Question 1

Which currency is used the most to denominate Eurobonds?​

Accepted Answer

A)  ​the British pound 
B)  ​the Japanese yen 
C)  ​the U.S. dollar 
D)  ​the Swiss franc 
A)  ​the British pound 
B)  ​the Japanese yen 
C)  ​the U.S. dollar 
D)  ​the Swiss franc

Question 2

LIBOR is:​

Accepted Answer

A)  ​the interest rate commonly charged for loans between banks. 
B)  ​the average inflation rate in European countries. 
C)  ​the maximum loan rate ceiling on loans in the international money market. 
D)  ​the maximum deposit rate ceiling on deposits in the international money market. 
E)  the maximum interest rate offered on bonds that are issued in London.​
Answer Key 
A)  ​the interest rate commonly charged for loans between banks. 
B)  ​the average inflation rate in European countries. 
C)  ​the maximum loan rate ceiling on loans in the international money market. 
D)  ​the maximum deposit rate ceiling on deposits in the international money market. 
E)  the maximum interest rate offered on bonds that are issued in London.​
Answer Key

Question 3

As a result of the Smithsonian Agreement, the U.S. dollar was:​

Accepted Answer

A)  ​the currency to be used by all countries as a medium of exchange for international trade. 
B)  ​forced to be freely floating relative to all currencies without any boundaries. 
C)  ​devalued relative to major currencies. 
D)  ​revalued (upward) relative to major currencies. 
A)  ​the currency to be used by all countries as a medium of exchange for international trade. 
B)  ​forced to be freely floating relative to all currencies without any boundaries. 
C)  ​devalued relative to major currencies. 
D)  ​revalued (upward) relative to major currencies.

Question 4

The interest rate commonly charged for loans between banks is called the cross rate.

Accepted Answer

A) True 
 B)False

Question 5

A currency put option provides the right, but not the obligation, to buy a specific currency at a specific price within a specific period of time.

Accepted Answer

A) True 
 B)False

Question 6

The main participants in the international money market are:​

Accepted Answer

A)  ​consumers. 
B)  ​small firms. 
C)  ​large corporations. 
D)  ​small European firms needing European currencies for international trade. 
A)  ​consumers. 
B)  ​small firms. 
C)  ​large corporations. 
D)  ​small European firms needing European currencies for international trade.

Question 7

Which of the following is true?

Accepted Answer

A)  Non-U.S. firms may desire to issue bonds in the United States due to less regulation there. 
B)  U.S. firms may desire to issue bonds in the United States due to less regulation there. 
C)  U.S. firms may desire to issue bonds in non-U.S. markets due to less regulation in some other countries. 
D)  Non-U.S. firms may desire to issue bonds in the United States due to less regulation there AND U.S. firms may desire to issue bonds in the United States due to less regulation there. 
A)  Non-U.S. firms may desire to issue bonds in the United States due to less regulation there. 
B)  U.S. firms may desire to issue bonds in the United States due to less regulation there. 
C)  U.S. firms may desire to issue bonds in non-U.S. markets due to less regulation in some other countries. 
D)  Non-U.S. firms may desire to issue bonds in the United States due to less regulation there AND U.S. firms may desire to issue bonds in the United States due to less regulation there.

Question 8

Shareholders can have influence on a wider variety of management issues in some countries than in others.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following is true of international money market securities?​

Accepted Answer

A)  ​The securities may be exposed to exchange rate risk. 
B)  ​The securities are perceived to be very risky. 
C)  ​The securities issued by corporations are not subject to credit (default) risk. 
D)  ​The securities have a maturity of one to five years. 
A)  ​The securities may be exposed to exchange rate risk. 
B)  ​The securities are perceived to be very risky. 
C)  ​The securities issued by corporations are not subject to credit (default) risk. 
D)  ​The securities have a maturity of one to five years.

Question 10

Your company expects to receive 5,000,000 Japanese yen 60 days from now. You decide to hedge your position by selling Japanese yen forward. The current spot rate of the yen is $.0089, while the forward rate is $.0095. You expect the spot rate in 60 days to be $.0090. How many dollars will you receive for the 5,000,000 yen 60 days from now if you sell yen forward?​

Accepted Answer

A)  ​$44,500 
B)  ​$45,000 
C)  ​$526 million 
D)  ​$47,500 
E)  ​$556 million 
A)  ​$44,500 
B)  ​$45,000 
C)  ​$526 million 
D)  ​$47,500 
E)  ​$556 million

Question 11

Which of the following is probably not appropriate for an MNC wishing to reduce its exposure to British pound payables?

