Question

Which of the following statements is correct?

If a firm is located in a country with a relatively unstable political environment, management will require a lower rate of return on capital projects.

Foreign bonds sold in the United States are called Samurai bonds.

The spot rate is the exchange rate at which one currency can be converted to another immediately.

All the answers are correct.

With the international capital budgeting, the decision to accept international projects with a negative NPV increases the value of the firm and is consistent with the fundamental goal of financial management, which is to maximize the sales.

Answer 1

Ans. The spot rate is the exchange rate at which one currency can be converted into another currency immediately.

Option a is incorrect because the firms require higher return in political unstable environment.

Option b is incorrect as the foreign bonds sold in us are called yankee bonda, sold in japan are called samurai bonds.