Question 1

All of the following are ways that a multinational corporation can minimize the impact of political risk EXCEPT:

Accepted Answer

A)  using local financing. 
B)  purchasing country risk insurance. 
C)  paying off government officials. 
D)  All of the options are ways that a multinational corporation can minimize the impact of political risk. 
A)  using local financing. 
B)  purchasing country risk insurance. 
C)  paying off government officials. 
D)  All of the options are ways that a multinational corporation can minimize the impact of political risk.

Question 2

Over the past decade, China has acquired hundreds of billions of U.S. dollars due to the trade imbalance between the two countries. The Chinese government has used many of these dollars to purchase Treasury bonds. What would be the effect if China suddenly decided to sell the majority of these Treasury bonds and exchange the dollars for pesos?

Accepted Answer

A)  The price of Treasury bonds would rise, the yield on the Treasury bonds would fall, the dollar would weaken, and the peso would strengthen. 
B)  The price of Treasury bonds would rise, the yield on the Treasury bonds would fall, the dollar would strengthen, and the peso would weaken. 
C)  The price of Treasury bonds would fall, the yield on the Treasury bonds would rise, the dollar would weaken, and the peso would strengthen. 
D)  The price of Treasury bonds would fall, the yield on the Treasury bonds would fall, the dollar would strengthen, and the peso would weaken. 
A)  The price of Treasury bonds would rise, the yield on the Treasury bonds would fall, the dollar would weaken, and the peso would strengthen. 
B)  The price of Treasury bonds would rise, the yield on the Treasury bonds would fall, the dollar would strengthen, and the peso would weaken. 
C)  The price of Treasury bonds would fall, the yield on the Treasury bonds would rise, the dollar would weaken, and the peso would strengthen. 
D)  The price of Treasury bonds would fall, the yield on the Treasury bonds would fall, the dollar would strengthen, and the peso would weaken.

Question 3

Given these two exchange rates, $1 = 12.5 Mexican peso and $1 = €0.75, compute the cross-rate between the Mexican peso and the euro. State this exchange rate in pesos.

Accepted Answer

A)  19.14 pesos 
B)  17.62 pesos 
C)  16.67 pesos 
D)  18.03 pesos 
A)  19.14 pesos 
B)  17.62 pesos 
C)  16.67 pesos 
D)  18.03 pesos

Question 4

The current spot rate between the U.S. dollar and the Swedish krona is $1 = 7.5500 krona. If the inflation rate in the United States is 4 percent and in Sweden is 1 percent, then what is the expected spot rate in one year?

Accepted Answer

A)  $0.1908 per krona 
B)  $0.2116 per krona 
C)  $0.1529 per krona 
D)  $0.1364 per krona 
A)  $0.1908 per krona 
B)  $0.2116 per krona 
C)  $0.1529 per krona 
D)  $0.1364 per krona

Question 5

Which of these seeks to reduce, or even eliminate, trade restrictions and tariffs to ease trade between countries?

Accepted Answer

A)  Commerce bureaus 
B)  Tariff agreements 
C)  Trade agreements 
D)  Economic analysts 
A)  Commerce bureaus 
B)  Tariff agreements 
C)  Trade agreements 
D)  Economic analysts

Question 6

If the current spot rate between the U.S. dollar and the Netherland Antilles guilder was $1 = 1.54 guilder, and if the inflation rate in the United States was 2 percent and in the Netherland Antilles it was 8 percent, then what would be the expected spot rate in one year?

Accepted Answer

A)  $0.6104 
B)  $0.6494 
C)  $1.4476 
D)  $0.6133 
A)  $0.6104 
B)  $0.6494 
C)  $1.4476 
D)  $0.6133

Question 7

Compute the amount of foreign currency that can be purchased for $1,000,000: 1 Malaysian ringget = $0.2875

Accepted Answer

A)  287,500 ringget 
B)  1,287,500 ringget 
C)  3,478,260.87 ringget 
D)  4,478,300 ringget 
A)  287,500 ringget 
B)  1,287,500 ringget 
C)  3,478,260.87 ringget 
D)  4,478,300 ringget

Question 8

Convert the following direct quote to dollar indirect quote: 1 Indian rupee = $0.2110.

