1) Multinational financial management requires that:
a. The effects of changing currency values be included in financial analyses.
b. Legal and economic differences be considered in financial decisions.
c. Political risk be excluded from multinational corporate financial analyses.
d. Statements a and b are correct.
e. All of the statements above are correct.
2) If the inflation rate in the United States is greater than the inflation rate in Sweden,other things held constant, the Swedish currency will:
a. Appreciate against the U.S. dollar.
b. Depreciate against the U.S. dollar.
c. Remain unchanged against the U.S. dollar.
d. Appreciate against other major currencies.
e. Appreciate against the dollar and other major currencies.
3)A computer costs $1,100 in the United States. The same computer costs 1,265 euros in Italy. Assuming that purchasing power parity (PPP) strictly holds, what is the spot exchange rate between the dollar and the euro?
a. $3.75 = 1 euro
b. $1.00 = 2.50 euros
c. $1.00 = 0.869565 euro
d. $1.15 = 1 euro
e. $1.00 = 1.15 euros
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