Week 2 Homework 2 International Finance: 535 Mohamed E Abdelrhaman Prof: James Glenn Strayer University April 2013
12. International Investments. A. Assume that the dollar is presently weak and is expected to strengthen over time. How will these expectations affect the tendency of U.S. investors to invest in foreign securities? ANSWER: It can be suggested that if the dollar is strong, we get more shares for the same amount of dollars than before. So the good choice of us is when dollar is weak and is expected to strengthen then investments will increase when dollars strengthen B. Explain how low U.S. interest rates can affect the tendency of U.S.-based MNCs to invest abroad. ANSWER: the level of economic activity will be higher when the interest rate is low, which is same as funds are available at lower interest rates. so depends on this situation, the investors may prefer to invest in Us firms which have more chances of growth. C. I n general terms, what is the attraction of foreign investments to U.S. investors? ANSWER: In general, access to international funding has allowed more growth in the U.S. economy over time, but it also makes the United States more reliant on foreign investors for funding. The U.S should be able to rely on substantial foreign funding in the future as long as the U.S. government and firms are still perceived to be creditworthy. If that trust were ever weakened, the U.S. government and firms would only be able to obtain foreign funding if they paid a higher rate to compensate for the risk. 14. Impact of Government Policies on Trade: A. Explain how governments might give their local firms a competitive advantage in the international trade arena? ANSWER:
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