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Ch 17: Assignment - Multinational Financial Management 4. Interest rate parity Search this course pls 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 diversily 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: Suppose you observe the following spot and forward exchange rates between the U.S. dollar ($) and the Canadian dollar ($) Office 365 One-Year Forward Exchange Rate 0.9023 Spot Exchange Rate 0.8875 Canadian dollar (U.5. dollar Canadian dollar) actory The rent one-rear interest rate on US Treasury securities is 0.094. If interest rate purity hot what is the expected vlado - Cardan securities of the 5.90 AM to searen 52 Clear 6 Ch 17: Assignment - Multinational Financial Management Q Search this cou Tools The current one-year interest rate on U.S. Treasury securities is 3.03%. If interest rate parity holds, what is the expected yield on one year Canadian securities of equal risk? 6.58% ips O 5.96% ps 7.52 J 6.279 ols Interest rate parity recognizes that when you invest in a country other than your home country, two factors affect your investment-returns on the investment itself and changes in the exchange rate. Which of the following would cause the overall return on your investment to be tower than the investment's stated return ductory Your home currency appreciates relative to the currency in which the investment in denominated. Your home currency depreciates relative to the currency in which the investment is nominated The currency in which the investment is denominated creates relative to your home current Grade it How Save & Continue 11 AM S2 Clear