Question 1

____ is not a bank characteristic important to customers in need of foreign exchange.

Accepted Answer

A)  Quote competitiveness 
B)  Speed of execution 
C)  Forecasting advice 
D)  Advice about current market conditions 
E)  All of these are important bank characteristics to customers in need of foreign exchange. 
A)  Quote competitiveness 
B)  Speed of execution 
C)  Forecasting advice 
D)  Advice about current market conditions 
E)  All of these are important bank characteristics to customers in need of foreign exchange.

Question 2

If companies cannot rely on stock markets to obtain funds, they will have to rely more heavily on the ____ market to raise long-term funds.

Accepted Answer

A)  derivative 
B)  Bond 
C)  money 
D)  foreign exchange 
A)  derivative 
B)  Bond 
C)  money 
D)  foreign exchange

Question 3

The Greek crisis that began in 2010 occurred because Greece was unable to obtain loans from any banks or governments.

Accepted Answer

A) True 
 B)False

Question 4

The ask quote is the price at which a bank offers to sell a currency.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is not true with respect to spot market liquidity?

Accepted Answer

A)  The more willing buyers and sellers there are, the more liquid a market is. 
B)  The spot markets for heavily traded currencies such as the Japanese yen are very liquid. 
C)  A currency's liquidity affects the ease with which an MNC can obtain or sell that currency. 
D)  If a currency is illiquid, an MNC is typically able to quickly purchase that currency at a reasonable exchange rate. 
A)  The more willing buyers and sellers there are, the more liquid a market is. 
B)  The spot markets for heavily traded currencies such as the Japanese yen are very liquid. 
C)  A currency's liquidity affects the ease with which an MNC can obtain or sell that currency. 
D)  If a currency is illiquid, an MNC is typically able to quickly purchase that currency at a reasonable exchange rate.

Question 6

If a U.S. firm is receiving 100,000 euros in 90 days and wishes to avoid the risk from exchange rate fluctuations, it could:​

Accepted Answer

A)  ​purchase a 90-day forward contract on euros. 
B)  ​sell a 90-day forward contract on euros. 
C)  ​purchase euros 90 days from now at the spot rate. 
D)  ​sell euros 90 days from now at the spot rate. 
A)  ​purchase a 90-day forward contract on euros. 
B)  ​sell a 90-day forward contract on euros. 
C)  ​purchase euros 90 days from now at the spot rate. 
D)  ​sell euros 90 days from now at the spot rate.

Question 7

In general, stock markets allow for more governance and attract more investors when they have all of the following except:

Accepted Answer

A)  more voting rights for shareholders. 
B)  more legal protection for shareholders. 
C)  more enforcement of the laws. 
D)  less stringent accounting requirements. 
A)  more voting rights for shareholders. 
B)  more legal protection for shareholders. 
C)  more enforcement of the laws. 
D)  less stringent accounting requirements.

Question 8

In general, common-law countries such as the United States, Canada, and the United Kingdom allow for more legal protection of shareholders than civil-law countries such as France and Italy.

Accepted Answer

A) True 
 B)False

Question 9

Institutional investors such as commercial banks, mutual funds, insurance companies, and pension funds from many countries are major participants in the international bond market.

Accepted Answer

A) True 
 B)False

Question 10

An investor engaging in a transaction whereby he or she contracts to purchase British pounds one year from now is an example of a spot market transaction.

Accepted Answer

A) True 
 B)False

Question 11

The forward market:

Accepted Answer

A)  for euros is very illiquid. 
B)  for currencies of Eastern European countries is very liquid. 
C)  does not exist for some currencies. 
D)  None of these are correct. 
A)  for euros is very illiquid. 
B)  for currencies of Eastern European countries is very liquid. 
C)  does not exist for some currencies. 
D)  None of these are correct.

Question 12

At any given point in time, a bank's bid quote will be greater than its ask quote.

