Question 1

In a(n) ____ swap, the notional value is increased over time.

Accepted Answer

A)  amortizing 
B)  basis 
C)  zero-coupon 
D)  accreting 
A)  amortizing 
B)  basis 
C)  zero-coupon 
D)  accreting

Question 2

The yields offered on newly issued bonds tend to be:

Accepted Answer

A)  lower in less developed countries where labor costs are low. 
B)  relatively high in countries such as Japan and the United States because the credit risk premium is much higher there than in other countries. 
C)  the same across countries at a given point in time. 
D)  None of these are correct. 
A)  lower in less developed countries where labor costs are low. 
B)  relatively high in countries such as Japan and the United States because the credit risk premium is much higher there than in other countries. 
C)  the same across countries at a given point in time. 
D)  None of these are correct.

Question 3

When estimating the cost of debt financing for a subsidiary, an MNC can use sensitivity analysis and simulation to account for the uncertainty surrounding forecasted exchange rates.

Accepted Answer

A) True 
 B)False

Question 4

Even if a foreign interest rate is higher than an MNC's domestic interest rate, the financing costs of issuing a bond denominated in the foreign currency will always be lower than the financing cost of a domestic bond as long as the currency depreciates over the lifetime of the bond.

Accepted Answer

A) True 
 B)False

Question 5

A U.S. firm could issue bonds denominated in euros and partially hedge against exchange rate risk by:

Accepted Answer

A)  ​invoicing its exports in U.S. dollars. 
B)  ​requesting that any imports ordered by the firm be invoiced in U.S. dollars. 
C)  ​invoicing its exports in euros. 
D)  ​requesting that any imports ordered by the firm be invoiced in euros. 
A)  ​invoicing its exports in U.S. dollars. 
B)  ​requesting that any imports ordered by the firm be invoiced in U.S. dollars. 
C)  ​invoicing its exports in euros. 
D)  ​requesting that any imports ordered by the firm be invoiced in euros.

Question 6

A parallel loan represents simultaneous loans provided by two parties with an agreement to repay at a specified point in the future.

Accepted Answer

A) True 
 B)False

Question 7

Currency swaps, whereby two parties exchange currencies at a specified point in time for a specified price, are often used by MNCs to hedge against interest rate risk.

Accepted Answer

A) True 
 B)False

Question 8

When a financial institution acts as a(n) ____ to an interest rate swap, it simply arranges a swap between two parties.

Accepted Answer

A)  ultraparty 
B)  broker 
C)  counterparty 
D)  None of these are correct. 
A)  ultraparty 
B)  broker 
C)  counterparty 
D)  None of these are correct.

Question 9

​In a(n) ____ swap, the fixed rate payer has the right to terminate the swap.

Accepted Answer

A)  ​callable 
B)  ​putable 
C)  ​amortizing 
D)  ​zero-coupon 
A)  ​callable 
B)  ​putable 
C)  ​amortizing 
D)  ​zero-coupon

Question 10

Assume a U.S.-based subsidiary wants to raise $1 million by issuing a bond denominated in Pakistani rupees (PKR). The current exchange rate of the rupee is $.02. Thus, the MNC needs ____ rupees to obtain the $1 million needed.

Accepted Answer

A)  50,000,000 
B)  20,000 
C)  1,000,000 
D)  None of these are correct. 
A)  50,000,000 
B)  20,000 
C)  1,000,000 
D)  None of these are correct.

Question 11

A ____ gives its owner the right to enter into a swap.​

Accepted Answer

A)  ​basis swap 
B)  ​swaption 
C)  ​callable swap 
D)  ​putable swap 
A)  ​basis swap 
B)  ​swaption 
C)  ​callable swap 
D)  ​putable swap

Question 12

Generally, the financing costs associated with a foreign currency-denominated bond will be ____ volatile than the financing costs of a domestic bond because of ____.

Accepted Answer

A)  more; exchange rate movements 
B)  less; exchange rate movements 
C)  less; global economic conditions 
D)  None of these are correct. 
A)  more; exchange rate movements 
B)  less; exchange rate movements 
C)  less; global economic conditions 
D)  None of these are correct.

In a(n) ____ swap, the notional value is increased over time.

The yields offered on newly issued bonds tend to be:

When estimating the cost of debt financing for a subsidiary, an MNC can use sensitivity analysis and simulation to account for the uncertainty surrounding forecasted exchange rates.

Even if a foreign interest rate is higher than an MNC's domestic interest rate, the financing costs of issuing a bond denominated in the foreign currency will always be lower than the financing cost of a domestic bond as long as the currency depreciates over the lifetime of the bond.

A U.S. firm could issue bonds denominated in euros and partially hedge against exchange rate risk by:

A parallel loan represents simultaneous loans provided by two parties with an agreement to repay at a specified point in the future.

Currency swaps, whereby two parties exchange currencies at a specified point in time for a specified price, are often used by MNCs to hedge against interest rate risk.

When a financial institution acts as a(n) ____ to an interest rate swap, it simply arranges a swap between two parties.

In a(n) ____ swap, the fixed rate payer has the right to terminate the swap.

Assume a U.S.-based subsidiary wants to raise $1 million by issuing a bond denominated in Pakistani rupees (PKR). The current exchange rate of the rupee is $.02. Thus, the MNC needs ____ rupees to obtain the $1 million needed.

A ____ gives its owner the right to enter into a swap.

Generally, the financing costs associated with a foreign currency-denominated bond will be volatile than the financing costs of a domestic bond because of .

Multinational Financial Management: an Overview

International Flow of Funds

International Financial Markets

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

Financing International Trade

Short-Term Financing

International Cash Management

Filters

Exam 18: Long-Term Debt Financing

In a(n) ____ swap, the notional value is increased over time.

The yields offered on newly issued bonds tend to be:

When estimating the cost of debt financing for a subsidiary, an MNC can use sensitivity analysis and simulation to account for the uncertainty surrounding forecasted exchange rates.

Even if a foreign interest rate is higher than an MNC's domestic interest rate, the financing costs of issuing a bond denominated in the foreign currency will always be lower than the financing cost of a domestic bond as long as the currency depreciates over the lifetime of the bond.

A U.S. firm could issue bonds denominated in euros and partially hedge against exchange rate risk by:

A parallel loan represents simultaneous loans provided by two parties with an agreement to repay at a specified point in the future.

Currency swaps, whereby two parties exchange currencies at a specified point in time for a specified price, are often used by MNCs to hedge against interest rate risk.

When a financial institution acts as a(n) ____ to an interest rate swap, it simply arranges a swap between two parties.

​In a(n) ____ swap, the fixed rate payer has the right to terminate the swap.

Assume a U.S.-based subsidiary wants to raise $1 million by issuing a bond denominated in Pakistani rupees (PKR). The current exchange rate of the rupee is $.02. Thus, the MNC needs ____ rupees to obtain the $1 million needed.

A ____ gives its owner the right to enter into a swap.​

Generally, the financing costs associated with a foreign currency-denominated bond will be ____ volatile than the financing costs of a domestic bond because of ____.

Multinational Financial Management: an Overview

International Flow of Funds

International Financial Markets

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

Financing International Trade

Short-Term Financing

International Cash Management

Filters

In a(n) ____ swap, the fixed rate payer has the right to terminate the swap.

A ____ gives its owner the right to enter into a swap.

Generally, the financing costs associated with a foreign currency-denominated bond will be volatile than the financing costs of a domestic bond because of .