The rate of interest charged on loans from a country perceived to have no risk of defaulting is called Group of answer choices the interest rate parity the MNC adjusted rate the risk free rate the weighted average cost of capital

The rate of interest charged on loans from a country perceived to have no risk of defaulting is called Group of answer choices the interest rate parity the MNC adjusted rate the risk free rate the weighted average cost of capital

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter20: Short-term Financing

Section: Chapter Questions

Problem 2QA

See similar textbooks

Related questions

Q: In the United States economy, the interest rate is: a. the equilibrium cost of borrowing capital. b.…

A: Interest rate is the cost of borrowing capital which is expressed in percentage terms. The Federal…

Q: Identify under which one of the following market the issue of treasury bills lies: a. Equity Market…

A: A Treasury Bill (T-Bill) is a short-term U.S. government debt

Q: Determine the key reasons why a multinational corporation might decide to borrow in a country such…

A: When the corporation wants to borrow the amount from various countries it will consider factors i.e…

Q: Which of the following statements is true? Select one: a. The Basel Accord imposes maximum asset…

A: Banking system is the main part of any country’s financial system. It regulates the flow of money.…

Q: What are the potential consequences of a country having a largeoverall debt? If you were in the…

A: A country having a debt means that it has taken a loan from some country or some company. Large…

Q: Compare the annual payments calculated and potential risks or benefits involved for a foreign…

A: Data given : Interest rate at 5%, 12% and 15%. Assumption : Exchange rate remains unchanged during…

Q: Identify under which one of the following market the issue of treasury bills lies: a. Foreign…

A: Foreign Currency Market- It is an over-the counter marketplace where participants buy, sell,…

Q: Discuss the possible effects of Ghana’s rising public Debt on the cedi to dollar exchange rate.

A: An exchange rate is the rate at which the currency of home country can be exchanged with the single…

Q: -2 In the portfolio balance approach, which of the following (other things equal) will cause an…

A: There is an inverse relationship between interest rates and bond demand. As interest rate falls,…

Q: Under a flexible-rate system, when the BP curve is flatter than the LM curve (i.e., there is…

A: Flexible exchange rate regime also known as floating exchange rate, which defined as the exchange…

Q: Due to ____, market forces should realign the relationship between the interest rate differential of…

A: Arbitrage means buying and selling the asset in order to profit from its price between markets.

Q: Which of the following statement is NOT true regarding the spot rate and forward rate? a. Forward…

A: Forward rate is the rate which will be available for exchange in future point in time. Spot rate is…

Q: 1. Explain the difference between debt to income (DTI) ratio and loan to value ratio (LTV). In…

A: We’ll answer the first question since the exact one wasn’t specified. Please submit a new question…

Q: h of the following is the most likely if the interest rate of the U.S. is lower relative to the…

A: The arbitrage opportunity exist if the interest are not same and if the spot rate and forward are…

Q: If a central bank decreases interest rates, then gradually: a. the country's gross domestic product…

A: An interest rate is defined as the amount the lender uses to charge the borrower on the principal…

Q: Which of the following is true? Group of answer choices a. Non-U.S. firms may desire to issue bonds…

A: Foreign direct investment is an investment type in which an entity in one country control the…

Q: Which of the following is not one of the pillars of Macroeconomic policies of the Government? a.…

A: Answer The key pillars of macroeconomic policy are: fiscal policy, monetary policy and exchange rate…

Q: Financial instruments are assets that have a monetary value or record a monetary transaction. To…

A: Description 1: Based on the description, it is classified as U.S. treasury bills. The financial…

Q: Which of the following deals with instrument relating to long-term debt and equity? Select one: A.…

A: Long term debt and equity are investments made for the long term in either the debt of a company via…

Q: Relative inflation rates affect interest rates, exchange rates, the overall economic health of a…

A: Honor code: Since you have asked multiple questions, we will solve the first question for you. If…

Q: Which one of the following is the rate that most international banks charge when they loan…

A: While providing short-term loans to other banks, most international banks use the inter bank offered…

Q: When domestic currency deposits and foreign currency deposits are imperfect substitutes, the…

A: Interest rate parity is defined as the fundamental equation, which used to governed the relationship…

Q: Fisher effect and Interest Rate Parity theories. If these theories exist, explain MNCs'…

A: There are different theories and models that help to predict the forward exchange rates based on…

Q: Compared to Basel II, Basel III capital adequacy regulation ______________.

A: Basel is a committee or framework for the banks. Its main purpose to increase the market discipline…

Q: Assume that there are substantial capital flows among Country A, Country B and Country C. How will a…

A: The exchange rate is the rate that depicts the difference between the currencies of different…

Q: Country differences, such as differences in the risk-free interest rate and differences in risk…

A: Risk-Free Rate of Return: The theoretical rate of return on investment with zero risk is known as…

Q: Monetary policy in Australia is implemented by the Reserve Bank, and currently is principally…

A: The role of Reserve Bank of Australia is : i) Formulation of monetary policy, and ii)…

Q: What is the link between LIBOR and central bank lombard rate: Select one alternative: LIBOR is…

A: LIBOR is benchmark interest rate for unsecured lending and central bank Lombard rate is interest…

Q: If a country runs a deficit on its current account, it has to be financed by running a capital…

A: A Current Account Deficit means when the income of the country from exports is less than the Imports…

Q: Which below is not one of the factors determining the mix of banks loan? * a. Market size…

