Question

Which of the following statements are true? There are several, select all that are correct. Consider each statement on its own separate from the others listed.

Question 13 options:

	Two reasons why financial management of a multinational company differs from that of purely domestic firms are: (1) different economic systems and (2) accounting systems
	International investment transactions affect exchange rates
	The relationtship stipulated in the purchasing power parity (PPP) equation is also called the law of one price
	In a monetary system with floating exchange rates, the exchange rate between two countries is determined by government intervention

Previous PageNext Page

Answer 1

Option 1,2, 3 are correct.

As an international company operates in multiple countries, they have different accounting systems and economic systems hence financial management is different from domestic firms.

Yes, as more and more investment is done in a currency, demand for that currency rises and hence it gets more expensive.

Yes, Purchasing Power Parity suggests that a commodity costs the same in every currency the difference between the prices in two currency is the exchange rate.

Floating rate is not affected by government intervention but by demand and supply of that currency.