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- From the U.S. standpoint, a capital outflow will occur when a Japanese investor buys a portion of the U.S. government debt. True FalseWhat does the word hedging mean? Why do companies hedge foreign exchange risk?What modifications may be made to the domestic cost of capital for a foreign venture to account for currency rate and political risk?
- How may the domestic cost of capital for a foreign venture be adjusted to account for currency rate risk, political risk, and nation risk?Create an alternative to international taxation, and then evaluate how your alternative impacts foreign investments.In what ways do investors quantify the risk levels between domestic and foreign securities? What asset allocation strategies and weightings would you consider when investing in international securities? Explain your reasoning.
- Why might a multinational corporation decide to borrow in a country such as Brazil,where interest rates are high, rather than in a country such as Switzerland, whereinterest rates are low?Why would the U.S. government consider reinstitutingthe “wall” between investment banking and commercialbanking?How can a country’s tax system affect the manner in which an operation in that country is financed by a foreign investor?
- What adjustments might be made due to exchange rate riskand political risk to the domestic cost of capital for a foreigninvestment?From a practical standpoint, how do international markets differ from domestic markets? What role do international securities play in a corporate portfolio? In what ways do investors quantify the risk levels between domestic and foreign securities? What asset allocation strategies and weightings would you consider when investing in international securities? Explain your reasoning.Determine the key reasons why a multinational corporation might decide to borrow in a country such as Brazil, where interest rates are high, rather than in a country like Switzerland, where interest rates are low.
