(40 marks) a) Analyse the concept of foreign capital investment flows, unpacking the different types of foreign investment. b) Drawing on theory and empirical evidence, discuss the major determinants of foreign investment (all types) and the effects (both positive and negative) for the host/receiving country. c) Using empirical (real-life) data from the latest World Investment Reports database (inward stock), assess and comment on the trend of foreign direct investment in Africa, for the past 10 years. In your analysis, identify the top 5 African countries heavily reliant on foreign direct investment, and comment on the factors attracting such investment to each respective country. Question 1 Question 2 (5 marks) Suppose you are a euro-based investor who just sold Amazon.com Inc. shares that you had bought six months ago. You had invested 10,000 euros to buy Amazon.com shares for $120 per share; the exchange rate was $1.15 per euro. You sold the stock for $135 per share and converted the dollar proceeds into euro at the exchange rate of $1.06 per euro. a) Determine the profit from this investment in euro terms. b) Compute the rate of return on your investment in euro terms. c) How much of the return is due to the exchange rate movement? Question 3 Alpha and Beta Companies can borrow for a five-year term at the following rates: Alpha Beta Aa Ba 12.0% LIBOR + 1% Moody's credit rating Fixed-rate borrowing cost Floating-rate borrowing cost 10.5% LIBOR (5 marks) a) Calculate the quality spread differential (QSD). b) Develop an interest rate swap in which both Alpha and Beta have an equal cost savings in their borrowing costs. Assume Alpha desires floating-rate debt and Beta desires fixed- rate debt. No swap bank is involved in this transaction.