One Foreign Project in Hungary and Another in Japan Had

question 33

Multiple Choice

One foreign project in Hungary and another in Japan had the same perceived value from the U.S. parent's perspective. Then, the exchange rate expectations were revised, upward for the value of the Hungarian forint and downward for the Japanese yen. The break-even salvage value for the project in Japan would now be ____ from the parent's perspective.

• A) negative
• B) higher than that for the Hungarian project
• C) lower than that for the Hungarian project
• D) the same as that for the Hungarian project
• E) A and C

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Definitions:

Longing Steel Futures

The act of buying futures contracts in steel, betting that the price of steel will increase over the term of the contract.

Treasury Bond

Long-term, fixed-interest U.S. government debt securities with maturities over ten years, considered low-risk investments.

Futures Contract

A contractual agreement regulated by law, specifying the sale or purchase of an item at a fixed price, to be executed at a later date.

Spot Price

The immediate market value at which certain assets, like commodities, currencies, or securities, are available for purchase or sale with instant delivery.