Peter, a Malaysian citizen wish to diversify his investment portfolio by investing his capital in Indonesia. He notices that the rupiah is depreciated at 8.8% year-to-date against the USD. The main reason that causes the rupiah depreciated is a broader withdrawal from the emerging-market assets. Thus, Indonesias sizeable current account deficit, and the high foreign ownership of government bonds and corporate debt making the economy more vulnerable. Besides that, the evolution of the pandemic COVID-19 has a greater impact on the global economy and have the key bearing on the rupiah. He asks your advice because you are currently studying the multinational finance subject at UCSI University. As his friend, you agree to provide your views by answering his questions as follows:

Required: (a) Would the depreciation of the rupiah always increase the risk of foreign investment for Peter? (5 marks)

(b) Explain to Peter under which condition the exchange rate changes may decrease the risk of foreign investment. (6 marks)

(c) Discuss TWO (2) examples for question (b) when the foreign investment is in developing countries. (8 marks)

(d) Explain to Peter about factors that should consider when investing in the emerging stock market in a developing country like Indonesia. (19 marks)

(e) Describe the following terms that relate to foreign investment. (i) Purchasing power parity (2 marks) (ii) Interest rate parity (2 marks) (iii) Forward premium (2 marks) (iv) Fisher effect (2 marks) (v) Arbitrage (2 marks) (vi) The balance of payments (2 marks)