Question 1

Eurobonds:

Accepted Answer

A)  can be issued only by European firms. 
B)  can be sold only to European investors. 
C)  A and B 
D)  none of the above 
A)  can be issued only by European firms. 
B)  can be sold only to European investors. 
C)  A and B 
D)  none of the above

Question 2

A Japanese yen is worth $.0080,and a Fijian dollar (F$)is worth $.5900.What is the value of the yen in Fijian dollars (i.e.,how many Fijian dollars do you need to buy a yen)

Accepted Answer

A)  73.75. 
B)  125. 
C)  1.69. 
D)  0.014. 
E)  none of the above 
A)  73.75. 
B)  125. 
C)  1.69. 
D)  0.014. 
E)  none of the above

Question 3

The Bretton Woods Agreement is a 1988 accord between 12 countries to standardize banks' capital requirements across countries;the resulting capital ratios are computed using risk-weighted assets.

Accepted Answer

A) True 
 B)False

Question 4

The forward rate is the exchange rate used for immediate exchange of currencies.

Accepted Answer

A) True 
 B)False

Question 5

Eurobonds:

Accepted Answer

A)  are usually issued in bearer form. 
B)  typically carry several protective covenants. 
C)  cannot contain call provisions. 
D)  A and B 
A)  are usually issued in bearer form. 
B)  typically carry several protective covenants. 
C)  cannot contain call provisions. 
D)  A and B

Question 6

International money market transactions normally represent:

Accepted Answer

A)  the equivalent of $1 million or more. 
B)  the equivalent of $1,000 to $10,000. 
C)  the equivalent of between $10,000 and $100,000. 
D)  the equivalent of between $100,000 and $200,000. 
A)  the equivalent of $1 million or more. 
B)  the equivalent of $1,000 to $10,000. 
C)  the equivalent of between $10,000 and $100,000. 
D)  the equivalent of between $100,000 and $200,000.

Question 7

If a U.S.firm desires to avoid the risk from exchange rate fluctuations,and it is receiving 100,000 in 90 days,it could:

Accepted Answer

A)  obtain a 90 day forward purchase contract on euros. 
B)  obtain a 90 day forward sale contract on euros. 
C)  purchase euros 90 days from now at the spot rate. 
D)  sell euros 90 days from now at the spot rate. 
A)  obtain a 90 day forward purchase contract on euros. 
B)  obtain a 90 day forward sale contract on euros. 
C)  purchase euros 90 days from now at the spot rate. 
D)  sell euros 90 days from now at the spot rate.

Question 8

The international credit market primarily concentrates on:

Accepted Answer

A)  short term lending (less than one year). 
B)  medium term lending. 
C)  long term lending. 
D)  providing an exchange of foreign currencies for firms who need them. 
E)  placing newly issued stock in foreign markets. 
A)  short term lending (less than one year). 
B)  medium term lending. 
C)  long term lending. 
D)  providing an exchange of foreign currencies for firms who need them. 
E)  placing newly issued stock in foreign markets.

Question 9

The Basel Accord is a 1987 agreement among the major European countries to make regulations more uniform across European countries and to reduce taxes on goods traded between these countries.

Accepted Answer

A) True 
 B)False

Question 10

The Single European Act and the Basel Accord prevented a trend toward increased globalization in the banking industry.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is not true with respect to spot market liquidity

Accepted Answer

A)  The more willing buyers and sellers there are, the more liquid a market is. 
B)  The spot markets for heavily traded currencies such as the Japanese yen are very liquid. 
C)  A currency's liquidity affects the ease with which an MNC can obtain or sell that currency. 
D)  If a currency is illiquid, an MNC is typically able to quickly purchase that currency at a reasonable exchange rate. 
A)  The more willing buyers and sellers there are, the more liquid a market is. 
B)  The spot markets for heavily traded currencies such as the Japanese yen are very liquid. 
C)  A currency's liquidity affects the ease with which an MNC can obtain or sell that currency. 
D)  If a currency is illiquid, an MNC is typically able to quickly purchase that currency at a reasonable exchange rate.

Question 12

According to the text,the forward rate is commonly used for:

Accepted Answer

A)  hedging. 
B)  Eurocurrency transactions. 
C)  Eurocredit transactions. 
D)  Eurobond transactions. 
A)  hedging. 
B)  Eurocurrency transactions. 
C)  Eurocredit transactions. 
D)  Eurobond transactions.

