Suppose the Interest Rate in England Is 5% and the Interest

question 56

Multiple Choice

Suppose the interest rate in England is 5% and the interest rate in France is 7%. If the euro, France's currency, is expected to depreciate by 3% against the British pound

• A) the euro-pound exchange rate will change as people will invest in other countries, such as the United States.
• B) there will be no flow of funds from England to France because of the exchange rate uncertainty.
• C) funds will flow from England to France.
• D) funds will flow from France to England.

Calculate and interpret service department charge rates and allocations across divisions.

Evaluate the performance of a manager in a profit center using return on investment (ROI) and residual income.

Differentiate between internal centralized service departments and their roles within an organization.

Understand the concept of return on investment and how it is calculated.

---

Definitions:

Noninterest-Bearing Notes

These are promissory notes issued at a discount to face value that do not pay periodic interest, with the return to the investor being the difference between the purchase price and the face value at maturity.

Discounted Note

A promissory note whose face value has been reduced to reflect the effect of interest that it will earn.

GAAP

Generally Accepted Accounting Principles, which are a set of accounting standards and practices used to prepare financial statements.