A US-Based MNC Has Just Established a Subsidiary in Algeria

question 53

Multiple Choice

A U.S.-based MNC has just established a subsidiary in Algeria. Shortly after the plant was built, the MNC determines that its exchange rate forecasts, which had previously indicated a slight appreciation in the Algerian dinar, were probably false. Instead of a slight appreciation, the MNC now expects that the dinar will depreciate substantially due to political turmoil in Algeria. This new development would likely cause the MNC to ____ its estimate of the previously computed net present value.

• A) lower
• B) increase
• C) lower, but not necessarily if the MNC invests enough in Algeria to offset the decrease in NPV
• D) increase, but not necessarily if the MNC reduces its investment in Algeria by an offsetting amount
• E) none of the above

Calculate yield-to-maturity and current yield for different bonds.

Understand the concepts of bond pricing, including factors influencing bond prices.

Describe the concept and strategies of bond investment, including bond laddering.

Explain the significance of bond maturity dates and their impact on bond investments.

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Definitions:

Mediation

A form of alternative dispute resolution where a neutral third party helps disputing parties to come to a mutually acceptable agreement.

U.S. Government

The government of the United States, a federal republic consisting of a national government, 50 states, the District of Columbia, and several territories.

Federal Court

A Federal Court is a court established by the federal government of a country, having jurisdiction over matters specifically reserved for the national government by the constitution.

State Court

The judiciary body at the state level in the United States, handling legal disputes and interpreting state laws.