19. The balance of payments is: 1 the flow of funds between one specified country and all other countries due to the purchases of goods or services only. B. C. the balance between government revenues and expenditures. a measurement of all transactions between domestic and foreign residents over a specified period of time. D. the flow of funds between one specified country and all other countries due to the provision of income on financial assets (dividend, interest payments). 20. Portfolio investment represents: A. transactions involving short-term financial assets (e.g. money market securities) between countries. B. investment in fixed assets in foreign countries that can be used to conduct business operations. C. transactions involving long-term financial assets (such as stocks and bonds) between countries. D. acquisition of part or all of a foreign company, construction of new plant, expansion of an existing plant in a foreign country. Essay Questions Q1. Yafa Investment Co. is a Palestinian firm that wishes to capitalize on expected exchange rate movements. Yafa Co. expects the exchange rate of U.S. dollar to appreciate from its present level of ILS 3.2 to ILS 3.7 in 30 days. Today, Yafa Co. is able to borrow ILS 10 million on a short- term basis from other banks. Present short-term interest rates (annualized) in the interbank market are as given in the table: Currency U.S. dollar ILS Annual Lending rate (return on short term deposits) Annual Borrowing rate 4% 6% 2.4% 3% Derive Hampton's expected profits from investing borrowed money in USD now before it appreciates? (7 marks)