Exam 17: Multinational

In Japan, 90-day securities have a 4% annualized return and 180-day securities have a 5% annualized return. In the United States, 90-day securities have a 4% annualized return and 180-day securities have an annualized return of 4.5%. All securities are of equal risk, and Japanese securities are denominated in terms of the Japanese yen. Assuming that interest rate parity holds in all markets, which of the following statements is most CORRECT?

When the value of the U.S. dollar appreciates against another country's currency, we may purchase more of the foreign currency with the U.S. dollar.

A currency trader observes the following quotes in the spot market: Given this information, how many Mexican pesos can be purchased for 1 Danish krone?

Suppose hockey skates sell in Canada for 105 Canadian dollars, and 1 Canadian dollar equals 0.71 U.S. dollar. If purchasing power parity (PPP) holds, what is the price of hockey skates in the United States?

Which of the following are reasons why companies move into international operations?

A product sells for $750 in the United States. The spot exchange rate is $1 to 1.65 Swiss francs. If purchasing power parity (PPP) holds, what is the price of the product in Switzerland?

Suppose that currently, 1 British pound equals 1.98 U.S. dollars and 1 U.S. dollar equals 1.02 Swiss francs. How many Swiss francs are needed to purchase 1 pound?

Multinational financial management requires that

Legal and economic differences among countries, although important, do NOT pose significant problems for most multinational corporations when they coordinate and control worldwide operations and subsidiaries.

If one U.S. dollar buys 0.63 euro, how many dollars can you purchase for one euro?