BUSI 2504 Study Guide - Russian Ruble, Real Interest Rate, Cash Flow

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Lo1 the different terminologies used in international finance. Lo2 how exchange rates are quoted, what they mean, and the difference between spot and forward exchange rates. Lo3 purchasing power parity, interest rate parity, unbiased forward rates, uncovered interest rate parity, and the generalized fisher effect and their implications for exchange rate changes. Lo4 how to estimate npv using home and foreign currency approach. Lo5 the different types of exchange rate risk and ways firms manage exchange rate risk. Lo6 the impact of political risk on international business investing. Answers to concepts review and critical thinking questions. 8. (lo3) the exchange rate will increase, as it will take progressively more euros to purchase a dollar. Disadvantages include political risk and costs of supervising distant operations. (lo3) a. If prices are rising faster in great britain, it will take more pounds to buy the same amount of goods that one dollar can buy; the pound will depreciate relative to the dollar.