Question 1

You are going to London and plan on spending £4,200.How many dollars will this trip cost you if the currency per $1 is £.82?

Accepted Answer

A) $5,875.95 
B) $5,892.16 
C) $5,121.95 
D) $5,890.01 
E) $6,044.04 
A) $5,875.95 
B) $5,892.16 
C) $5,121.95 
D) $5,890.01 
E) $6,044.04

Question 2

Which of these must be significantly eliminated if interest rate parity is to exist?

Accepted Answer

A) Absolute purchasing power parity 
B) Short-run exposure to exchange rate risk 
C) Covered interest arbitrage opportunities 
D) Relative purchasing power parity 
E) Translation exposure 
A) Absolute purchasing power parity 
B) Short-run exposure to exchange rate risk 
C) Covered interest arbitrage opportunities 
D) Relative purchasing power parity 
E) Translation exposure

Question 3

The spot rate on the Canadian dollar is 1.34.Interest rates in Canada are expected to average 3.4 percent while they are anticipated to be 3.9 percent in the U.S.What is the expected exchange rate three years from now?

Accepted Answer

A) C$1.37 
B) C$1.32 
C) C$1.36 
D) C$1.29 
E) C$1.28 
A) C$1.37 
B) C$1.32 
C) C$1.36 
D) C$1.29 
E) C$1.28

Question 4

Assume the spot rate between the UK and the U.S.is £.6789 = $1, while the one-year forward rate is £.6782 = $1.The risk-free rate in the UK is 3.1 percent.The risk-free rate in the U.S.is 2.9 percent.How much profit can you earn for the year on a loan of $1,500 by utilizing covered interest arbitrage?

Accepted Answer

A) $4.09 
B) $2.78 
C) $3.15 
D) $4.60 
E) $3.55 
A) $4.09 
B) $2.78 
C) $3.15 
D) $4.60 
E) $3.55

Question 5

Assume you can currently exchange $100 for €80.25.The inflation rate in Europe is expected to be 1.8 percent as compared to 2.4 percent in the U.S.Based on relative purchasing power parity, what should the exchange rate be four years from now?

Accepted Answer

A) €.8219/$1 
B) €.8014/$1 
C) €.7970/$1 
D) €.8073/$1 
E) €.7834/$1 
A) €.8219/$1 
B) €.8014/$1 
C) €.7970/$1 
D) €.8073/$1 
E) €.7834/$1

Question 6

Which one of the following is an example of the political risks associated with foreign operations?

Accepted Answer

A) Technological changes 
B) Exchange rate fluctuations 
C) Translation exposure to exchange rate risk 
D) Changes in foreign tax laws 
E) Changes in relative wage rates between the home country and the foreign country 
A) Technological changes 
B) Exchange rate fluctuations 
C) Translation exposure to exchange rate risk 
D) Changes in foreign tax laws 
E) Changes in relative wage rates between the home country and the foreign country

Question 7

The spot rate on the Canadian dollar is 1.21.Interest rates in Canada are expected to average 2.8 percent while they are anticipated to be 3.2 percent in the U.S.What is the expected exchange rate three years from now?

Accepted Answer

A) C$1.31 
B) C$1.20 
C) C$1.29 
D) C$1.26 
E) C$1.28 
A) C$1.31 
B) C$1.20 
C) C$1.29 
D) C$1.26 
E) C$1.28

Question 8

You are given the exchange rate between the U.S.dollar and the Canadian dollar.You are also given the exchange rate between the U.S.dollar and the Mexican peso.What is the name given to the Canadian dollar per Mexican peso exchange rate derived from the information that was provided?

Accepted Answer

A) Swap rate 
B) Depositary rate 
C) Forward rate 
D) London Interbank rate 
E) Cross-rate 
A) Swap rate 
B) Depositary rate 
C) Forward rate 
D) London Interbank rate 
E) Cross-rate

Question 9

Given the following exchange rates, which of the following currencies are selling at a premium against the dollar?