Accepted Answer

A) True 
 B)False

Question 13

The international money market is frequently accessed by MNCs for short-term investment and financing needs, while longer-term financing needs are met in the international credit market or the international bond market and in international stock markets.

Accepted Answer

A) True 
 B)False

Question 14

The forward rate is the exchange rate used for immediate exchange of currencies.

Accepted Answer

A) True 
 B)False

Question 15

The bid/ask spread on an exchange rate can be used to directly determine:​

Accepted Answer

A)  ​how an exchange rate will change. 
B)  ​the transaction cost of foreign exchange. 
C)  ​the forward premium. 
D)  ​the currency option premium. 
A)  ​how an exchange rate will change. 
B)  ​the transaction cost of foreign exchange. 
C)  ​the forward premium. 
D)  ​the currency option premium.

Question 16

Which of the following is not true regarding ADRs?

Accepted Answer

A)  ADRs are denominated in the currency of the stock's home country. 
B)  ADRs enable U.S. investors to avoid cross-border transactions. 
C)  ADRs allow non-U.S. firms to tap into the U.S. market for funds. 
D)  ADRs sometimes allow for arbitrage opportunities. 
A)  ADRs are denominated in the currency of the stock's home country. 
B)  ADRs enable U.S. investors to avoid cross-border transactions. 
C)  ADRs allow non-U.S. firms to tap into the U.S. market for funds. 
D)  ADRs sometimes allow for arbitrage opportunities.

Question 17

Which of the following is not a factor that affects the bid/ask spread?

Accepted Answer

A)  order costs 
B)  inventory costs 
C)  volume 
D)  All of these factors affect the bid/ask spread. 
A)  order costs 
B)  inventory costs 
C)  volume 
D)  All of these factors affect the bid/ask spread.

Question 18

Shareholders in some countries may have more power to effectively sue publicly traded firms if their executives or directors commit financial fraud.

Accepted Answer

A) True 
 B)False

Question 19

Eurobonds are certificates representing bundles of stock.

Accepted Answer

A) True 
 B)False

Question 20

The interest rate in developing countries is usually very low.

Accepted Answer

A) True 
 B)False

Exam 3: International Financial Markets

____ is not a bank characteristic important to customers in need of foreign exchange.

If companies cannot rely on stock markets to obtain funds, they will have to rely more heavily on the ____ market to raise long-term funds.

The Greek crisis that began in 2010 occurred because Greece was unable to obtain loans from any banks or governments.

The ask quote is the price at which a bank offers to sell a currency.

Which of the following is not true with respect to spot market liquidity?

If a U.S. firm is receiving 100,000 euros in 90 days and wishes to avoid the risk from exchange rate fluctuations, it could:​

In general, stock markets allow for more governance and attract more investors when they have all of the following except:

In general, common-law countries such as the United States, Canada, and the United Kingdom allow for more legal protection of shareholders than civil-law countries such as France and Italy.

Institutional investors such as commercial banks, mutual funds, insurance companies, and pension funds from many countries are major participants in the international bond market.

An investor engaging in a transaction whereby he or she contracts to purchase British pounds one year from now is an example of a spot market transaction.

The forward market:

At any given point in time, a bank's bid quote will be greater than its ask quote.

The international money market is frequently accessed by MNCs for short-term investment and financing needs, while longer-term financing needs are met in the international credit market or the international bond market and in international stock markets.

The forward rate is the exchange rate used for immediate exchange of currencies.

The bid/ask spread on an exchange rate can be used to directly determine:​

Which of the following is not true regarding ADRs?

Which of the following is not a factor that affects the bid/ask spread?

Shareholders in some countries may have more power to effectively sue publicly traded firms if their executives or directors commit financial fraud.

Eurobonds are certificates representing bundles of stock.

The interest rate in developing countries is usually very low.

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

If a U.S. firm is receiving 100,000 euros in 90 days and wishes to avoid the risk from exchange rate fluctuations, it could:

The bid/ask spread on an exchange rate can be used to directly determine: