Exam 14: Global Financial Management

Whether a firm has growth or value and how this firm characteristic provides an estimate of the cost of equity refers to the ______.

_______ is the safest method available to an exporter, but that which exposes the importer to some risk related to delivery of goods.

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

______ refers to losses that are incurred and that cause the participant's balance to fall below the maintenance margin at the end of the trading day.

Marked-to-market refers to futures contracts in which gains are earned in cash at the end of each trading day.

Scenario - Aero, Inc. Aero, Inc. started from the idea of Brad Aerostle of Madison, South Dakota in 1992. Brad earned a financial degree from Harvard and had watched the financial markets for years. Armed with college credentials and knowledge, he believed he could offer needed services to individuals and companies desiring to conduct business around the globe. From the minute Brad put his idea into motion, his brainchild - Aero, Inc. - proved quite profitable. Aero, Inc. currently has over five thousand clients ranging from slightly wealthy individuals to very rich and thriving corporations around the world. Brad's skill at what he does has made his company a sought out firm by those who want to prosper in the foreign marketplace. -Aero, Inc. likes to make its customers aware of what is taking place within the global financial world. One of the lessons it imparts to its clients is about the International Monetary Fund's special drawing right. Which of the following best identifies what Aero, Inc. would be discussing with its clients?

Selling a currency in a currency futures contract and profiting on a decrease in the value of the currency over time is called _____.

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.

Differentiate between the three types of bonds.

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

Buying securities in a portfolio with price patterns over time that are different from one another, which reduces the volatility of the portfolio, is called _____.

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