Absolute purchasing power parity is directly related to the law of one price (LOOP).

Select one:

True

False

Which of the following is probably the best method of incorporating country risk into a capital budgeting analysis?

Select one:

a. Adjusting the discount rate downwards by the amount of political risk.

b. Adjusting the political risk rating to obtain a more favourable NPV.

c. Country risk should be ignored in capital budgeting, since it is a subjective analysis.

d. Adjusting the input variables to estimate the sensitivity of the projects NPV depending on different scenarios.

e. Calculating the NPV of cash flows that would occur at the beginning of the projects life.

Which of the following is the most important reason for wanting a reputable central bank?

Select one:

a. Fiat money

b. Sterilized central bank interventions

c. Comparative advantage theory

d. Target-zone arrangements

e. Securitization