A: Factors determining the mix of bank loan portfolio: Bank size Customer size characteristics of the…

Q: In a CDO structure, when economic condition turns out to be better than previously expected, the…

A: Collateralized debt obligation (CDO) is a financial instrument which derive its value from asset…

Q: What does the nominal interest rate parity state? Would the condition be violated if nominal…

A: Nominal Interest rate parity - It states that nominal interest rates across the globe should be the…

Q: Finance Use covered interest rate parity (CIP) to show that a fixed exchange rate and free capital…

A: Interest rate parity (IRP) is a concept that connects interest rates, spot exchange rates, and forex…

Q: Match macroprudential instruments with the types of measures. (you can also write down the matches…

A: Macroprudential: It is the approach to financial regulation that aims to reduce risk of the overall…

Q: What risk is due to changes in the level of interest rate in the economy and may affect industries…

A: Change in level of interest rate in the economy affects industries at the same time and is a major…

Q: What does the nominal interest rate parity state? Would the condition be violated if nominal…

A: Introduction: Interest rate parity is nothing but a model that the difference in interest rates…

Q: The size of a country’s national debt should not be of much economic concern as long as:

A: Government too requires funds so that the country or even state can run by them, it is the amounts…

Question

The rate of interest charged on loans from a country perceived to have no risk of defaulting is called

Group of answer choices

the interest rate parity

the MNC adjusted rate

the risk free rate

the weighted average cost of capital

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1 Introduction

VIEW

Step 2 Explantion

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

What is sovereign risk and what is the difference between rescheduling and repudiation? What is total debt service ratio and how is it calculated? Find the total debt service ratio of a country. See if you can also find an example of a country, or countries, that Western banks currently have exposure to.
. Which of the following is incorrect? Country credit risk spread is the difference between yields of international bonds of the country and government bonds of the developed country (generally US. Credit default swap (CDS) is a derivative product which provides the buyer to grantee to be paid back face value of a bond by credit default swap issuer in case the borrower does not pay. In general, a Eurobond of developing country or company interest rate is smaller than sum of same maturity of US bond rate and country of company credit default swap rate point (CDS premium /10000). In general, a company or county Eurobond's primary market sale is done by a syndicated group (banks and other financial intuitions). If the US dollar index (USDX) increases, we expect depreciation of any other currency against the USD.
What does the term "carry trade" mean? Group of answer choices Borrow in the domestic currency to earn only the higher yield of the dollar implied by the failure of uncovered interest rate parity (UIRP). Borrow in foreign currency to earn only the expected capital appreciation of the dollar implied by the failure of UIRP. Borrow in the domestic currency to earn both the higher yield and the expected capital appreciation of the dollar implied by the failure of UIRP. Borrow in the foreign currency to earn both the higher yield and the expected capital appreciation of the dollar implied by the failure of UIRP.
How might thetreasurer of a multinational firm use the interest rate parity concept (a) when deciding howto invest the firm’s surplus cash and (b) whendeciding where to borrow funds on a short-termbasis?
Which of the following statements regarding fixed-rate loans is true? Group of answer choices a. Fixed-rate loans are preferable if interest rates are expected to rise. b. The cost of fixed-rate loans increases with an increase in the market interest rate. c. The cost of fixed-rate loans decreases with a decrease in the market interest rate. d. Fixed-rate loans are preferable if interest rates are expected to fall. e. Fixed-rate loans have periodic adjustment dates, at which time the interest rate and monthly payment are adjusted as necessary.
In a fixed-for-fixed currency swap where country A’s interest rate is higher than country B’s interest rate, who is the lender in the implicit loan: the counterparty paying in country A’s currency or the counterparty paying in country B’s currency? Justify your answer.
For each of the following monetary policy tools:A. The BSP buys securities in the open market.B. The BSP sells foreign exchange currentC. The BSP increases the reserve requirement ratio.D. The BSP applies its moral suasion ability requesting commercial banks to lowerdown interest rates.E. The government decided to deposit funds at the BSP.1. Determine whether the monetary tool imposed by the BSP is an expansionary or acontractionary policy.
Let i be home interest rates, i* a foreign interest rates and p be the forward foreign exchange premium (=F/S-1). Assume there is a transaction cost equal to C incurred in any covered interest rate arbitrage. Write down the relation by which incentives are present for money to move from the foreign country to home.
Interest Rate Parity Consider investors who invest in either U.S. or British one-year Treasury bills. Assume zero transaction costs and no taxes. If interest rate parity exists, then the return for U.S. investors who use covered interest arbitrage will be the same as the return for U.S. investors who invest in U.S. Treasury bills. Is this statement true or false? If false, correct the statement.
If a country runs a deficit on its current account, it has to be financed by running a capital account surplus which limited to borrowing from abroad TRUE OR FALSE?
Exchange rate risk is a. The risk associated with the use of debt financing by companies b. The risk of doing business in a particular industry or environment c. The risk of loss due to imports and exports dominated in other currencies d. The uncertainty about the time element, the price concession, and the conversion to cash. ************************** correct answer please.
Why is credit risk management important and what are the features of a loan or debt instrument it determines? What is the difference between a spot loan and revolving loan? What is loan commitment? What are the different rates that have replaced LIBOR and in what countries/economic blocs are they used in? What are the borrower and market specific factors that impact the return on a loan for a financial institution? Are higher interest rates a restrictive or stimulative form of monetary policy and explain your answer?