Exam 14: Global Financial Management

Describe the options and swaps contract in hedging the forex risks. Provide an example of each.

______ is a simple agreement wherein the exporter sends an invoice with the goods and the exporter pays upon their receipt.

_______ refers to selling a currency in a currency futures contract and profiting on a decrease in the value of the currency over time

Futures contracts available in currencies of emerging-market countries by large banks in the OTC market are called _____.

Briefly discuss the sources of funds to finance international trade and investment.

______ refers to investing most of retirement and other savings in one's home country, which reduces diversification.

The cost of equity is required rate of return by stockholders in a firm and is estimated by means of the Capital Asset Pricing Model (CAPM).

Payment protection to both exporters and importers, as the importer's bank writes a guarantee of payment refers to ______.

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 contacts is called _______.

The small commitment fee needed to purchase a futures contract is a ______.

_____ risk arises from the import and export of goods and services.

Futures contracts available in currencies of emerging-market countries by large banks in the OTC market refers to _____.

Differentiate between transaction and translation risks. Explain how these risks affect firms and investors.

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

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?

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

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

Bank and government loans to importers to cover the cost of major purchases refers to _____.

Bonds that are sold in any country outside the home country, but in the home country's currency, are called _____.

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. -When the Gayla Corporation conducts its operations in foreign markets, its customers often pay in different forms of currency. Many times there is a difference in the value of that currency received in comparison to the company's U. S. currency. Which of the following best identifies what the Gayla Corporation is experiencing?