollar deposit is partially due to

Fluctuations in foreign exchange markets can affect foreign revenues and profits of a multinational company, but they have no impact on its overall value.

When more units of a foreign currency are required to buy one euro, the currency is said to have appreciated with respect to the euro.

Although several economic and political factors can influence foreign exchange rate movements, by far the most important explanation for long- term changes in exchange rates is a differing inflation rate between two countries.

When more units of a foreign currency are required to buy one euro, the currency is said to have appreciated with respect to the euro.

As a foreign exchange hedge, currency swaps have all of the following characteristics EXCEPT

For currencies, changes in the value of foreign exchange rates are called .

The risk attached to international cash flows are all of the following EXCEPT

Exchange rate risk hedging tools include forward contracts, options, interest rate swaps, currency swaps, and hybrid securities.

The functional currency is the currency of the economic environment in which a business entity primarily generates and expends cash, and in which its accounts are maintained.

The risk resulting from the effects of changes in foreign exchange rates on the firm's value is

Between two major currencies, the spot exchange rate is the rate and the forward exchange rate is the rate .

Although several economic and political factors can influence foreign exchange rate movements, by far the most important explanation for long- term changes in exchange rates is fiscal policy that a country adopts.

In doing business in foreign countries, financing operations in the local market not only improves the company's business ties to the host community but also minimizes exchange rate risk.

Hedging strategies are techniques used to offset or protect against risk; in the international context these include borrowing or lending in different currencies, undertaking contracts in the forward, futures, and/or options markets, and also swapping assets/liabilities with other parties.

The forward exchange rate is the rate of exchange between two currencies on any given day.

Countries that experience high inflation rates will see their currencies decline in value relative to the currencies of countries with lower inflation rates.

In international trade when a U.S. company sells a product in France, the U.S. company experiences an exchange rate gain if the franc depreciates against the dollar before the U.S. exporter collects on its accounts receivable.

When fewer units of a foreign currency are required to buy one euro, the currency is said to have with respect to the euro.

Three basic types of risk associated with international cash flows are 1) business and financial risks,2) inflation and foreign exchange risks, and 3) political risks.