End-of-Chapter 3 Problems

End-of-Chapter 3 Problems - Moore School of Business...

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1 Moore School of Business Spring 2012 University of South Carolina IBUS 401 – INTERNATIONAL FINANCIAL MANAGEMENT Answers to selected end-of-chapters problems Chapter 3 International Financial Markets Problems assigned: 1, 2, 3, 4, 6, 11, 14, 16, 18, 22 1. Motives for Investing in Foreign Money Markets. The MNC may be able to earn a higher interest rate on funds invested in a financial market outside of its own country. In addition, the exchange rate of the currency involved may be expected to appreciate. 2. Motives for Providing Credit in Foreign Markets. Financial institutions may believe that they can earn a higher return by providing credit in foreign financial markets if interest rate levels are higher and if the economic conditions are strong so that the risk of default on credit provided is low. The institutions may also want to diversity their credit so that they are not too exposed to the economic conditions in any single country. 3. Exchange Rate Effects on Investing. If the Australian dollar appreciates over the investment period, this implies that the U.S. firm purchased the Australian dollars to make its investment at a lower exchange rate than the rate
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This note was uploaded on 03/20/2012 for the course IBUS 401 taught by Professor Mr.guedhami during the Spring '12 term at South Carolina.

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End-of-Chapter 3 Problems - Moore School of Business...

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