Question 1

A forward contract can be used to lock in the __________ of a specified currency for a future point in time.

Accepted Answer

A)  purchase price 
B)  sale price 
C)  A or B 
D)  none of the above 
A)  purchase price 
B)  sale price 
C)  A or B 
D)  none of the above C

Question 2

The strike price is also known as the premium price.

Accepted Answer

A) True 
 B)False  False

Question 3

_______is not a factor that affects the bid/ask spread.

Accepted Answer

A)  Order costs 
B)  Inventory costs 
C)  Volume 
D)  All of the above factors affect the bid/ask spread 
A)  Order costs 
B)  Inventory costs 
C)  Volume 
D)  All of the above factors affect the bid/ask spread D

Question 4

Which currency is used the most to denominate Eurobonds

Accepted Answer

A)  the British pound. 
B)  the Japanese yen. 
C)  the U.S. dollar. 
D)  the Swiss franc. 
A)  the British pound. 
B)  the Japanese yen. 
C)  the U.S. dollar. 
D)  the Swiss franc.

Question 5

The international money market primarily concentrates on:

Accepted Answer

A)  short term lending (one year or less). 
B)  medium term lending. 
C)  long term lending. 
D)  placing bonds with investors. 
E)  placing newly issued stock in foreign markets. 
A)  short term lending (one year or less). 
B)  medium term lending. 
C)  long term lending. 
D)  placing bonds with investors. 
E)  placing newly issued stock in foreign markets.

Question 6

From 1944 to 1971,the exchange rate between any two currencies was typically:

Accepted Answer

A)  fixed within narrow boundaries. 
B)  floating, but subject to central bank intervention. 
C)  floating, and not subject to central bank intervention. 
D)  nonexistent;that is currencies were not exchanged, but gold was used to pay for all foreign transactions. 
A)  fixed within narrow boundaries. 
B)  floating, but subject to central bank intervention. 
C)  floating, and not subject to central bank intervention. 
D)  nonexistent;that is currencies were not exchanged, but gold was used to pay for all foreign transactions.

Question 7

Which of the following is not true regarding the Bretton Woods Agreement

Accepted Answer

A)  It called for fixed exchange rates between currencies. 
B)  Governments intervened to prevent exchange rates from moving more than 1 percent above or below their initially established levels. 
C)  The agreement lasted from 1944 until 1971. 
D)  Each country used gold to back its currency. 
E)  All of the above are true regarding the Bretton Woods Agreement. 
A)  It called for fixed exchange rates between currencies. 
B)  Governments intervened to prevent exchange rates from moving more than 1 percent above or below their initially established levels. 
C)  The agreement lasted from 1944 until 1971. 
D)  Each country used gold to back its currency. 
E)  All of the above are true regarding the Bretton Woods Agreement.

Question 8

Assume that a bank's bid rate on Japanese yen is $.0041 and its ask rate is $.0043.  Its bidask percentage spread is:

Accepted Answer

A)  about 4.99%. 
B)  about 4.88%. 
C)  about 4.65%. 
D)  about 4.43%. 
A)  about 4.99%. 
B)  about 4.88%. 
C)  about 4.65%. 
D)  about 4.43%.

Question 9

A syndicated Eurocredit loan:

Accepted Answer

A)  represents a loan by a single bank to a syndicate of corporations. 
B)  represents a loan by a single bank to a syndicate of country governments. 
C)  represents a direct loan by a syndicate of oil producing exporters to a less developed country. 
D)  represents a loan by a group of banks to a borrower. 
E)  A and B 
A)  represents a loan by a single bank to a syndicate of corporations. 
B)  represents a loan by a single bank to a syndicate of country governments. 
C)  represents a direct loan by a syndicate of oil producing exporters to a less developed country. 
D)  represents a loan by a group of banks to a borrower. 
E)  A and B

Question 10

Eurobonds are certificates representing bundles of stock.

Accepted Answer

A) True 
 B)False

Question 11

Assume the Canadian dollar is equal to $.88 and the Peruvian Sol is equal to $.35.  The value of the Peruvian Sol in Canadian dollars is:

Accepted Answer

A)  about .3621 Canadian dollars. 
B)  about .3977 Canadian dollars. 
C)  about 2.36 Canadian dollars. 
D)  about 2.51 Canadian dollars. 
A)  about .3621 Canadian dollars. 
B)  about .3977 Canadian dollars. 
C)  about 2.36 Canadian dollars. 
D)  about 2.51 Canadian dollars.

Question 12

Loans of one year or longer extended by banks in Europe are called:

Accepted Answer

A)  Eurocurrency loans. 
B)  Eurocredit loans. 
C)  Eurobond loans. 
D)  Parallel loans. 
A)  Eurocurrency loans. 
B)  Eurocredit loans. 
C)  Eurobond loans. 
D)  Parallel loans.

Question 13

An investor engaging in a transaction whereby he or she contracts to purchase British pounds one year from now is an example of a spot market transaction.