Question 13

A cross exchange rate expresses the amount of one foreign currency per unit of another foreign currency.

Accepted Answer

A) True 
 B)False

Question 14

The ask quote is the price for which a bank offers to sell a currency.

Accepted Answer

A) True 
 B)False

Question 15

The bid/ask spread for small retail transactions is commonly in the range of ______ percent;the bid/ask spread for wholesale transactions is commonly in the range of ______ percent.

Accepted Answer

A)  3 to 7;.01 to .03 
B)  2 to 5;.05 to .10 
C)  10 to 15;.01 to .03 
D)  1 to 2;.05 to .07 
A)  3 to 7;.01 to .03 
B)  2 to 5;.05 to .10 
C)  10 to 15;.01 to .03 
D)  1 to 2;.05 to .07

Question 16

When the foreign exchange market opens in the U.S.each morning,the opening exchange rate quotations will be based on the:

Accepted Answer

A)  closing prices in the U.S. during the previous day. 
B)  closing prices in Canada during the previous day. 
C)  prevailing prices in locations where the foreign exchange markets have been open. 
D)  officially set by central banks before the U.S. market opens. 
A)  closing prices in the U.S. during the previous day. 
B)  closing prices in Canada during the previous day. 
C)  prevailing prices in locations where the foreign exchange markets have been open. 
D)  officially set by central banks before the U.S. market opens.

Question 17

Under the gold standard,each currency was convertible into gold at a specified rate,and the exchange rate between two currencies was determined by their relative convertibility rates per ounce of gold.

Accepted Answer

A) True 
 B)False

Question 18

Forward markets for currencies of developing countries are:

Accepted Answer

A)  prohibited. 
B)  less liquid than markets for developed countries. 
C)  more liquid than markets for developed countries. 
D)  only available for use by government agencies. 
A)  prohibited. 
B)  less liquid than markets for developed countries. 
C)  more liquid than markets for developed countries. 
D)  only available for use by government agencies.

Question 19

A futures contract is a contract specifying a standard volume of a particular currency to be exchanged on a specific settlement date.

Accepted Answer

A) True 
 B)False

Question 20

The forward market:

Accepted Answer

A)  for euros is very illiquid. 
B)  for Eastern European countries is very liquid. 
C)  does not exist for some currencies. 
D)  none of the above 
A)  for euros is very illiquid. 
B)  for Eastern European countries is very liquid. 
C)  does not exist for some currencies. 
D)  none of the above

Exam 3: International Financial Markets

Eurobonds:

A Japanese yen is worth $.0080,and a Fijian dollar (F$)is worth $.5900.What is the value of the yen in Fijian dollars (i.e.,how many Fijian dollars do you need to buy a yen)

The Bretton Woods Agreement is a 1988 accord between 12 countries to standardize banks' capital requirements across countries;the resulting capital ratios are computed using risk-weighted assets.

The forward rate is the exchange rate used for immediate exchange of currencies.

Eurobonds:

International money market transactions normally represent:

If a U.S.firm desires to avoid the risk from exchange rate fluctuations,and it is receiving 100,000 in 90 days,it could:

The international credit market primarily concentrates on:

The Basel Accord is a 1987 agreement among the major European countries to make regulations more uniform across European countries and to reduce taxes on goods traded between these countries.

The Single European Act and the Basel Accord prevented a trend toward increased globalization in the banking industry.

Which of the following is not true with respect to spot market liquidity

According to the text,the forward rate is commonly used for:

A cross exchange rate expresses the amount of one foreign currency per unit of another foreign currency.

The ask quote is the price for which a bank offers to sell a currency.

The bid/ask spread for small retail transactions is commonly in the range of ______ percent;the bid/ask spread for wholesale transactions is commonly in the range of ______ percent.

When the foreign exchange market opens in the U.S.each morning,the opening exchange rate quotations will be based on the:

Under the gold standard,each currency was convertible into gold at a specified rate,and the exchange rate between two currencies was determined by their relative convertibility rates per ounce of gold.

Forward markets for currencies of developing countries are:

A futures contract is a contract specifying a standard volume of a particular currency to be exchanged on a specific settlement date.

The forward market:

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

Filters

The bid/ask spread for small retail transactions is commonly in the range of percent;the bid/ask spread for wholesale transactions is commonly in the range of percent.