Accepted Answer

A)  Purchase pounds forward. 
B)  Buy a pound futures contract. 
C)  Buy a pound put option. 
D)  Buy a pound call option. 
A)  Purchase pounds forward. 
B)  Buy a pound futures contract. 
C)  Buy a pound put option. 
D)  Buy a pound call option.

Question 12

A currency futures contract is a contract specifying a standard volume of a particular currency to be exchanged on a specific settlement date.

Accepted Answer

A) True 
 B)False

Question 13

Under the gold standard, each currency was convertible into gold at a specified rate, and the exchange rate between two currencies was determined by their relative convertibility rates per ounce of gold.

Accepted Answer

A) True 
 B)False

Question 14

When obtaining a loan, the risk premium depends on the:​

Accepted Answer

A)  ​risk-free interest rate of the borrower. 
B)  ​credit risk of the borrower. 
C)  ​borrower's stock price. 
D)  ​lender's stock price. 
A)  ​risk-free interest rate of the borrower. 
B)  ​credit risk of the borrower. 
C)  ​borrower's stock price. 
D)  ​lender's stock price.

Question 15

Assume that a bank's bid rate on Swiss francs is $.45 and its ask rate is $.47. Its bid/ask percentage spread is:​

Accepted Answer

A)  ​about 4.44%. 
B)  ​about 4.26%. 
C)  ​about 4.03%. 
D)  ​about 4.17%. 
A)  ​about 4.44%. 
B)  ​about 4.26%. 
C)  ​about 4.03%. 
D)  ​about 4.17%.

Question 16

The term LIBOR refers to international bonds that were issued in London.

Accepted Answer

A) True 
 B)False

Question 17

A syndicated loan:

Accepted Answer

A)  represents a loan by a single bank to a syndicate of corporations. 
B)  represents a loan by a single bank to a syndicate of country governments. 
C)  represents a direct loan by a syndicate of oil-producing exporters to a less developed country. 
D)  represents a loan by a group of banks to a borrower. 
E)  represents a loan by a single bank to a syndicate of corporations AND represents a loan by a single bank to a syndicate of country governments. 
A)  represents a loan by a single bank to a syndicate of corporations. 
B)  represents a loan by a single bank to a syndicate of country governments. 
C)  represents a direct loan by a syndicate of oil-producing exporters to a less developed country. 
D)  represents a loan by a group of banks to a borrower. 
E)  represents a loan by a single bank to a syndicate of corporations AND represents a loan by a single bank to a syndicate of country governments.

Question 18

An obligation to purchase a specific amount of currency at a specific exchange rate at a future point in time is called a:

Accepted Answer

A)  call option 
B)  spot contract 
C)  put option 
D)  forward contract 
E)  both spot contract AND forward contract 
A)  call option 
B)  spot contract 
C)  put option 
D)  forward contract 
E)  both spot contract AND forward contract

Question 19

Forward markets for currencies of developing countries are:​

Accepted Answer

A)  ​prohibited. 
B)  ​less liquid than markets for currencies of developed countries. 
C)  ​more liquid than markets for currencies of developed countries. 
D)  ​only available for use by government agencies. 
A)  ​prohibited. 
B)  ​less liquid than markets for currencies of developed countries. 
C)  ​more liquid than markets for currencies of developed countries. 
D)  ​only available for use by government agencies.

Question 20

The preferences of corporations and governments to borrow in foreign currencies on a short-term basis and of investors to make short-term investments in foreign currencies resulted in the creation of the international bond market.

Accepted Answer

A) True 
 B)False

Which currency is used the most to denominate Eurobonds?

LIBOR is:

As a result of the Smithsonian Agreement, the U.S. dollar was:

The interest rate commonly charged for loans between banks is called the cross rate.

A currency put option provides the right, but not the obligation, to buy a specific currency at a specific price within a specific period of time.

The main participants in the international money market are:

Which of the following is true?