Accepted Answer

A) True 
 B)False

Question 14

The existence of imperfect markets has prevented the internationalization of financial markets.

Accepted Answer

A) True 
 B)False

Question 15

LIBOR is:

Accepted Answer

A)  the interest rate commonly charged for loans between banks. 
B)  the average inflation rate in European countries. 
C)  the maximum loan rate ceiling on loans in the international money market. 
D)  the maximum deposit rate ceiling on deposits in the international money market. 
E)  the maximum interest rate offered on bonds that are issued in London. 
A)  the interest rate commonly charged for loans between banks. 
B)  the average inflation rate in European countries. 
C)  the maximum loan rate ceiling on loans in the international money market. 
D)  the maximum deposit rate ceiling on deposits in the international money market. 
E)  the maximum interest rate offered on bonds that are issued in London.

Question 16

_______ is not a bank characteristic important to customers in need of foreign exchange.

Accepted Answer

A)  Quote competitiveness 
B)  Speed of execution 
C)  Forecasting advice 
D)  Advice about current market conditions 
E)  All of the above are important bank characteristics to customers in need of foreign exchange. 
A)  Quote competitiveness 
B)  Speed of execution 
C)  Forecasting advice 
D)  Advice about current market conditions 
E)  All of the above are important bank characteristics to customers in need of foreign exchange.

Question 17

The main participants in the international money market are:

Accepted Answer

A)  consumers. 
B)  small firms. 
C)  large corporations. 
D)  small European firms needing European currencies for international trade. 
A)  consumers. 
B)  small firms. 
C)  large corporations. 
D)  small European firms needing European currencies for international trade.

Question 18

The U.S.dollar is not ever used as a medium of exchange in:

Accepted Answer

A)  industrialized countries outside the U.S. 
B)  in any Latin American countries. 
C)  in Eastern European countries where foreign exchange restrictions exist. 
D)  none of the above 
A)  industrialized countries outside the U.S. 
B)  in any Latin American countries. 
C)  in Eastern European countries where foreign exchange restrictions exist. 
D)  none of the above

Question 19

Assume that a bank's bid rate on Swiss francs is $.45 and its ask rate is $.47.  Its bidask percentage spread is:

Accepted Answer

A)  about 4.44%. 
B)  about 4.26%. 
C)  about 4.03%. 
D)  about 4.17%. 
A)  about 4.44%. 
B)  about 4.26%. 
C)  about 4.03%. 
D)  about 4.17%.

Question 20

The Basel II accord would:

Accepted Answer

A)  replace the Basel Accord. 
B)  reduce the amount of capital banks are required to hold. 
C)  require banks to take more risks and to document their risk. 
D)  correct some inconsistencies that still exist. 
A)  replace the Basel Accord. 
B)  reduce the amount of capital banks are required to hold. 
C)  require banks to take more risks and to document their risk. 
D)  correct some inconsistencies that still exist.

Exam 3: International Financial Markets

A forward contract can be used to lock in the __________ of a specified currency for a future point in time.

The strike price is also known as the premium price.

_______is not a factor that affects the bid/ask spread.

Which currency is used the most to denominate Eurobonds

The international money market primarily concentrates on:

From 1944 to 1971,the exchange rate between any two currencies was typically:

Which of the following is not true regarding the Bretton Woods Agreement

Assume that a bank's bid rate on Japanese yen is $.0041 and its ask rate is $.0043. Its bidask percentage spread is:

A syndicated Eurocredit loan:

Eurobonds are certificates representing bundles of stock.

Assume the Canadian dollar is equal to $.88 and the Peruvian Sol is equal to $.35. The value of the Peruvian Sol in Canadian dollars is:

Loans of one year or longer extended by banks in Europe are called:

An investor engaging in a transaction whereby he or she contracts to purchase British pounds one year from now is an example of a spot market transaction.

The existence of imperfect markets has prevented the internationalization of financial markets.

LIBOR is:

_______ is not a bank characteristic important to customers in need of foreign exchange.

The main participants in the international money market are:

The U.S.dollar is not ever used as a medium of exchange in:

Assume that a bank's bid rate on Swiss francs is $.45 and its ask rate is $.47. Its bidask percentage spread is:

The Basel II accord would:

Multinational Financial Management: An Overview

International Flow of Funds

Exchange Rate Determination

Currency Derivatives

Government Influence on Exchange Rates

International Arbitrage and Interest Rate Parity

Relationships among Inflation,Interest Rates,and Exchange Rates

Forecasting Exchange Rates

Measuring Exposure to Exchange Rate Fluctuations

Managing Transaction Exposure

Managing Economic Exposure and Translation Exposure

Direct Foreign Investment

Multinational Capital Budgeting

Multinational Restructuring

Country Risk Analysis

Multinational Cost of Capital and Capital Structure

Long-Term Financing

Financing International Trade

Short-Term Financing

International Cash Management

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