Accepted Answer

A) Japanese yen only 
B) Swiss franc and Australian dollar only 
C) UK pound only 
D) Australian dollar, Swiss franc, and UK pound only 
E) Japanese yen and Swiss franc only 
A) Japanese yen only 
B) Swiss franc and Australian dollar only 
C) UK pound only 
D) Australian dollar, Swiss franc, and UK pound only 
E) Japanese yen and Swiss franc only

Question 10

Assume you can exchange $1 for ¥110.23 or €0.86 in New York.In Tokyo, the exchange rate is ¥1 = €0.009.If you have $900, how much profit can you earn using triangle arbitrage?

Accepted Answer

A) $130.58 
B) $127.56 
C) $138.21 
D) $129.87 
E) $135.88 
A) $130.58 
B) $127.56 
C) $138.21 
D) $129.87 
E) $135.88

Question 11

Which one of the following is the risk arising from changes in value caused by political actions?

Accepted Answer

A) Exchange rate risk 
B) Political risk 
C) Translation risk 
D) LIBOR risk 
E) Cross-rate risk 
A) Exchange rate risk 
B) Political risk 
C) Translation risk 
D) LIBOR risk 
E) Cross-rate risk

Question 12

Interest rate parity defines the relationships among which of the following?

Accepted Answer

A) Spot exchange rates, future exchange rates, interest rates, and inflation rates 
B) Real and nominal interest rates across countries 
C) Real interest and inflation rates 
D) Forward exchange rates, relative interest rates, and spot exchange rates 
E) Spot exchange rates, forward exchange rates, nominal interest rates, and real interest rates 
A) Spot exchange rates, future exchange rates, interest rates, and inflation rates 
B) Real and nominal interest rates across countries 
C) Real interest and inflation rates 
D) Forward exchange rates, relative interest rates, and spot exchange rates 
E) Spot exchange rates, forward exchange rates, nominal interest rates, and real interest rates

Question 13

Which one of the following terms is used to describe international bonds issued in a single country and generally denominated in that country's currency?

Accepted Answer

A) Eurobonds 
B) American Depositary Receipts 
C) Foreign bonds 
D) Swaps 
E) Gilts 
A) Eurobonds 
B) American Depositary Receipts 
C) Foreign bonds 
D) Swaps 
E) Gilts

Question 14

You are debating between spending a week in Brazil or a week in Chile.You've estimated the cost of the Brazilian trip at 56,300 reals and the Chilean trip at 13.6 million pesos.The currency per U.S.dollar is 2.5658 reals and 609.10 pesos.If you prefer the less expensive trip, as measured in U.S.dollars, you should travel to _____ because you can save ____.

Accepted Answer

A) Brazil; you can save $460.45 
B) Brazil; you can save $518.74 
C) Chile; you can save $384.29 
D) Chile; you can save $613.33 
E) Brazil; you can save $385.55 
A) Brazil; you can save $460.45 
B) Brazil; you can save $518.74 
C) Chile; you can save $384.29 
D) Chile; you can save $613.33 
E) Brazil; you can save $385.55

Question 15

Currently, you can exchange €100 for $112.55.The inflation rate in Europe is expected to be 1.4 percent.In one year, it is expected that €100 can be exchanged for $113.50.Assume relative purchasing power parity exists.What is the expected inflation rate in the U.S.?

Accepted Answer

A) 4.99 percent 
B) 5.92 percent 
C) 5.05 percent 
D) 5.69 percent 
E) 5.48 percent 
A) 4.99 percent 
B) 5.92 percent 
C) 5.05 percent 
D) 5.69 percent 
E) 5.48 percent

Question 16

Which one of the following terms is used to identify the concept that exchange rates vary to keep purchasing power constant among currencies?

Accepted Answer

A) Exchange rate equilibrium 
B) Exchange rate parity 
C) Universal parity 
D) Market equilibrium 
E) Purchasing power parity 
A) Exchange rate equilibrium 
B) Exchange rate parity 
C) Universal parity 
D) Market equilibrium 
E) Purchasing power parity

Question 17

Which of these is defined as an agreement to exchange two securities or two currencies?

Accepted Answer

A) Hedge 
B) Swap 
C) SWIFT 
D) Gilt 
E) Arbitrage 
A) Hedge 
B) Swap 
C) SWIFT 
D) Gilt 
E) Arbitrage

Question 18

Assume the USD equivalent of the Norwegian krone is .1425.If you have NKr5,500, how much do you have in US dollars?

Accepted Answer

A) $861.42 
B) $42,608.14 
C) $38,596.49 
D) $783.75 
E) $16,216.50 
A) $861.42 
B) $42,608.14 
C) $38,596.49 
D) $783.75 
E) $16,216.50

Question 19

An agreement to exchange currencies sometime in the future is referred to as which one of the following?

Accepted Answer

A) Forward trade 
B) Hedge 
C) Gilt 
D) Forward exchange rate 
E) Spot trade 
A) Forward trade 
B) Hedge 
C) Gilt 
D) Forward exchange rate 
E) Spot trade

Question 20

Assume the one-year forward rate for the Swiss franc is SF.9655 = $1.The spot rate is SF .9702 = $1.The interest rate on a risk-free asset in Switzerland is 3.8 percent.If interest rate parity exists, a one-year risk-free security in the U.S.is yielding _____ percent.

Accepted Answer

A) 4.21 
B) 4.51 
C) 3.98 
D) 4.40 
E) 4.31 
A) 4.21 
B) 4.51 
C) 3.98 
D) 4.40 
E) 4.31

You are going to London and plan on spending £4,200.How many dollars will this trip cost you if the currency per $1 is £.82?

Which of these must be significantly eliminated if interest rate parity is to exist?

The spot rate on the Canadian dollar is 1.34.Interest rates in Canada are expected to average 3.4 percent while they are anticipated to be 3.9 percent in the U.S.What is the expected exchange rate three years from now?

Assume you can currently exchange $100 for €80.25.The inflation rate in Europe is expected to be 1.8 percent as compared to 2.4 percent in the U.S.Based on relative purchasing power parity, what should the exchange rate be four years from now?

Which one of the following is an example of the political risks associated with foreign operations?

The spot rate on the Canadian dollar is 1.21.Interest rates in Canada are expected to average 2.8 percent while they are anticipated to be 3.2 percent in the U.S.What is the expected exchange rate three years from now?

You are given the exchange rate between the U.S.dollar and the Canadian dollar.You are also given the exchange rate between the U.S.dollar and the Mexican peso.What is the name given to the Canadian dollar per Mexican peso exchange rate derived from the information that was provided?

Given the following exchange rates, which of the following currencies are selling at a premium against the dollar?

Assume you can exchange $1 for ¥110.23 or €0.86 in New York.In Tokyo, the exchange rate is ¥1 = €0.009.If you have $900, how much profit can you earn using triangle arbitrage?

Which one of the following is the risk arising from changes in value caused by political actions?

Interest rate parity defines the relationships among which of the following?

Which one of the following terms is used to describe international bonds issued in a single country and generally denominated in that country's currency?

Currently, you can exchange €100 for $112.55.The inflation rate in Europe is expected to be 1.4 percent.In one year, it is expected that €100 can be exchanged for $113.50.Assume relative purchasing power parity exists.What is the expected inflation rate in the U.S.?

Which one of the following terms is used to identify the concept that exchange rates vary to keep purchasing power constant among currencies?

Which of these is defined as an agreement to exchange two securities or two currencies?

Assume the USD equivalent of the Norwegian krone is .1425.If you have NKr5,500, how much do you have in US dollars?

An agreement to exchange currencies sometime in the future is referred to as which one of the following?

