International Finance And Treasury - Study Mode

[#416] From the statements given identify choose the correct answer. Statement I To become a global corporation, a firm passes through different stages, viz, capturing markets abroad, establishing joint venture/subsidiaries abroad, developing into MNCs and moving towards global mode of operation. Statement II Government support is not a pre-requisite of the successful globalisation of the business.
Correct Answer

(A) Both Statement I is correct and Statement II is wrong

[#417] If inflation is expected to be 5% htgher in the United Kingdom than in Switzerland, then
Correct Answer

(A) purchasing power parity would predict that the UK spot rate should decline by about 5%

[#418] Type of bond whose present value is lesser than that of its face value is classified as
Correct Answer

(A) discount bond

Explanation

Solution: Type of bond whose present value is lesser than that of its face value is classified as discount bond. A discount bond is a bond that is issued for less than its par or face value. Discount bonds may also be a bond currently trading for less than its face value in the secondary market.

[#419] For an investment, weighted average time to maturity is considered as
Correct Answer

(D) duration

Explanation

Solution: For an investment, weighted average time to maturity is considered as duration. Duration is defined as the average time it takes to receive all the cash flows of a bond, weighted by the present value of each of the cash flows. Essentially, it is the payment-weighted point in time at which an investor can expect to recoup his or her original investment.

[#420] Bonds that does not pay any interest rate are considered as
Correct Answer

(B) zero coupon bond

Explanation

Solution: Bonds that does not pay any interest rate are considered as zero coupon bond. A zero-coupon bond is a debt security instrument that does not pay interest. Zero-coupon bonds trade at deep discounts, offering full face value (par) profits at maturity. The difference between the purchase price of a zero-coupon bond and the par value, indicates the investor's return.