Question 1

Compute the number of dollars that can be bought with 8 million of foreign currency units: $1 = 7.2501 South African rand

Accepted Answer

To convert 8 million South African rand to dollars, divide 8,000,000 by the exchange rate of 7.2501, resulting in approximately $1,103,433.056.

Question 2

Given these two exchange rates, $1 = 1.3254 Australian dollars and $1 = £0.5233, compute the cross rate between the Australian dollars and the pound. State this exchange rate in Australian dollars and in pounds.

Accepted Answer

To find the cross rate between Australian dollars and pounds, divide the rate of Australian dollars per US dollar by the rate of pounds per US dollar. This gives: 1.3254 / 0.5233 = 2.5329 Australian dollars per pound. The inverse, 1 / 2.5329 = 0.3948 pounds per Australian dollar.

Question 3

Given these two exchange rates, $1 = 11.25 Mexican peso and $1 = €0.7521, compute the cross rate between the Mexican peso and the euro. State this exchange rate in pesos and in euros.

Accepted Answer

To find the cross rate between the Mexican peso and the euro, divide the rate of the peso against the dollar by the rate of the euro against the dollar: 11.25 / 0.7521 = 14.9589. Therefore, 1 euro = 14.9589 pesos, and 1 peso = 1 / 14.9589 = 0.0669 euros.

Question 4

Compute the number of dollars that can be bought with 1 million of foreign currency units: $1 = 3.8249 Saudi Arabian riyal

Accepted Answer

To convert 1 million foreign currency units (Saudi Arabian riyal) to dollars, divide 1 million by the exchange rate: 1,000,000 / 3.8249 = $261,444.7437.

Question 5

Compute the number of dollars that can be bought with 2 million of foreign currency units: $1 = 15,990 Vietnam dong

Accepted Answer

The answer of Compute the number of dollars that can...

Question 6

Compute the amount of foreign currency that can be purchased for $1,000,000: 1 Malaysian ringget = $0.2875

Accepted Answer

To find the amount of foreign currency that can be purchased for $1,000,000, we need to divide the given amount by the exchange rate. 
$1,000,000 / $0.2875 per Malaysian ringgit = 3,478,260.87 Malaysian ringgit. 
Therefore, the correct answer is C.

Question 7

A financial manager has determined that the appropriate discount rate for a foreign project is 15 percent. However, that discount rate applies in the United States using dollars. What discount rate should be used in the foreign country using the foreign currency? The inflation rates in the United States and in the foreign country are expected to be 8 percent and 4 percent, respectively.

Accepted Answer

The appropriate discount rate in the foreign country can be calculated using the formula:

Discount rate in foreign country = (1 + Discount rate in the US) / (1 + Inflation rate in the foreign country) - 1

Using the information provided:

Discount rate in foreign country = (1 + 0.15) / (1 + 0.04) - 1 = 11.02%

Therefore, the appropriate discount rate in the foreign country using the foreign currency is approximately 11%.

Question 8

Compute the number of dollars that can be bought with 2 million of foreign currency units: $1 = 48.210 Philippine peso

Accepted Answer

The answer of Compute the number of dollars that can...

Question 9

If the price of copper in Europe is €2.22 per ounce, what is the expected price of copper in the United States if the spot exchange rate is $1 = €0.7802?

Accepted Answer

First, we need to convert the price of copper in Europe from euro to US dollars:

€2.22 × $1/€0.7802 = $2.8454 per ounce

Therefore, the expected price of copper in the United States is $2.8454 per ounce. The correct answer is D.

Question 10

Compute the number of dollars that can be bought with 5 million of foreign currency units: $1 = 2,150.4 Venezuelan bolivar

Accepted Answer

The answer of Compute the number of dollars that can...

Question 11

In the late 1990s, many East Asian currencies suddenly and dramatically devalued. What is the percentage change in the value of a $75 million investment in Indonesia when the exchange rate changes from $1 = 1,000 rupiah to $1 = 7,000 rupiah?

Accepted Answer

The answer of In the late 1990s, many East Asian...

Question 12

If the spot rate between the U.S. dollar and the New Zealand dollar is $1 = NZD1.5215, and if the interest rate in the United States is 8 percent and in New Zealand is 4 percent, then what should be the three-month forward exchange rate?

Accepted Answer

The answer of If the spot rate between the U.S....

Question 13

A financial manager has determined that the appropriate discount rate for a foreign project is 16 percent. However, that discount rate applies in the United States using dollars. What discount rate should be used in the foreign country using the foreign currency? The inflation rates in the United States and in the foreign country are expected to be 4 percent and 8 percent, respectively.

Accepted Answer

The appropriate discount rate in the foreign country using the foreign currency is calculated as follows:

discount rate in foreign country = (1 + discount rate in US) / (1 + inflation rate in foreign country) - 1

= (1.16) / (1.08) - 1

= 0.074 or 7.4%

Therefore, the discount rate that should be used in the foreign country using the foreign currency is 7.4%, which is closest to choice B (20%).

Question 14

If the price of silver in England is £7.10 per ounce, what is the expected price of silver in the United States if the spot exchange rate is $1 = £0.5275?

Accepted Answer

The answer of If the price of silver in England...

Question 15

What is the percentage change in the value of a $50 million investment in Russia when the exchange rate changes from $1 = 7 rubles to $1 = 12 rubles?

