Question

Currency Swaps Will currency swaps result in low financing costs?

Country Risk of Mexico What is the country risk of Mexico and describe some of the key componets causing the risk rating?

Country Risk versus NPV Explain how Country risk affect NPV.

Answer 1

1)

this question answer is some times yes and some times No

because currency swaps are created grater participation in by firms and firms are mainly dependent by these swap rates ( and)

currency swaps will establish exchange rates that is based on market forces

2)

3)

Countries with a lower country risk rating (implying high risk), the project's required rate of return could be increased (by increasing the discount rate on NPV analysis).

To adjust cash flows, consider each key form of country risk and re estimate cash flows if that form of risk occurs. For example, if the host government may block funds temporarily, estimate the NPV of the project if that occurs. Re estimate the NPV for any other forms of country risk as well. This process results in a distribution of possible NPVs that can be assessed to determine whether a project should be accepted.