Accepted Answer

A)  5.0226 rupee 
B)  4.7393 rupee 
C)  4.8814 rupee 
D)  4.9097 rupee 
A)  5.0226 rupee 
B)  4.7393 rupee 
C)  4.8814 rupee 
D)  4.9097 rupee

Question 9

If the price of copper in Europe is €2.22 per ounce, what is the expected price of copper in the United States if the spot exchange rate is $1 = €0.7802?

Accepted Answer

A)  $3.0002 per ounce 
B)  $3.514 per ounce 
C)  $1.7320 per ounce 
D)  $2.8454 per ounce 
A)  $3.0002 per ounce 
B)  $3.514 per ounce 
C)  $1.7320 per ounce 
D)  $2.8454 per ounce

Question 10

Convert the following indirect quote to a dollar direct quote: $1 = 0.5467 Latvian lat

Accepted Answer

A)  $1.5467 
B)  $0.15467 
C)  $0.018292 
D)  $1.8292 
A)  $1.5467 
B)  $0.15467 
C)  $0.018292 
D)  $1.8292

Question 11

When Starbucks opens a location in Mexico City, this is an example of:

Accepted Answer

A)  foreign direct investment. 
B)  arbitrage opportunity. 
C)  management of capital budgeting issues. 
D)  none of the options. 
A)  foreign direct investment. 
B)  arbitrage opportunity. 
C)  management of capital budgeting issues. 
D)  none of the options.

Question 12

Compute the number of dollars that can be bought with 8 million of foreign currency units: $1 = 7.2501 South African rand

Accepted Answer

A)  $1,103,433.056 
B)  $5,800,080.00 
C)  $8,000,000.00 
D)  $9,103,200.00 
A)  $1,103,433.056 
B)  $5,800,080.00 
C)  $8,000,000.00 
D)  $9,103,200.00

Question 13

Which of the following is the definition of political risk?

Accepted Answer

A)  The possibility that changes in the corporation will occur that reduce the profitability of doing business in that country. 
B)  The possibility that changes in the political environment will occur that reduce the profitability of doing business in that country. 
C)  The possibility that changes in the business environment will occur that increase the profitability of doing business in that country. 
D)  The possibility that international rules will occur that reduce the profitability of doing business in one particular country. 
A)  The possibility that changes in the corporation will occur that reduce the profitability of doing business in that country. 
B)  The possibility that changes in the political environment will occur that reduce the profitability of doing business in that country. 
C)  The possibility that changes in the business environment will occur that increase the profitability of doing business in that country. 
D)  The possibility that international rules will occur that reduce the profitability of doing business in one particular country.

Question 14

The U.S. dollar spot exchange rate with the Canadian dollar is $1 = CA$1.12. The U.S. dollar and Swiss franc exchange rate is $1 =1.275. If the cross-rate between the franc and Canadian dollar is 1 franc = CA$0.9750, which of the following statements is correct?

Accepted Answer

A)  Starting with U.S. dollars, buy Swiss francs and convert them to Canadian dollars, and then convert back to U.S. dollars. 
B)  Starting with Canadian dollars, buy Swiss francs and convert them to U.S. dollars, and then convert back to Swiss francs. 
C)  Starting with Swiss francs, buy Canadian dollars and convert them to Swiss francs, and then convert back to U.S. dollars. 
D)  Starting with Canadian dollars, buy U.S. dollars and convert them to Swiss francs, and then convert back to U.S. dollars. 
A)  Starting with U.S. dollars, buy Swiss francs and convert them to Canadian dollars, and then convert back to U.S. dollars. 
B)  Starting with Canadian dollars, buy Swiss francs and convert them to U.S. dollars, and then convert back to Swiss francs. 
C)  Starting with Swiss francs, buy Canadian dollars and convert them to Swiss francs, and then convert back to U.S. dollars. 
D)  Starting with Canadian dollars, buy U.S. dollars and convert them to Swiss francs, and then convert back to U.S. dollars.

Question 15

In the late 1990s, many East Asian currencies suddenly and dramatically devalued. What is the percentage change in value of a $10 million investment in Indonesia when the exchange rate changes from $1 = 3,000 rupiah to $1 = 10,000 rupiah?

Accepted Answer

A)  30 percent 
B)  10 percent 
C)  70 percent 
D)  90 percent 
A)  30 percent 
B)  10 percent 
C)  70 percent 
D)  90 percent

Question 16

________ is a theory relating the expected adjustment needed in the future spot exchange rate between countries to the inflation rate in each economy.

