FIN 565 Week 8 Final Exam - 100% Correct Answers

FIN 565 Week 8 Final Exam (100% Correct Answers) Question 1.1. (TCO A) A high home inflation rate relative to other countries would the home country's current account balance, other things being equal. A high growth in the home income level relative to other countries would the home country's current account balance, other things being equal. (Points : 5) increase; increase increase; decrease decrease; decrease decrease; increase Question 2.2. (TCO A) Assume the Canadian dollar is equal to $0.98 and the Brazilian real is equal to $0.28. The value of the Brazilian real in Canadian dollars is (Points : 5) about 0.3500 Canadian dollars. about 0.2857 Canadian dollars. about 3.5714 Canadian dollars. about 1.0204 Canadian dollars. Question 3.3. (TCO B) Assume that IRP holds and the euro's interest rate is 9%, whereas the U.S. interest rate is 12%. Then, the euro's interest rate increases to 11%, whereas the U.S. interest rate remains the same. As a result of the increase in the interest rate on euros, the euro's forward ..will in order to maintain IRP. (Points : 5) discount; increase discount; decrease premium; increase premium; decrease Question 4.4. (TCO C) A strong dollar is normally expected to cause (Points : 5) high unemployment and high inflation in the United States. high unemployment and low inflation in the United States. low unemployment and low inflation in the United States. low unemployment and high inflation in the United States. Question 5.5. (TCO D) Assume no transactions costs exist for any futures or forward contracts. The price of British pound futures with a settlement date 180 days from now will (Points : 5) definitely be above the 180-day forward rate. be about the same as the 180-day forward rate. definitely be below the 180-day forward rate. None of the above Question 6.6. (TCO H) Other things being equal, the financial leverage of MNCs will be higher if the governments of their home countries are likely to rescue them (in the event of failure) and if their home countries are likely to experience a recession. (Points : 5) less; more less; less more; less more; more Question 7.7. (TCO E) Other things being equal, firms from a particular home country will engage in more international acquisitions if they expect foreign currencies to against their home currency and if their cost of capital is relatively . (Points : 5) appreciate; low appreciate; high depreciate; high depreciate; low Question 8.8. (TCO F) The agency costs of an MNC are likely to be lower if it (Points : 5) scatters its subsidiaries across many foreig