1. Compensating balances are often included as a requirement for a line of credit. These balances provide income to banks but add to the cost of financing for the borrower. Why, then, would borrowers agree to such an arrangement?

2. Explain the purpose of a standstill agreement and the basics of how it works. Find a recent example in the USA and use it in your discussion.

3. Describe the foreign currency and home currency approaches to capital budgeting. Which is better? Which approach would you recommend a U.S. firm use (possibly use your own firm)? Justify your answer.