Accepted Answer

A)  purchase power parity 
B)  law of one price 
C)  interest rate parity 
D)  hedging 
A)  purchase power parity 
B)  law of one price 
C)  interest rate parity 
D)  hedging

Question 17

Given these two exchange rates, $1 = 1.43 Australian dollars and $1 = £0.69, compute the cross-rate between the Australian dollar and the pound. State this exchange rate in Australian dollars.

Accepted Answer

A)  A$2.07 
B)  A$2.12 
C)  A$2.36 
D)  A$4.83 
A)  A$2.07 
B)  A$2.12 
C)  A$2.36 
D)  A$4.83

Question 18

Which of these is defined as the amount of foreign currency it takes to buy one unit of domestic currency?

Accepted Answer

A)  Exchange rate 
B)  Spot transaction 
C)  Indirect quote 
D)  Direct quote 
A)  Exchange rate 
B)  Spot transaction 
C)  Indirect quote 
D)  Direct quote

Question 19

Convert the following indirect quote to a dollar direct quote: $1 = 15,990 Vietnam dong

Accepted Answer

A)  $0.00006254 
B)  $159.90 
C)  $6.2539 
D)  $1.00625 
A)  $0.00006254 
B)  $159.90 
C)  $6.2539 
D)  $1.00625

Question 20

Compute the number of dollars that can be bought with 1.5 million of foreign currency units: $1 = 0.5467 Latvian lat

Accepted Answer

A)  $969,806.68520 
B)  $9,698,066.852 
C)  $82,003,061.45 
D)  $2,743,735.138 
A)  $969,806.68520 
B)  $9,698,066.852 
C)  $82,003,061.45 
D)  $2,743,735.138

All of the following are ways that a multinational corporation can minimize the impact of political risk EXCEPT:

Given these two exchange rates, $1 = 12.5 Mexican peso and $1 = €0.75, compute the cross-rate between the Mexican peso and the euro. State this exchange rate in pesos.

The current spot rate between the U.S. dollar and the Swedish krona is $1 = 7.5500 krona. If the inflation rate in the United States is 4 percent and in Sweden is 1 percent, then what is the expected spot rate in one year?

Which of these seeks to reduce, or even eliminate, trade restrictions and tariffs to ease trade between countries?

If the current spot rate between the U.S. dollar and the Netherland Antilles guilder was $1 = 1.54 guilder, and if the inflation rate in the United States was 2 percent and in the Netherland Antilles it was 8 percent, then what would be the expected spot rate in one year?

Compute the amount of foreign currency that can be purchased for $1,000,000: 1 Malaysian ringget = $0.2875

Convert the following direct quote to dollar indirect quote: 1 Indian rupee = $0.2110.

If the price of copper in Europe is €2.22 per ounce, what is the expected price of copper in the United States if the spot exchange rate is $1 = €0.7802?

Convert the following indirect quote to a dollar direct quote: $1 = 0.5467 Latvian lat

When Starbucks opens a location in Mexico City, this is an example of:

Compute the number of dollars that can be bought with 8 million of foreign currency units: $1 = 7.2501 South African rand

Which of the following is the definition of political risk?

The U.S. dollar spot exchange rate with the Canadian dollar is $1 = CA$1.12. The U.S. dollar and Swiss franc exchange rate is $1 =1.275. If the cross-rate between the franc and Canadian dollar is 1 franc = CA$0.9750, which of the following statements is correct?

In the late 1990s, many East Asian currencies suddenly and dramatically devalued. What is the percentage change in value of a $10 million investment in Indonesia when the exchange rate changes from $1 = 3,000 rupiah to $1 = 10,000 rupiah?

________ is a theory relating the expected adjustment needed in the future spot exchange rate between countries to the inflation rate in each economy.

Given these two exchange rates, $1 = 1.43 Australian dollars and $1 = £0.69, compute the cross-rate between the Australian dollar and the pound. State this exchange rate in Australian dollars.

Which of these is defined as the amount of foreign currency it takes to buy one unit of domestic currency?

