Polikesa, a country in North Africa, has vast reserves of uranium. However, due to strict business laws in Polikesa, most international firms are skeptical of starting mining operations in the country. Which of the following techniques can Polikesa use to attract foreign investment? O By nationalizing all industries O By following a fixed exchange rate O By increasing its imports O By making regulatory reforms

Polikesa, a country in North Africa, has vast reserves of uranium. However, due to strict business laws in Polikesa, most international firms are skeptical of starting mining operations in the country. Which of the following techniques can Polikesa use to attract foreign investment? O By nationalizing all industries O By following a fixed exchange rate O By increasing its imports O By making regulatory reforms

Macroeconomics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506756

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter19: International Finance And The Foreign Exchange Market

Section: Chapter Questions

Problem 8CQ

See similar textbooks

Similar questions

Does a higher rate of return in a nations economy, all other things being equal, affect the exchange rate of its currency? If so, how?
If a developing country needs foreign capital inflows, management expertise, and technology, how can it encourage foreign investors while at the same time protect itself against capital flight and banking system collapse, as happened during the Asian financial crisis?
Is a country for which imports and exports comprise a large fraction of the GDP more likely to adopt a flexible exchange rate or a fixed (hard peg) exchange rate?
If a countrys currency is expected to appreciate in value, what would you think will be the impact of expected exchange rates on yields (e.g., the Interest rate paid on government bonds) in that country? Hint: Think about how expected exchange rate changes and interest rates affect a currencys demand and supply.
Q.1.11 What is a foreign exchange rate? (a) The rate at which the currency of one country trades for the goods ofanother country.(b) The rate at which one country’s goods trade for those of anothercountry.(c) The rate at which currencies of different countries are exchanged.(d) The rate at which one country’s currency trades for gold provided byanother country.Q.1.12 As a result of more Americans visiting South Africa, we can expect, ceteris paribus:(a) an appreciation of the rand relative to the dollar.(b) a depreciation of the rand relative to the dollar.(c) an appreciation of the dollar relative to the rand.(d) that it will cost South Africans more to visit the United States.Q.1.13 What is a tariff? (a) A form of subsidy.(b) A tax on imported goods.(c) A tax on foreign property.(d) A form of quota.
Exchange rates are an important factor when doing business internationally. Please discuss: a. Potential mechanisms through which exchange rates affect revenues of multinational enterprises (MNEs) doing foreign direct investment (FDI) in a given foeign countryn (include atleast 3 mechanisms ). b. What stratergies can MNEs employ to hedge against the risks of stemming from foreign exchange (include atleast two potential stratergies).
Each of the governments of Brazil and Turkey has issued bonds in Brazilian real (BRL) and Turkish lira (TRY), respectively. Assume that both government securities are one-year bonds, i.e., paying the face value of the bond one year from now. Suppose that the exchange rate, E, stands at 1 Brazilian real per 0.79 Turkish lira. The following table gives face values and prices of both bonds: Face Value Price Brazil BRL 10,000 BRL 9,630 Turkey TRY 10,000 TRY 9,450 Compute the nominal interest rate on each of the bonds. Compute the expected exchange rate next year consistent with uncovered interest parity. If you expect the real to depreciate relative to the lira, which bond should you buy? Assume that you are a Brazilian investor. You exchange the reals for liras and purchase the Turkish bond. One year from now, it turns out that the exchange rate, E, is 0.75, i.e., 0.75 liras buy one real. What is your realized rate of return in reals compared to the realized rate of return…
8) Suppose that the government has imposed the tax on the foreign investorsper currency they pay for financial assets issued by the country. Discuss itsimplications on the current foreign exchange rate?
Let's suppose you have $1 million to invest. You are considering to invest in UK first, then convert the British Pound back to US$ in the future. You know following information: Annual Interest rate on investment in US: 2% Annual Interest rate on investment in UK: 1% Investment period: 1 year Current exchange rate: 1.52 $/BP Forward exchange rate which you can apply when converting BP to US$: 1.53 $/BP What will be profit or loss if you apply the covered-interest arbitrage? (step by step answer please)
Suppose that the current spot exchange rate is 60.830/s and the three-month forward exchange rate is €0.815/S. The three-month interest rate is 6.00 percent per annum in the United States and 5.40 percent per annum in France. Assume that you can borrow up to $1,000,000 or 6830,000. Show how to realize a certain profit via covered interest arbitrage, assuming that you want to realize profit in terms of U.S. dollars. Also determine the size of your arbitrage profit