If the Risk of Holding Assets in Foreign Countries Rises

question 166

Multiple Choice

If the risk of holding assets in foreign countries rises relative to the risk of holding U.S assets,then

• A)U.S.net capital outflow rises which increases the U.S.exchange rate.
• B)U.S.net capital outflow rises which decreases the U.S.exchange rate.
• C)U.S.net capital outflow falls which increases the U.S.exchange rate.
• D)U.S.net capital outflow falls which decreases the U.S.exchange rate.

Understand corporate share capital transactions and their impact on financial statements.

Comprehend the accounting treatments and reporting requirements for share issues, reissues, and buy-backs in accordance with AASB standards.

Interpret the effects of dividends, both declared and paid, on a company’s financial position and performance.

Distinguish between various types of share capital and their specific features and implications.

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Definitions:

Direct Quote

A quote in foreign exchange markets that specifies the domestic currency price for one unit of a foreign currency.

Political Risk

The risk associated with changes in government policy which may negatively affect domestic and foreign businesses.

Disadvantage

This refers to an unfavorable condition or circumstance that reduces the chances of success or effectiveness.

Hedge

Investment made to reduce the risk of adverse price movements in an asset, often by taking an offsetting position in a related security.