a) Depreciation of Rupiah will not always increase the risk of foreign investment for Peter

b) Condition in which the exchange risk might decrease the foreign investment risks are:

• If the companies in which Peter invested has properly hedged their positions then his investments might decrease the foreign investment risks.
• Enough foreign diversification can protect Peter from foreign investment risk

C) 2 examples for the question (b) are:

• When the company Peter is investing is involved in the export market and the company receives the payments in a foreign currency that the one Peter is invested or other than the country in which the company is exporting in.
• In case of currency depreciation, the local sales go up due to lack of imports and the companies make far higher revenues which shall protect Peter from currency depreciations.

d) Factors which Peter should consider while investing in emerging foreign markets are:

• International trade relations of the country.
• The GDP of the country
• The industry which contributes most to the GDP
• The geopolitical relations of the Country
• The tax regulations & government regulations in the country
• The income per capita or income per person of the country
• The overall population of the country
• The beliefs, culture and ideology of the country.
• The banking system of the country
• The economic growth of the country during the course of histroy
• The ruling Government and its capability of the country he is investing in.

e) Terms related to the foreign Market:

1. Purchasing Power Parity - It is a concept where 2 or more currencies are compared with respect to goods or "Basket of goods & services" it can procure/purchase with that particular currency over a course of time.
2. Interest Rate Parity - It defines that interest rate differential i.e difference of interest rates between 2 equivalent assets will be completely equal to the total difference between the spot exchange rate of those currencies & the forward exchange rate hence it eliminates the arbitrage situations and prices currencies at correct intrinsic value.
3. Forward Premium - It is a scenario where the expected future value i.e forward value is greater than the asset value in the spot market i.e spot rate which indicates that the asset is going to increase in the value
4. Fisher effect - Fisher effect draws the relationship between inflation with respect to real and nominal interest rates.

• Formula - Real Interest rate = Nominal Interest rate - Expected Inflation rate.

5. Arbitrage - It means buying a security in one market (where it is priced lesser) and selling it in another market (where the price is higher) to make a riskless profit.

6. The Balance of Payments - It is the difference between inflow of the money and outflow of the money of a particular time period which could be over a quarter or a year. It mainly occurs due to exports and imports of a country involved in international trade.