Question: PLEASE READ CAREFULLY! Paragraph 1 FOR INFORMATION ONLY. THE REAL QUESTION IS PARAGRAPH 2! 1. Explain the main reason a foreign currency appreciation increases the

PLEASE READ CAREFULLY!

Paragraph 1 FOR INFORMATION ONLY. THE REAL QUESTION IS PARAGRAPH 2!

1. Explain the main reason a foreign currency appreciation increases the profitability of a foreign investment. Direct your explanation to the conversion of debt payment (principal and interest) and dividends from the foreign currency, let us say, ringgit to dollars. Everything else presupposes it remains constant. What would happen if the foreign currency depreciates against the dollar.

2. How would the results alter if we additionally had sales from Malaysia to China, and the renminbi revalued against the ringgit by 10% yearly for the next 20 years? Presuppose the volume of sales in China are double what they are in Malaysia in the beginning. Also, presuppose the price elasticity of demand is - 3 for the product in China. Presuppose the expenses are incurred in ringgit.

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