In the process of estimating the value of foreign companies,with respect to including an additional risk premium in the discount rate to adjust for perceived currency risk,which of the following are true?
I.The risk premiums would probably be relatively small.
II.Currency risk premiums are the reason shareholders would benefit if managers increased their level of currency management.
III.Currency risk premiums are the reason a global application of the CAPM is not recommended.
IV.It is likely that currency risk premiums are included in the spot and/or forward exchange rates used to translate currencies.
A) I and II only.
B) I and IV only.
C) II and III only.
D) III and IV only.
Correct Answer:
Verified
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