Shareholders can have influence on a wider variety of management issues in some countries than in others.

Which of the following is true of international money market securities?

Which of the following is probably not appropriate for an MNC wishing to reduce its exposure to British pound payables?

A currency futures contract is a contract specifying a standard volume of a particular currency to be exchanged on a specific settlement date.

Under the gold standard, each currency was convertible into gold at a specified rate, and the exchange rate between two currencies was determined by their relative convertibility rates per ounce of gold.

When obtaining a loan, the risk premium depends on the:

Assume that a bank's bid rate on Swiss francs is $.45 and its ask rate is $.47. Its bid/ask percentage spread is:

The term LIBOR refers to international bonds that were issued in London.

A syndicated loan:

An obligation to purchase a specific amount of currency at a specific exchange rate at a future point in time is called a:

Forward markets for currencies of developing countries are:

The preferences of corporations and governments to borrow in foreign currencies on a short-term basis and of investors to make short-term investments in foreign currencies resulted in the creation of the international bond market.

Multinational Financial Management: an Overview

International Flow of Funds

Exchange Rate Determination

Currency Derivatives

Government Influence on Exchange Rates

International Arbitrage and Interest Rate Parity

Relationships Among Inflation, Interest Rates, and Exchange Rates

Forecasting Exchange Rates

Measuring Exposure to Exchange Rate Fluctuations

Managing Transaction Exposure

Managing Economic Exposure and Translation Exposure

Direct Foreign Investment

Multinational Capital Budgeting

International Corporate Governance and Control

Country Risk Analysis

Multinational Capital Structure and Cost of Capital

Long-Term Debt Financing

Financing International Trade

Short-Term Financing

International Cash Management

Filters

Exam 3: International Financial Markets

Which currency is used the most to denominate Eurobonds?​

LIBOR is:​

As a result of the Smithsonian Agreement, the U.S. dollar was:​

The interest rate commonly charged for loans between banks is called the cross rate.

A currency put option provides the right, but not the obligation, to buy a specific currency at a specific price within a specific period of time.

The main participants in the international money market are:​

Which of the following is true?

Shareholders can have influence on a wider variety of management issues in some countries than in others.

Which of the following is true of international money market securities?​

Which of the following is probably not appropriate for an MNC wishing to reduce its exposure to British pound payables?

A currency futures contract is a contract specifying a standard volume of a particular currency to be exchanged on a specific settlement date.

Under the gold standard, each currency was convertible into gold at a specified rate, and the exchange rate between two currencies was determined by their relative convertibility rates per ounce of gold.

When obtaining a loan, the risk premium depends on the:​

Assume that a bank's bid rate on Swiss francs is $.45 and its ask rate is $.47. Its bid/ask percentage spread is:​

The term LIBOR refers to international bonds that were issued in London.

A syndicated loan:

An obligation to purchase a specific amount of currency at a specific exchange rate at a future point in time is called a:

Forward markets for currencies of developing countries are:​

The preferences of corporations and governments to borrow in foreign currencies on a short-term basis and of investors to make short-term investments in foreign currencies resulted in the creation of the international bond market.

Multinational Financial Management: an Overview

International Flow of Funds

Exchange Rate Determination

Currency Derivatives

Government Influence on Exchange Rates

International Arbitrage and Interest Rate Parity

Relationships Among Inflation, Interest Rates, and Exchange Rates

Forecasting Exchange Rates

Measuring Exposure to Exchange Rate Fluctuations

Managing Transaction Exposure

Managing Economic Exposure and Translation Exposure

Direct Foreign Investment

Multinational Capital Budgeting

International Corporate Governance and Control

Country Risk Analysis

Multinational Capital Structure and Cost of Capital

Long-Term Debt Financing

Financing International Trade

Short-Term Financing

International Cash Management

Filters

Which currency is used the most to denominate Eurobonds?

LIBOR is:

As a result of the Smithsonian Agreement, the U.S. dollar was:

The main participants in the international money market are:

Which of the following is true of international money market securities?

When obtaining a loan, the risk premium depends on the:

Assume that a bank's bid rate on Swiss francs is $.45 and its ask rate is $.47. Its bid/ask percentage spread is:

Forward markets for currencies of developing countries are: