英文版罗斯公司理财习题答案Chap020

CHAPTER20INTERNATIONALCORPORATEFINANCEAnswerstoConceptsReviewandCriticalThinkingQuestions1.a.Thedollarissellingatapremiumbecauseitismoreexpensiveintheforwardmarketthaninthespotmarket(SFr1.53versusSFr1.50).b.Thefrancisexpectedtodepreciaterelativetothedollarbecauseitwilltakemorefrancstobuyonedollarinthefuturethanitdoestoday.c.InflationinSwitzerlandishigherthanintheUnitedStates,asarenominalinterestrates.2.Theexchangeratewillincrease,asitwilltakeprogressivelymorepesostopurchaseadollar.ThisistherelativePPPrelationship.3.a.TheAustraliandollarisexpectedtoweakenrelativetothedollar,becauseitwilltakemoreA$inthefuturetobuyonedollarthanitdoestoday.b.TheinflationrateinAustraliaishigher.c.NominalinterestratesinAustraliaarehigher;relativerealratesinthetwocountriesarethesame.4.AYankeebondismostaccuratelydescribedbyd.5.No.Forexample,ifacountry’scurrencystrengthens,importsbecomecheaper(good),butitsexportsbecomemoreexpensiveforotherstobuy(bad).Thereverseistrueforcurrencydepreciation.6.Additionaladvantagesincludebeingclosertothefinalconsumerand,thereby,savingontransportation,significantlylowerwages,andlessexposuretoexchangeraterisk.Disadvantagesincludepoliticalriskandcostsofsupervisingdistantoperations.7.Onekeythingtorememberisthatdividendpaymentsaremadeinthehomecurrency.Moregenerally,itmaybethattheownersofthemultinationalareprimarilydomesticandareultimatelyconcernedabouttheirwealthdenominatedintheirhomecurrencybecause,unlikeamultinational,theyarenotinternationallydiversified.8.a.False.IfpricesarerisingfasterinGreatBritain,itwilltakemorepoundstobuythesameamountofgoodsthatonedollarcanbuy;thepoundwilldepreciaterelativetothedollar.b.False.Theforwardmarketwouldalreadyreflecttheprojecteddeteriorationoftheeurorelativetothedollar.Onlyifyoufeelthattheremightbeadditional,unanticipatedweakeningoftheeurothatisn’treflectedinforwardratestoday,willtheforwardhedgeprotectyouagainstadditionaldeclines.c.True.Themarketwouldonlybecorrectonaverage,whileyouwouldbecorrectallthetime.9.a.Americanexporters:theirsituationingeneralimprovesbecauseasaleoftheexportedgoodsforafixednumberofeuroswillbeworthmoredollars.Americanimporters:theirsituationingeneralworsensbecausethepurchaseoftheimportedgoodsforafixednumberofeuroswillcostmoreindollars.b.Americanexporters:theywouldgenerallybebetteroffiftheBritishgovernment’sintentionsresultinastrengthenedpound.Americanimporters:theywouldgenerallybeworseoffifthepoundstrengthens.c.Americanexporters:theywouldgenerallybemuchworseoff,becauseanextremecaseoffiscalexpansionlikethisonewillmakeAmericangoodsprohibitivelyexpensivetobuy,orelseBraziliansales,iffixedincruzeiros,wouldbecomeworthanunacceptablylownumberofdollars.Americanimporters:theywouldgenerallybemuchbetteroff,becauseBraziliangoodswillbecomemuchcheapertopurchaseindollars.10.IRPisthemostlikelytoholdbecauseitpresentstheeasiestandleastcostlymeanstoexploitanyarbitrageopportunities.RelativePPPisleastlikelytoholdsinceitdependsontheabsenceofmarketimperfectionsandfrictionsinordertoholdstrictly.11.Italldependsonwhethertheforwardmarketexpectsthesameappreciationovertheperiodandwhethertheexpectationisaccurate.Assumingthattheexpectationiscorrectandthatothertradersdonothavethesameinformation,therewillbevaluetohedgingthecurrencyexposure.12.Onepossiblereasoninvestmentintheforeignsubsidiarymightbepreferredisifthisinvestmentprovidesdirectdiversificationthatshareholderscouldnotattainbyinvestingontheirown.Anotherreasoncouldbeifthepoliticalclimateintheforeigncountrywasmorestablethaninthehomecountry.Increasedpoliticalriskcanalsobeareasonyoumightpreferthehomesubsidiaryinvestment.Indonesiacanserveasagreatexampleofpoliticalrisk.Ifitcannotbediversifiedaway,investinginthistypeofforeigncountrywillincreasethesystematicrisk.Asaresult,itwillraisethecostofthecapital,andcouldactuallydecreasetheNPVoftheinvestment.13.Yes,thefirmshouldundertaketheforeigninvestment.If,aftertakingintoconsiderationallrisks,aprojectinaforeigncountryhasapositiveNPV,thefirmshouldundertakeit.Notethatinpractice,thestatedassumption(thattheadjustmenttothediscountratehastakenintoconsiderationallpoliticalanddiversificationissues)isahugetask.Butoncethathasbeenaddressed,thenetpresentvalueprincipleholdsforforeignoperations,justasfordomestic.14.Iftheforeigncurrencydepreciates,theU.S.parentwillexperienceanexchangeratelosswhentheforeigncashflowisremittedtotheU.S.Thisproblemcouldbeovercomebysellingforwardcontracts.Anotherwayofovercomingthisproblemwouldbetoborrowinthecountrywheretheprojectislocated.15.False.Ifthefinancialmarketsareperfectlycompetitive,thedifferencebetweentheEurodollarrateandtheU.S.ratewillbeduetodifferencesinriskandgovernmentregulation.Therefore,speculatinginthosemarketswillnotbebeneficial.16.ThedifferencebetweenaEurobondandaforeignbondisthattheforeignbondisdenominatedinthecurrencyofthecountryoforiginoftheissuingcompany.Eurobondsaremorepopularthanforeignbondsbecauseofregistrationdifferences.Eurobondsareunregisteredsecurities.SolutionstoQuestionsandProblemsNOTE:Allend-of-chapterproblemsweresolvedusingaspreadsheet.Manyprobl