Problem 1: Springfield Co., based in the U.S., has a cost of goods sold attributable to foreign material orders that exceeds its foreign revenue. All foreign transactions are denominated in the foreign currency of concern. This firm would _______ a stronger dollar and would _______ a weaker dollar.
- benefit from; be unaffected by
- benefit from; be adversely affected by
- be unaffected by; be adversely affected by
- be unaffected by; benefit from
- benefit from; benefit from
Problem 2: Based on interest rate parity, the larger the degree by which the U.S. interest rate exceeds the foreign interest rate, the:
- larger will be the forward discount of the foreign currency.
- larger will be the forward premium of the foreign currency.
- smaller will be the forward premium of the foreign currency.
- smaller will be the forward discount of the foreign currency