Exam 14: Global Financial Management

How short-term changes in exchange rates can affect operating costs and revenues of firms engaged in international business activities is referred to as ________ risks.

Moody's and Standard and Poor's provide bond ratings, which are important in assuring the credit quality to foreign investors.

Scenario - The Gayla Corporation The Gayla Corporation is a multinational business that conducts operations in twelve foreign markets.  This multi-million dollar organization is very familiar with currency exchanges and has considerable understanding when it comes to the risks associated with operating in the global market arena.  The Gayla Corporation claims it would not be as successful without the expertise of the financial wizards that work for it. The company has not lost money so far and plans to stay that way. The financial experts of the Gayla Corporation are very much aware of the organization's cost of debt.  Which of the following best identifies what cost of debt means to the corporation?

An Export-Import Bank is a(n)

_____ risk refers to the ways in which long-term exchange rate movements affect firms.

A group of banks that collectively make a loan to a firm is called a hedge.

Buying a currency in a currency futures contract and profiting on an increase in the value of the currency over time is called  _____.

Prolonged periods of relatively high dollar values in world currency markets would be a disadvantage to U.S. exporters and an advantage to their foreign competitors.

Explain the domestic versus global cost of capital.

Of the following, which is NOT true about international banking and payments?

Currency swaps allow firms to exchange currencies at a previously agreed exchange rate as a way to hedge exchange rate movements.

The weighted average of different interest rates paid on long-term borrowings is called the _____.

A basket of currencies consisting of dollars, euros, pounds, and yen created by the International Monetary Fund is known as the _____.

______ is a coefficient obtained by regressing a stock's return on a currency's return over time.

______ is the sensitivity of a stock to market risk affected by currency movements.

Does exchange rate risk affect a firm's cash flows and its stock value? Explain.

The required rate of return demanded by stock and bond investors and used in net present value capital budgeting analyses as the discount rate is called the _____.

_____ risk is associated with the short-term effects of currency movements on the consolidated accounting statements of a firm.

Losses that are incurred and that cause the participant's balance to fall below the maintenance margin at the end of the trading day is called a _____.

Marked-to-market involves the trading of futures contracts in major currencies and offering price transparency and efficiency in addition to elimination of counterparty risk due to guaranteed payments on contract.