Assume the one-year forward rate for the Swiss franc is SF.9655 = $1.The spot rate is SF .9702 = $1.The interest rate on a risk-free asset in Switzerland is 3.8 percent.If interest rate parity exists, a one-year risk-free security in the U.S.is yielding _____ percent.

Introduction to Financial Management

Financial Statements, Taxes, and Cash Flow

Working With Financial Statements

Introduction to Valuation: the Time Value of Money

Discounted Cash Flow Valuation

Interest Rates and Bond Valuation

Equity Markets and Stock Valuation

Net Present Value and Other Investment Criteria

Making Capital Investment Decisions

Some Lessons From Capital Market History

Risk and Return

Cost of Capital

Leverage and Capital Structure

Dividends and Dividend Policy

Raising Capital

Short-Term Financial Planning

Working Capital Management

Filters

Exam 18: International Aspects of Financial Management

You are going to London and plan on spending £4,200.How many dollars will this trip cost you if the currency per $1 is £.82?

Which of these must be significantly eliminated if interest rate parity is to exist?

The spot rate on the Canadian dollar is 1.34.Interest rates in Canada are expected to average 3.4 percent while they are anticipated to be 3.9 percent in the U.S.What is the expected exchange rate three years from now?

Assume you can currently exchange $100 for €80.25.The inflation rate in Europe is expected to be 1.8 percent as compared to 2.4 percent in the U.S.Based on relative purchasing power parity, what should the exchange rate be four years from now?

Which one of the following is an example of the political risks associated with foreign operations?

The spot rate on the Canadian dollar is 1.21.Interest rates in Canada are expected to average 2.8 percent while they are anticipated to be 3.2 percent in the U.S.What is the expected exchange rate three years from now?

You are given the exchange rate between the U.S.dollar and the Canadian dollar.You are also given the exchange rate between the U.S.dollar and the Mexican peso.What is the name given to the Canadian dollar per Mexican peso exchange rate derived from the information that was provided?

Given the following exchange rates, which of the following currencies are selling at a premium against the dollar?

Assume you can exchange $1 for ¥110.23 or €0.86 in New York.In Tokyo, the exchange rate is ¥1 = €0.009.If you have $900, how much profit can you earn using triangle arbitrage?

Which one of the following is the risk arising from changes in value caused by political actions?

Interest rate parity defines the relationships among which of the following?

Which one of the following terms is used to describe international bonds issued in a single country and generally denominated in that country's currency?

Currently, you can exchange €100 for $112.55.The inflation rate in Europe is expected to be 1.4 percent.In one year, it is expected that €100 can be exchanged for $113.50.Assume relative purchasing power parity exists.What is the expected inflation rate in the U.S.?

Which one of the following terms is used to identify the concept that exchange rates vary to keep purchasing power constant among currencies?

Which of these is defined as an agreement to exchange two securities or two currencies?

Assume the USD equivalent of the Norwegian krone is .1425.If you have NKr5,500, how much do you have in US dollars?

An agreement to exchange currencies sometime in the future is referred to as which one of the following?

Assume the one-year forward rate for the Swiss franc is SF.9655 = $1.The spot rate is SF .9702 = $1.The interest rate on a risk-free asset in Switzerland is 3.8 percent.If interest rate parity exists, a one-year risk-free security in the U.S.is yielding _____ percent.

Introduction to Financial Management

Financial Statements, Taxes, and Cash Flow

Working With Financial Statements

Introduction to Valuation: the Time Value of Money

Discounted Cash Flow Valuation

Interest Rates and Bond Valuation

Equity Markets and Stock Valuation

Net Present Value and Other Investment Criteria

Making Capital Investment Decisions

Some Lessons From Capital Market History

Risk and Return

Cost of Capital

Leverage and Capital Structure

Dividends and Dividend Policy

Raising Capital

Short-Term Financial Planning

Working Capital Management

Filters