Question 1

The government enforcement of securities laws varies among countries.

Accepted Answer

A) True 
 B)False

Question 2

If a U.S. firm will need C$200,000 in 90 days to pay for imports from Canada and it wishes to avoid the risk from exchange rate fluctuations, it could:​

Accepted Answer

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

Question 3

If there is a large supply of savings relative to the demand for short-term funds, the interest rate for that country will be relatively low.

Accepted Answer

A) True 
 B)False

Question 4

The LIBOR varies among currencies because the market supply of and the demand for funds vary among currencies.

Accepted Answer

A) True 
 B)False

Question 5

The largest stock exchanges by market capitalization are located in China.

Accepted Answer

A) True 
 B)False

Question 6

The bid/ask spread for small retail transactions is commonly in the range of ____ percent.​

Accepted Answer

A)  ​3 to 7 
B)  ​.01 to .03 
C)  ​10 to 15 
D)  ​.5 to 1 
A)  ​3 to 7 
B)  ​.01 to .03 
C)  ​10 to 15 
D)  ​.5 to 1

Question 7

Which of the following is probably not an example of the use of forward contracts by an MNC?

Accepted Answer

A)  Hedging pound payables by selling pounds forward 
B)  Hedging peso receivables by selling pesos forward 
C)  Hedging yen payables by purchasing yen forward 
D)  Hedging peso payables by purchasing pesos forward 
E)  All of these are examples of using forward contracts. 
A)  Hedging pound payables by selling pounds forward 
B)  Hedging peso receivables by selling pesos forward 
C)  Hedging yen payables by purchasing yen forward 
D)  Hedging peso payables by purchasing pesos forward 
E)  All of these are examples of using forward contracts.

Question 8

A forward contract can be used to lock in the ____ of a specified currency at a future point in time.

Accepted Answer

A)  purchase price 
B)  sale price 
C)  purchase price or sale price 
D)  None of these are correct. 
A)  purchase price 
B)  sale price 
C)  purchase price or sale price 
D)  None of these are correct.

Question 9

The bid/ask spreads quoted on more liquid, heavily traded currencies are larger than the spreads on less liquid, less traded currencies.

Accepted Answer

A) True 
 B)False

Question 10

According to the text, the average foreign exchange trading around the world ____ per day.

Accepted Answer

A)  equals about $200 billion 
B)  equals about $400 billion 
C)  equals about $700 billion 
D)  exceeds $5 trillion 
A)  equals about $200 billion 
B)  equals about $400 billion 
C)  equals about $700 billion 
D)  exceeds $5 trillion

Question 11

Assume that the bank's bid quote for the Mexican peso is $.126 and the ask price is $.129. If you have Mexican pesos, what is the amount of pesos that you need to purchase $100,000?​

Accepted Answer

A)  ​12,600 
B)  ​775,194 
C)  ​793,651 
D)  ​12,900 
A)  ​12,600 
B)  ​775,194 
C)  ​793,651 
D)  ​12,900

Question 12

Assume the Canadian dollar is equal to $.88 and the Peruvian nuevo sol is equal to $.35. The value of the Peruvian nuevosol in Canadian dollars is:​

Accepted Answer

A)  ​about .3621 Canadian dollars. 
B)  ​about .3977 Canadian dollars. 
C)  ​about 2.36 Canadian dollars. 
D)  ​about 2.51 Canadian dollars. 
A)  ​about .3621 Canadian dollars. 
B)  ​about .3977 Canadian dollars. 
C)  ​about 2.36 Canadian dollars. 
D)  ​about 2.51 Canadian dollars.

Question 13

A put option is the amount or percentage by which the existing spot rate exceeds the forward rate.

Accepted Answer

A) True 
 B)False

Question 14

The international money market primarily concentrates on:​

Accepted Answer

A)  ​short-term lending (one year or less). 
B)  ​medium-term lending. 
C)  ​long-term lending. 
D)  ​placing bonds with investors. 
E)  ​placing newly issued stock in foreign markets. 
A)  ​short-term lending (one year or less). 
B)  ​medium-term lending. 
C)  ​long-term lending. 
D)  ​placing bonds with investors. 
E)  ​placing newly issued stock in foreign markets.

