The Home Currency Approach

question 51

Multiple Choice

The home currency approach

• A)discounts all of a project's foreign cash flows using the current spot rate.
• B)employs uncovered interest parity to project future exchange rates.
• C)computes the net present value (NPV)of a project in the foreign currency and then converts that NPV into U.S.dollars.
• D)utilizes the international Fisher effect to compute the NPV of foreign cash flows in the foreign currency.
• E)utilizes the international Fisher effect to compute the relevant exchange rates determine the NPV of foreign cash flows in U.S.dollars.

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Definitions:

Unemployment Rate

The portion of the workforce currently unemployed but actively searching for work opportunities.

Opportunity Cost

The foregone benefit of the next best alternative when a decision is made to choose one option over another.

Allocative Efficiency

Occurs when no resources are wasted; it is not possible to make any person better off without making someone else worse off.

Economic Problem

The challenge of limited resources to meet unlimited wants and needs of society.