Motives For Investing Foreign Money

907 Words May 4th, 2016 4 Pages
Mary Schiavone
Mr. Edward Colton
International Finance
04 May 2016
Chapter 3
1. Motives for Investing in Foreign Money
Explain why an MNC may invest funds in a financial market outside its own country.
An MNC may invest funds in a financial market outside its own country because of the ability to conduct foreign trade with business clients, direct foreign investments and acquisition of foreign real assets. Furthermore, an MNC may invest funds in foreign markets for high interest rates and the expected appreciation of those funds.
2. Motives for Providing Credit in Foreign Markets
Explain why some financial institutions prefer to provide credit in financial markets outsides their own country.
Some financial institutions prefer to provide credit in foreign financial markets because they could potentially receive a high rate of return on their investments in foreign markets. Moreover, by providing credit to several countries, they lower the threat associated with poor economic conditions from one country over another.
3. Exchange Rate Effects on Investing
Explain how the appreciation of the Australian dollar against the U.S. dollar would affect the return to a U.S. firm that invested in Australian money market security.
The appreciation of the Australian dollar against the U.S. dollar would be beneficial to a U.S. firm who invested in Australian market security because they would be receiving a higher rate of return on their investment due to the exchange rate and appreciation…
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