Accepted Answer

The answer of What is the percentage change in the...

Question 16

Compute the number of dollars that can be bought with 1.5 million of foreign currency units: $1 = 0.5467 Latvian lat

Accepted Answer

The answer of Compute the number of dollars that can...

Question 17

A financial manager has determined that the appropriate discount rate for a foreign project is 15 percent. However, that discount rate applies in the United States using dollars. What discount rate should be used in the foreign country using the foreign currency? The inflation rates in the United States and in the foreign country are expected to be 5 percent and 7 percent, respectively.

Accepted Answer

The correct discount rate in the foreign country can be calculated using the International Fisher Effect, which suggests that the real interest rate is constant across countries. According to this principle, the nominal interest rate in a country (i) is approximately equal to the real interest rate (r) plus the expected inflation rate (π) in that country, i.e., i ≈ r + π. The formula to adjust the discount rate from one country to another considering inflation rates is: $i_f = \frac{(1 + i_h)(1 + π_f)}{(1 + π_h)} - 1$, where $i_f$ is the foreign nominal interest rate, $i_h$ is the home nominal interest rate, $π_f$ is the foreign inflation rate, and $π_h$ is the home inflation rate. Substituting the given values: $i_f = \frac{(1 + 0.15)(1 + 0.07)}{(1 + 0.05)} - 1 = 0.17$ or 17%.

Question 18

Compute the amount of foreign currency that can be purchased for $1,300,000: 1 Thai baht = $0.03057

Accepted Answer

To find the amount of foreign currency that can be purchased, divide the amount in dollars by the exchange rate: $1,300,000 / $0.03057 = 42,525,351.65 baht.

Question 19

In the late 1990s, many East Asian currencies suddenly and dramatically devalued. What is the percentage change in value of a $10 million investment in Indonesia when the exchange rate changes from $1 = 3,000 rupiah to $1 = 10,000 rupiah?

Accepted Answer

In Indonesia, the exchange rate changed from $1 = 3,000 rupiah to $1 = 10,000 rupiah. This is a 233.33% increase in the value of rupiah (10,000/3,000 = 3.3333). Therefore, a $10 million investment in Indonesia would be worth 70% less after the devaluation. The calculation is:

($10,000,000/3,000) - ($10,000,000/10,000) = $3,333,333.33 - $1,000,000 = $2,333,333.33

This is a decrease of $7,666,666.67, which is 76.67% of the original investment. However, we need to convert this to a percentage decrease in value, which is:

($7,666,666.67/$10,000,000) x 100% = 76.67%

Rounded to the nearest tenth, this is a 70% decrease in the value of the investment.

Question 20

If the price of silver in England is £6.85 per ounce, what is the expected price of silver in the United States if the spot exchange rate is $1 = £0.5426?

Accepted Answer

The answer of If the price of silver in England...

Quiz 19: International Corporate Finance

Compute the number of dollars that can be bought with 8 million of foreign currency units: $1 = 7.2501 South African rand

Given these two exchange rates, $1 = 1.3254 Australian dollars and $1 = £0.5233, compute the cross rate between the Australian dollars and the pound. State this exchange rate in Australian dollars and in pounds.

Given these two exchange rates, $1 = 11.25 Mexican peso and $1 = €0.7521, compute the cross rate between the Mexican peso and the euro. State this exchange rate in pesos and in euros.

Compute the number of dollars that can be bought with 1 million of foreign currency units: $1 = 3.8249 Saudi Arabian riyal

Compute the number of dollars that can be bought with 2 million of foreign currency units: $1 = 15,990 Vietnam dong

Compute the amount of foreign currency that can be purchased for $1,000,000: 1 Malaysian ringget = $0.2875

Compute the number of dollars that can be bought with 2 million of foreign currency units: $1 = 48.210 Philippine peso

If the price of copper in Europe is €2.22 per ounce, what is the expected price of copper in the United States if the spot exchange rate is $1 = €0.7802?

Compute the number of dollars that can be bought with 5 million of foreign currency units: $1 = 2,150.4 Venezuelan bolivar

In the late 1990s, many East Asian currencies suddenly and dramatically devalued. What is the percentage change in the value of a $75 million investment in Indonesia when the exchange rate changes from $1 = 1,000 rupiah to $1 = 7,000 rupiah?

If the spot rate between the U.S. dollar and the New Zealand dollar is $1 = NZD1.5215, and if the interest rate in the United States is 8 percent and in New Zealand is 4 percent, then what should be the three-month forward exchange rate?

If the price of silver in England is £7.10 per ounce, what is the expected price of silver in the United States if the spot exchange rate is $1 = £0.5275?

What is the percentage change in the value of a $50 million investment in Russia when the exchange rate changes from $1 = 7 rubles to $1 = 12 rubles?

Compute the number of dollars that can be bought with 1.5 million of foreign currency units: $1 = 0.5467 Latvian lat

Compute the amount of foreign currency that can be purchased for $1,300,000: 1 Thai baht = $0.03057

In the late 1990s, many East Asian currencies suddenly and dramatically devalued. What is the percentage change in value of a $10 million investment in Indonesia when the exchange rate changes from $1 = 3,000 rupiah to $1 = 10,000 rupiah?

If the price of silver in England is £6.85 per ounce, what is the expected price of silver in the United States if the spot exchange rate is $1 = £0.5426?