Question 15

The process by which higher credit risk in one country is transmitted to another country is called:

Accepted Answer

A)  interest rate risk. 
B)  credit contagion. 
C)  intermediation. 
D)  negative cointegration. 
A)  interest rate risk. 
B)  credit contagion. 
C)  intermediation. 
D)  negative cointegration.

Question 16

​An MNC's short-term financing decisions are satisfied in the ____ market, while its medium-term debt financing decisions are satisfied in the ____ market.

Accepted Answer

A)  ​international money; international credit 
B)  ​international money; international bond 
C)  ​international credit; international money 
D)  ​international bond; international credit 
E)  ​international money; international stock 
A)  ​international money; international credit 
B)  ​international money; international bond 
C)  ​international credit; international money 
D)  ​international bond; international credit 
E)  ​international money; international stock

Question 17

Certificates representing bundles of the stock of a non-U.S. firm are called:​

Accepted Answer

A)  ​Eurobonds. 
B)  ​ADRs. 
C)  ​FRNs. 
D)  ​LIBOR certificates. 
A)  ​Eurobonds. 
B)  ​ADRs. 
C)  ​FRNs. 
D)  ​LIBOR certificates.

Question 18

The strike price is also known as the premium price.

Accepted Answer

A) True 
 B)False

Question 19

If there is a strong demand to borrow a currency, and a low supply of savings in that currency, the interest rate will be relatively low.

Accepted Answer

A) True 
 B)False

Question 20

The strike price on a currency option is also known as the exercise price.

Accepted Answer

A) True 
 B)False

Exam 3: International Financial Markets

The government enforcement of securities laws varies among countries.

If a U.S. firm will need C$200,000 in 90 days to pay for imports from Canada and it wishes to avoid the risk from exchange rate fluctuations, it could:​

If there is a large supply of savings relative to the demand for short-term funds, the interest rate for that country will be relatively low.

The LIBOR varies among currencies because the market supply of and the demand for funds vary among currencies.

The largest stock exchanges by market capitalization are located in China.

The bid/ask spread for small retail transactions is commonly in the range of ____ percent.​

Which of the following is probably not an example of the use of forward contracts by an MNC?

A forward contract can be used to lock in the ____ of a specified currency at a future point in time.

The bid/ask spreads quoted on more liquid, heavily traded currencies are larger than the spreads on less liquid, less traded currencies.

According to the text, the average foreign exchange trading around the world ____ per day.

Assume that the bank's bid quote for the Mexican peso is $.126 and the ask price is $.129. If you have Mexican pesos, what is the amount of pesos that you need to purchase $100,000?​

Assume the Canadian dollar is equal to $.88 and the Peruvian nuevo sol is equal to $.35. The value of the Peruvian nuevosol in Canadian dollars is:​

A put option is the amount or percentage by which the existing spot rate exceeds the forward rate.

The international money market primarily concentrates on:​

The process by which higher credit risk in one country is transmitted to another country is called:

​An MNC's short-term financing decisions are satisfied in the ____ market, while its medium-term debt financing decisions are satisfied in the ____ market.

Certificates representing bundles of the stock of a non-U.S. firm are called:​

The strike price is also known as the premium price.

If there is a strong demand to borrow a currency, and a low supply of savings in that currency, the interest rate will be relatively low.

The strike price on a currency option is also known as the exercise price.

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 will need C$200,000 in 90 days to pay for imports from Canada and it wishes to avoid the risk from exchange rate fluctuations, it could:

The bid/ask spread for small retail transactions is commonly in the range of ____ percent.

Assume that the bank's bid quote for the Mexican peso is $.126 and the ask price is $.129. If you have Mexican pesos, what is the amount of pesos that you need to purchase $100,000?

Assume the Canadian dollar is equal to $.88 and the Peruvian nuevo sol is equal to $.35. The value of the Peruvian nuevosol in Canadian dollars is:

The international money market primarily concentrates on:

An MNC's short-term financing decisions are satisfied in the market, while its medium-term debt financing decisions are satisfied in the market.

Certificates representing bundles of the stock of a non-U.S. firm are called: