Chapter 17: Multinational Financial Management Test Banks

There is a general upwards trend in unemployment in Japan, directly contrasting to Australia’s declining unemployment rate. Australia’s current unemployment rate is 6.0% and Japans is 3.7%

2) Interest rate parity (how exchange rate is determined by the flows of capital) and

Interest rates in the EU and UK will affect The business because if the base rate are low this is good because it will allow consumer to get cheaper loans allowing them to purchase the business luxuries like items, also it allows people to finance cars cheaper because the base interest rate is low.

11. Which one of the following actions will decrease the current ratio, all else constant? Assume the current ratio is greater than 1.0.

In an open economy with few capital restrictions and substantial import-export trade, a rise in interest rates and a decline in the producer price index of inflation will

5. d.10% annually in North America and Latin America during the Year 11-Year 20 period and 12% annually in Europe-Africa and the Asia-Pacific during the Year 11-Year 20 period. e.10% annually in North America and Latin America during the Year 11-Year 20 period and

Which of the following is the most likely order of the interest rates (yields to maturity) of the bonds from highest to lowest?

If interest rates in the overall economy decrease, what will happen to the market value of a corporate bond with a fixed

The U.S. has reached the even level of inflation—not too hot and not too cold. The Japanese have endured a decade of near zero inflation ,and as of 2004, a outright deflation. However, the Japanese economy shows signs of climbing out of its funk based on it strong GDP showing.

Japan’s unemployment rate of about 4% opposed to the U.S. unemployment rate of close to 10%. Even the financial debt to GDP ration is an advantage, and debt in the private sector has not increased unlike the U.S. and European countries, (Time, 2009). In addition, since Japan is a huge exporter and with the U.S. demand going downward, the international balances and growth declined especially as the dollar value dropped and the yen surged. •

The world economic environment is continually undergoing rapid integration through exports, imports and the coordination of monetary and fiscal policies. Both Australia and Japan’s economies are mixed, whereby they contain elements of planned and market economies. Over the past 3 decades the Australian and Japanese economies have experienced gradual economic growth. Japan experienced a recession in 2014. The monetary system used in Australia and governed by the Reserve Bank of Australia who set the interest rate on overnight loans. The Australian currency is called the Australian dollar (AUD). The Australian Stock Exchange (ASX) is Australia’s stock market, which allows the buying and selling of shares of companies. The Japanese currency is

Back to the case, the coupon rate of Swiss Franc is much lower than other currencies. But it is not the standard of evaluating which currency should be borrowed. We will use forward rates computed from the parity to evaluate the borrowing cost of each currency and the currency has the lowest cost should be chosen. The basic known information is listed as following:

Japan ranks as the third largest economy in the world as of 2010. The GDP at current prices in US dollars in Japan was reported at 5068.06 billion in 2009, according to the International Monetary Fund (IMF). Japan’s resurgence after World War II has however reached an inflection point in yearly 1989 after the burst of Japan’s asset price and real estate bubbles. As can be seen from the graph below, Japan’s GDP has hovered around the same level through more than 20 years of economic stagnation. The GDP’s slow growth has been exacerbated by the world financial crisis of 2008. A major landmark of Japan’s stagnation has been the BOJ’s fight against deflation.

Japan is the third largest economy by nominal GDP, $4.6 trillion, and fourth largest economy by purchasing power parity. In addition,

303). Subsequently issued bonds after the drop in yen bonds, in the short-term, will probably be set with lower coupon rates making the fixed terms of the already issued dual-currency bond valuable.