Chapter Questions
What additional factors are encountered in international as compared with domestic financial management? Discuss each briefly.
What different types of businesses operate in the international environment? Why are the techniques and strategies available to these firms different?
What is meant by arbitrage profits?
What are the markets and mechanics involved in generating simple arbitrage profits?
How do purchasing-power parity, interest rate parity, and the Fisher effect explain the relationships among the current spot rate, the future spot rate, and the forward rate?
What is meant by (a) exchange rate risk and (b) political risk?
In the New York exchange market, the forward rate for the Indian currency, the rupee, is not quoted. If you were exposed to exchange rate risk in rupees, how could you hedge your position?
What risks are associated with direct foreign investment? How do these risks differ from those encountered in domestic investment?
Is the evaluation of a direct foreign investment more complicated than the evaluation of a domestic investment?