The Home Currency Approach

question 67

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 needed to compute the NPV of foreign cash flows in U.S. dollars.

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Definitions:

Homeostasis

The regulatory process by which biological systems maintain stability while adjusting to changing external conditions.

Drive Reduction

A theory suggesting that motivation arises from the desire to reduce physical needs, such as hunger or thirst, thereby maintaining homeostasis.

Physiological Need

A physiological need is a basic bodily requirement that humans must satisfy to maintain health and survival, such as the need for food, water, and sleep.

Homeostasis

The ability of an organism to maintain internal stability and balance of physiological processes regardless of external changes.