Assume That Interest Rates on Comparable Securities Are Identical in the United

question 85

Multiple Choice

Assume that interest rates on comparable securities are identical in the United States and foreign countries.Now suppose that investors anticipate that in the future the U.S.dollar will appreciate against foreign currencies.Investment funds would thus be expected to:

• A) Flow from the United States to foreign countries
• B) Flow from foreign countries to the United States
• C) Remain totally in foreign countries
• D) Not be affected by the expected dollar appreciation

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Definitions:

Cash Flows

The total amount of money being transferred into and out of a business, affecting its liquidity.

Net Working Capital

The difference between a company's current assets and current liabilities, indicating its short-term financial health and operational efficiency.

Present Value

The calculation of the current value of a sum of money or stream of cash flows that is to be received in the future, discounted at a specific rate.

Dollar Outlays

The total amount of money spent or invested in a particular project, purchase, or endeavor, often used in budgeting and financial planning.