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Consider the following

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1. Consider the following. One of the scenarios is an example of triangular arbitrage opportunity. Pick the correct answer. A. buying a currency at NAB's ask and selling at ANZ's bid, which is higher than NAB's ask. B. buying Hong Kong dollars from NAB (quoted at A$.55) that has quoted the South African rand (SAR)/ Hong Kong dollar (HK$) exchange rate at SAR2.50 when the spot rate for the rand is A$.20. C. buying Hong Kong dollars from a bank (quoted at A$.55) that has quoted the South African rand/ Hong Kong dollar exchange rate at SAR3.00 when the spot rate for the rand is A$.20. D. converting funds to a foreign currency and investing the funds overseas. E. converting foreign funds to the local currency and investing the funds in the money market.

2. MNCs typically prefer to hedge exchange rate risk because A. MNCs are typically well diversified across numerous currencies. B. Creditors prefer MNCs that maintain low exposure to exchange rate risk. C. International Fisher effect (IFE) does not hold very well. D. MNCs can increase the volatility in their earnings overtime by hedging exchange rate risk. E. Corporate managers prefer to restructure the firm often.