Question
please answer both, ratting will be given, much appreciated 1- Currencies U.S. dollar foreign-exchange rates. May 5, 2011 Country/currency.in US$............per US$ British Pound....1.53470.6516 Norwegian Kroner...0.16905.9173
please answer both, ratting will be given, much appreciated
1-
Currencies U.S. dollar foreign-exchange rates. May 5, 2011
Country/currency.in US$............per US$
British Pound....1.53470.6516
Norwegian Kroner...0.16905.9173
Thai Baht..0.0310....32.250
The price of an ounce of gold in New York is $1,950, and the price of the same ounce of gold in London is 1,285 British Pounds. Using the exchange rates above, what would you predict would occur in well-functioning markets based upon this information?
| a. | The price of gold will fall in New York and rise in London | |
| b. | The price of gold will fall in New York and will stay the same in London | |
| c. | The price of gold will rise in New York and fall in London | |
| d. | The price of gold will stay the same in both New York and London | |
| e. | The price of gold will rise in New York and will stay the same in London |
2- The chapter on financial leverage, as well as the discussion in class, used risk units to illustrate what about financial leverage?
| a. | That debt is risk free | |
| b. | That the risk of the firms assets cannot be changed by shifts in financial leverage | |
| c. | That firm value is maximized where the cost of capital is minimized | |
| d. | That for firms with leverage, the higher the EBIT, the higher is firm risk | |
| e. | That debt financing creates a tax shield and therefore lowers firm risk |
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