2.Higher interest rates in a foreign country tend to ____ the growth of an economy and ____ demand for the MNC’s product.a. increase; increaseb. reduce; reducec. increase; reduced. reduce; increasee. none of the above3. Perhaps the most appropriate method for incorporating forms of country risk in a capital budgeting analysis is to estimate how the ____ would be affected by each form of risk.a. discount rateb. cash flowsc. opportunity costd. none of the above4. The U.S. risk-free rate is currently 3%. The expected U.S. market return is 10%. Solso, Inc. is considering a project that has a beta of 1.2. What is the cost of dollar-denominated equity?a. 8.4%b. 11.4%c. 10%d. None of the above6. If U.S. firms issue bonds in ____, the dollar outflows to cover fixed coupon payments increase as the dollar ____.a. a foreign currency; weakensb. dollars; strengthensc. a foreign currency; strengthensd. dollars; weakense. none of the above7. A U.S. firm has received a large amount of cash inflows periodically in Swiss francs as a result of exporting goods to Switzerland. It has no other business outside the U.S. It could best reduce its exposure to exchange rate risk by:a. purchasing Swiss franc-denominated bondsb. purchasing U.S. dollar-denominated bondsc. issuing U.S. dollar-denominated bondsd. issuing Swiss franc-denominated bonds 8. In general, the ____ rate payer in a plain vanilla swap believes interest rates are going to ____.a. fixed; declineb. floating; declinec. floating; increased. none of the above
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