If Managers Intend to Adjust the Projections of Foreign Investments

question 38

Multiple Choice

If managers intend to adjust the projections of foreign investments, it is probably better to make the adjustments in:

• A)the discount rate used.
• B)the cash flows projected.
• C)both the discount rate and cash flows.
• D)exchange rate, but never in the discount rate.

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Definitions:

Par Value

The face value of a bond or a stock's stated value, as set forth in the corporate charter.

Yield To Maturity

The total return anticipated on a bond if it is held until the maturity date, considering all interest payments at set intervals and the principal repayment at maturity.

Intrinsic Value

The actual, inherent worth of an asset or company, not necessarily matching its current market value.

Zero-Coupon Bond

A debt security that does not pay interest but is traded at a deep discount, rendering profit at maturity when the bond is redeemed for its full face value.