Convert the following indirect quote to a dollar direct quote: $1 = 15,990 Vietnam dong

Compute the number of dollars that can be bought with 1.5 million of foreign currency units: $1 = 0.5467 Latvian lat

Introduction to Financial Management

Reviewing Financial Statements

Analyzing Financial Statements

Time Value of Money 1: Analyzing Single Cash Flows

Time Value of Money 2: Analyzing Annuity Cash Flows

Understanding Financial Markets and Institutions

Valuing Bonds

Valuing Stocks

Characterizing Risk and Return

Estimating Risk and Return

Calculating the Cost of Capital

Estimating Cash Flows on Capital Budgeting Projects

Weighing Net Present Value and Other Capital Budgeting Criteria

Working Capital Management and Policies

Financial Planning and Forecasting

Assessing Long-Term Debt, Equity, and Capital Structure

Sharing Firm Wealth: Dividends, Share Repurchases, and Other Payouts

Issuing Capital and the Investment Banking Process

Mergers and Acquisitions and Financial Distress

Filters

Exam 19: International Corporate Finance

All of the following are ways that a multinational corporation can minimize the impact of political risk EXCEPT:

Given these two exchange rates, $1 = 12.5 Mexican peso and $1 = €0.75, compute the cross-rate between the Mexican peso and the euro. State this exchange rate in pesos.

The current spot rate between the U.S. dollar and the Swedish krona is $1 = 7.5500 krona. If the inflation rate in the United States is 4 percent and in Sweden is 1 percent, then what is the expected spot rate in one year?

Which of these seeks to reduce, or even eliminate, trade restrictions and tariffs to ease trade between countries?

If the current spot rate between the U.S. dollar and the Netherland Antilles guilder was $1 = 1.54 guilder, and if the inflation rate in the United States was 2 percent and in the Netherland Antilles it was 8 percent, then what would be the expected spot rate in one year?

Compute the amount of foreign currency that can be purchased for $1,000,000: 1 Malaysian ringget = $0.2875

Convert the following direct quote to dollar indirect quote: 1 Indian rupee = $0.2110.

If the price of copper in Europe is €2.22 per ounce, what is the expected price of copper in the United States if the spot exchange rate is $1 = €0.7802?

Convert the following indirect quote to a dollar direct quote: $1 = 0.5467 Latvian lat

When Starbucks opens a location in Mexico City, this is an example of:

Compute the number of dollars that can be bought with 8 million of foreign currency units: $1 = 7.2501 South African rand

Which of the following is the definition of political risk?

The U.S. dollar spot exchange rate with the Canadian dollar is $1 = CA$1.12. The U.S. dollar and Swiss franc exchange rate is $1 =1.275. If the cross-rate between the franc and Canadian dollar is 1 franc = CA$0.9750, which of the following statements is correct?

In the late 1990s, many East Asian currencies suddenly and dramatically devalued. What is the percentage change in value of a $10 million investment in Indonesia when the exchange rate changes from $1 = 3,000 rupiah to $1 = 10,000 rupiah?

________ is a theory relating the expected adjustment needed in the future spot exchange rate between countries to the inflation rate in each economy.

Given these two exchange rates, $1 = 1.43 Australian dollars and $1 = £0.69, compute the cross-rate between the Australian dollar and the pound. State this exchange rate in Australian dollars.

Which of these is defined as the amount of foreign currency it takes to buy one unit of domestic currency?

Convert the following indirect quote to a dollar direct quote: $1 = 15,990 Vietnam dong

Compute the number of dollars that can be bought with 1.5 million of foreign currency units: $1 = 0.5467 Latvian lat

Introduction to Financial Management

Reviewing Financial Statements

Analyzing Financial Statements

Time Value of Money 1: Analyzing Single Cash Flows

Time Value of Money 2: Analyzing Annuity Cash Flows

Understanding Financial Markets and Institutions

Valuing Bonds

Valuing Stocks

Characterizing Risk and Return

Estimating Risk and Return

Calculating the Cost of Capital

Estimating Cash Flows on Capital Budgeting Projects

Weighing Net Present Value and Other Capital Budgeting Criteria

Working Capital Management and Policies

Financial Planning and Forecasting

Assessing Long-Term Debt, Equity, and Capital Structure

Sharing Firm Wealth: Dividends, Share Repurchases, and Other Payouts

Issuing Capital and the Investment Banking Process

Mergers and Acquisitions and Financial Distress

Filters