(Solved): The rise of globalization is due to the many companies that have become multinational corporations ...

The rise of globalization is due to the many companies that have become multinational corporations for various reasons-for example, to access bettertechnology, to enter new markets, to obtain more raw materiats, 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 the supply of a currency increases, the currency's value will decrease relative to other currencies. If a government intends to prevent its currency's value from falling relative to other currencies, it will sell its currency from reserves in the market. An increase in inflation tends to lower the currency's value with respect to other currencies with lower inflation rates. When interest rates increase in a country, its currency's value tends to increase because foreign investors convert their home currency to invest in these higher ylelding securities. 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 51,000 in default-free 90 -day japanese bonds that promise a \( 2 \% \) annual nominal return. - The spot exchange rate is \( \times 101.12 \) per dollar. - The 90-day forward exchange rate is \( 1100.25 \) 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 Which of the following statements is implied by interest rate parity theory? When interest rates increase in a country, its currency's value tends to increase because foreign investors cenvert their home currency to invest in these bigher yielding securities: The relationship beiwcen interest rates and exchange rates can be represented through the concept of interest rate purity. Consider the following: An American ifwestor is considering ifvesting \( \$ 1,000 \) in defouit-free 90 -day lapanese bonds that promise a 2 as annual norninal return. - The spot exchange rate is Y101.12 per dollar. - The 90-day forward exchange rate is x \( 100.25 \) per doliar, The investor's annualized return on these bonds-if he or she can lock in the dollar retuen by telling the foreign currency in the forward market-will be Wr \( 6.311 \% \) ollowing statements is implied by interest rate pority theory? 4.116\% rest rates in all countries should be the same. \( 5.214 \% \) rest rates in all countries with the same poltical risk should be the same. 5.488\% grvestment in one's home country should have the same return as a similar investment in a foreign country. A product bought in one country should have the same price in other countrles, adjusted for exchange rate.