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- If a U.S.-based MNC focused completely on exporting, then its valuation would likely be adversely affected if most currencies were expected to appreciate against the dollar over time. Group of answer choices True FalseYour company located in the US imports raw materials from Europe. If the European Central Bank announces to lower the Euro exchange rate, what impact do you expect to see in your business? A. Your company will pay higher US dollar costs to import from Europe. B. Your company will pay lower US dollar costs to import from Europe. C. The Euro exchange rate doesn't have any impact on your company. D. It should reduce your competitiveness in your home market.From the U.S. standpoint, a capital outflow will occur when a Japanese investor buys a portion of the U.S. government debt. True False
- Although we stated that real assets constitute the true productive capacity of an economy, it is hard to conceive of a modern economy without well-developed financial markets and security types. How would the productive capacity of the U.S. economy be affected if there were no markets in which to trade financial assets?Which of the following is an example of managing economic exposure by flexible sourcing policy? An American company sells its products in Brazil and Portugal. Reduced sales in Brazil due to the dollar appreciation against the “real” can be compensated by increased sales in Portugal due to the dollar depreciation against the euro. If yen is strong, it is preferable for a Japanese company to open a manufacturing subsidiary in the U.S. to produce and sell its products there. An American IT company hires software developers in Ukraine because of the weak position of grivna against dollar. A Canadian company spends a lot of money for research & development activities to improve its reputation and gain more customers.In general, a firm that concentrates on local sales, has very little foreign competition, and obtains foreign supplies (denominated in foreign currencies) will likely ____ a(n) ____ local currency. A. none of these B. benefit from; depreciated C. be hurt by; depreciated D. be hurt by; appreciated
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- Leads are deliberate early payments of amounts due to be paid in foreign currency to overseas suppliers, or other foreign currency payments. Leads can avoid the risk that the sterling cost of these payments may rise if the amounts of the payments are quoted in foreign currency and the foreign currency increases in value Under what circumstances can how an international company can use ‘leads and lags’ to protect itself against foreign exchange risk.If the U.S.A. imports more than it exports, then: O a. The supply of dollars is likely to exceed the demand in the foreign exchange market, ceteris paribus. Ob. One can infer that the U.S. dollar would be under pressure to depreciate against other currencies. O. Both a. and b. are correct. O d. None of the above.Please answer both subparts. 1. Why would an Australian gold-mining company decide to use USD as its functional currency and why? (a) It matches the functional currency of all its competitors and accordingly is not disadvantaged. (b) USD is less volatile than AUD and therefore reduces the foreign exchange risk to the company. (c) Gold is considered a USD-based commodity so shareholders may want a "pure" exposure to world gold prices. (d) This would mean the company has no foreign exchange exposure as its foreign exchange risk came from the sale of gold, which was in USD. 2. You are the corporate treasurer of XYZ and you have just purchased an AUD put /USD call currency option from Thebank. Which one of the following statements is most correct and WHY? (a) The option gives XYZ the right, but not the obligation to buy AUD and sell USD. (b) The option gives XYZ the right, but not the obligation to buy USD and sell AUD. (c) The option requires TheBank to buy USD and sell AUD if XYZ…