In order to protect against foreign exchange risk, firms can use

Related MCQs

• A firm that buys foreign exchange in order to take advantage of higher foreign interest rates is
• If more European and Japanese firms want to build factories and expand their offshore investments in the United States, the supply of U.S. dollars on foreign exchange markets will increase as a result of this investment activity.
• 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 _______.
• Which of the following is true? A. Risk is the probability of an outturn being less than anticipated. B. An objective probability is one which can be established mathematically or from historical data. C. The discount rate may be raised or lowered to allow for the risk of a project, the extent of the risk premium being based on indisputable theory.
• When the foreign exchange market opens in the UK each morning, the opening exchange rate quotations will be based on the:
• Under a fixed exchange standard, if the domestic demand for foreign exchange increases
• When the foreign exchange market opens in the UK each morning, the opening exchange rate quotations will be based on the:
• Assume that Baps Corporation is considering the establishment of a subsidiary in Norway. The initial investment required by the parent is $5,000,000. If the project is undertaken, Baps would terminate the project after four years. Baps' cost of capital is 13%, and the project is of the same risk as Baps' existing projects. All cash flows generated from the project will be remitted to the parent at the end of each year. Listed below are the estimated cash flows the Norwegian subsidiary will generate over the project's lifetime in Norwegian kroner (NOK): Year 1 Year 2 Year 3 Year 4 NOK 10,000,000 NOK 15,000,000 NOK 17,000,000 NOK 20,000,000 The current exchange rate of the Norwegian kroner is $.135. Baps' exchange rate forecast for the Norwegian kroner over the project's lifetime is listed below: Year 1 Year 2 Year 3 Year 4 $.13 $.14 $.12 $.15 Baps is also uncertain regarding the cost of capital. Recently, Norway has been involved in some political turmoil. What is the net
• Assume that Baps Corporation is considering the establishment of a subsidiary in Norway. The initial investment required by the parent is $5,000,000. If the project is undertaken, Baps would terminate the project after four years. Baps' cost of capital is 13%, and the project is of the same risk as Baps' existing projects. All cash flows generated from the project will be remitted to the parent at the end of each year. Listed below are the estimated cash flows the Norwegian subsidiary will generate over the project's lifetime in Norwegian kroner (NOK): Year 1 NOK 10,000,000 Year 2 NOK 15,000,000 Year 3 NOK 17,000,000 Year 4 NOK 20,000,000 The current exchange rate of the Norwegian kroner is $.135. Baps' exchange rate forecast for the Norwegian kroner over the project's lifetime is listed below: Year 1 $.13 Year 2 $.14 Year 3 $.12 Year 4 $.15 Baps is also uncertain regarding the cost of capital. Recently, Norway has been involved in some political turmoil. What is the net p
• A _______ involves an exchange of currencies between two parties, with a promise to re-exchange currencies at a specified exchange rate and future date.