6. Which statement is NOT CORRECT?

a. Multinational firms can reduce their tax liability through transfer pricing.

b. Countries that adopt a fixed exchange rate give up control of their monetary policy.

c. Expropriation of assets by foreign governments is a risk of foreign operations.

d. US companies must follow all US laws regardless of where their operations are.

Use the following information for questions 7-8

Current Exchange Rates: 1.3 Canadian Dollars per US$ and US$1.5 per Euro.

Current one-year Inflation Rates: 5% in Canada, 3% in US, and 6% in the Europe

7. The cross rate is __________ Euros per Canadian Dollar.

a .51 b. .87 c. 1.15 d. 1.95

8. If interest parity holds true, what is the expected exchange rate between Euros and US$ one year from now?

a) .648 Dollars per Euro

b) .686 Euros per Dollar

c) 1.46 Euros per Dollar

d) 1.54 Dollars per Euro

9. If the inflation rate in the United States is greater than the inflation rate in Sweden, other things held constant, the Swedish currency will

a. Appreciate against the U.S. dollar.

b. Depreciate against the U.S. dollar.

c. Remain unchanged against the U.S. dollar.

d. Appreciate against other major currencies.

10. Which of the following statements is NOT CORRECT?

a. Any bond sold outside the country of the borrower is called an international bond.

b. Foreign bonds and Eurobonds are two important types of international bonds.

c. The term Eurobond specifically applies to any foreign bonds denominated in U.S. currency.

d. Foreign bonds are bonds sold by a foreign borrower but denominated in the currency of the country in which the issue is sold.