The specific relevance of the multinationals domestic currency. Introduction: The companies with an important foreign operations are often termed as the international corporations or the multinational companies. The multinational companies have to consider the various financial features that do not affect the domestic companies. The various factors are the varying rate of interest from one country to another, foreign exchange rate, foreign tax rate, typical accounting methods, and the foreign government intervention.

Question

Want to see the full answer?

Answer 1

Question

Chapter 21, Problem 7CRCT

Summary Introduction

To determine: The specific relevance of the multinationals domestic currency.

Introduction:

The companies with an important foreign operations are often termed as the international corporations or the multinational companies. The multinational companies have to consider the various financial features that do not affect the domestic companies. The various factors are the varying rate of interest from one country to another, foreign exchange rate, foreign tax rate, typical accounting methods, and the foreign government intervention.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

4. Interest rate parity The rise of globalization is due to the many companies that have become multinational corporations for various reasons-for example, to access better technology, to enter new markets, to obtain more raw materials, to find funding resources, to minimize production costs, or to diversify business risk. This multimarket presence exposes companies to different kinds of risk as well-for example, political risk and exchange rate risk. The relationship between interest rates and exchange rates can be represented through the concept of interest rate parity. Consider the following: An American investor is considering investing $1,000 in default-free 90-day Japanese bonds that promise a 4% annual nominal return. • The spot exchange rate is ¥101.12 per dollar. • The 90-day forward exchange rate is 100.25 per dollar. The investor's annualized return on these bonds-if he or she can lock in the dollar return by selling the foreign currency in the forward market-will be…

1. Should international companies invest in countries with totalitarian regimes? Why?

The rise of globalization is due to the many companies that have become multinational corporations for various reasons—for example, to access better technology, to enter new markets, to obtain more raw materials, to find funding resources, to minimize production costs, or to diversify business risk. This multimarket presence exposes companies to different kinds of risk as well—for example, political risk and exchange rate risk. Several factors affect the exchange rate of a currency with another currency. Which of the following statements are true about the factors that have an impact on exchange rates? Check all that apply. If a government intends to prevent its currency’s value from falling relative to other currencies, it will purchase its currency from sellers in the market. If the demand for a currency increases, the currency’s value will increase relative to other currencies. When a government limits imports and restricts foreign exchange transactions, its currency’s value tends…