Question 1

If a U.S.firm desires to avoid the risk from exchange rate fluctuations,and it will need C$200,000 in 90 days to make payment on imports from Canada,it could:

Accepted Answer

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

Question 2

Which of the following is true

Accepted Answer

A)  Non U.S. firms may desire to issue bonds in the U.S. due to less regulations in the U.S. 
B)  U.S. firms may desire to issue bonds in the U.S. due to less regulations in the U.S. 
C)  U.S. firms may desire to issue bonds in the non U.S. markets due to less regulations in non U.S. countries. 
D)  A and B 
A)  Non U.S. firms may desire to issue bonds in the U.S. due to less regulations in the U.S. 
B)  U.S. firms may desire to issue bonds in the U.S. due to less regulations in the U.S. 
C)  U.S. firms may desire to issue bonds in the non U.S. markets due to less regulations in non U.S. countries. 
D)  A and B

Question 3

A share of the ADR of a Dutch firm represents one share of that firm's stock that is traded on a Dutch stock exchange.The share price of the firm was 15 euros when the Dutch market closed.As the U.S.market opens,the euro is worth $1.10.Thus,the price of the ADR should be _____.

Accepted Answer

A)  $13.64 
B)  $15.00 
C)  $16.50 
D)  16.50 euros 
E)  none of the above 
A)  $13.64 
B)  $15.00 
C)  $16.50 
D)  16.50 euros 
E)  none of the above

Question 4

The international money market is primarily served by:

Accepted Answer

A)  the governments of European countries, which directly intervene in foreign currency markets. 
B)  government agencies such as the International Monetary Fund that enhance development of countries. 
C)  several large banks that accept deposits and provide loans in various currencies. 
D)  small banks that convert foreign currency for tourists and business visitors. 
A)  the governments of European countries, which directly intervene in foreign currency markets. 
B)  government agencies such as the International Monetary Fund that enhance development of countries. 
C)  several large banks that accept deposits and provide loans in various currencies. 
D)  small banks that convert foreign currency for tourists and business visitors.

Question 5

Futures contracts are typically _______;forward contracts are typically _______.

Accepted Answer

A)  sold on an exchange;sold on an exchange 
B)  offered by commercial banks;sold on an exchange 
C)  sold on an exchange;offered by commercial banks 
D)  offered by commercial banks;offered by commercial banks 
A)  sold on an exchange;sold on an exchange 
B)  offered by commercial banks;sold on an exchange 
C)  sold on an exchange;offered by commercial banks 
D)  offered by commercial banks;offered by commercial banks

Question 6

Assume a Japanese firm invoices exports to the U.S.in U.S.dollars.  Assume that the forward rate and spot rate of the Japanese yen are equal.  If the Japanese firm expects the U.S.dollar to _______ against the yen,it would likely wish to hedge.  It could hedge by _______ dollars forward.

Accepted Answer

A)  depreciate;buying 
B)  depreciate;selling 
C)  appreciate;selling 
D)  appreciate;buying 
A)  depreciate;buying 
B)  depreciate;selling 
C)  appreciate;selling 
D)  appreciate;buying

Question 7

A put option is the amount or percentage by which the existing spot rate exceeds the forward rate.

Accepted Answer

A) True 
 B)False

Question 8

As a result of the Smithsonian Agreement,the U.S.dollar was:

Accepted Answer

A)  the currency to be used by all countries as a medium of exchange for international trade. 
B)  forced to be freely floating relative to all currencies without any boundaries. 
C)  devalued relative to major currencies. 
D)  revalued (upward) relative to major currencies. 
A)  the currency to be used by all countries as a medium of exchange for international trade. 
B)  forced to be freely floating relative to all currencies without any boundaries. 
C)  devalued relative to major currencies. 
D)  revalued (upward) relative to major currencies.

Question 9

A currency put option provides the right,but not the obligation,to buy a specific currency at a specific price within a specific period of time.

Accepted Answer

A) True 
 B)False

Question 10

The ADR of a British firm is convertible into 3 shares of stock.The share price of the firm was 30 pounds when the British market closed.When the U.S.market opens,the pound is worth $1.63.The price of this ADR should be $_______.

Accepted Answer

A)  48.90 
B)  146.70 
C)  55.21 
D)  none of the above 
A)  48.90 
B)  146.70 
C)  55.21 
D)  none of the above

Question 11

According to the text,the average foreign exchange trading around the world ________ per day.

Accepted Answer

A)  equals about $200 billion 
B)  equals about $400 billion 
C)  equals about $700 billion 
D)  exceeds $1 trillion 
A)  equals about $200 billion 
B)  equals about $400 billion 
C)  equals about $700 billion 
D)  exceeds $1 trillion

Question 12

The interest rate commonly charged for loans between banks is called the cross rate.

Accepted Answer

A) True 
 B)False

If a U.S.firm desires to avoid the risk from exchange rate fluctuations,and it will need C$200,000 in 90 days to make payment on imports from Canada,it could:

Which of the following is true

A share of the ADR of a Dutch firm represents one share of that firm's stock that is traded on a Dutch stock exchange.The share price of the firm was 15 euros when the Dutch market closed.As the U.S.market opens,the euro is worth $1.10.Thus,the price of the ADR should be _____.

The international money market is primarily served by:

Futures contracts are typically _;forward contracts are typically _.

Assume a Japanese firm invoices exports to the U.S.in U.S.dollars. Assume that the forward rate and spot rate of the Japanese yen are equal. If the Japanese firm expects the U.S.dollar to _ against the yen,it would likely wish to hedge. It could hedge by _ dollars forward.

A put option is the amount or percentage by which the existing spot rate exceeds the forward rate.

As a result of the Smithsonian Agreement,the U.S.dollar was:

A currency put option provides the right,but not the obligation,to buy a specific currency at a specific price within a specific period of time.

The ADR of a British firm is convertible into 3 shares of stock.The share price of the firm was 30 pounds when the British market closed.When the U.S.market opens,the pound is worth $1.63.The price of this ADR should be $_______.

According to the text,the average foreign exchange trading around the world ________ per day.

The interest rate commonly charged for loans between banks is called the cross rate.

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

Exam 3: International Financial Markets

If a U.S.firm desires to avoid the risk from exchange rate fluctuations,and it will need C$200,000 in 90 days to make payment on imports from Canada,it could:

Which of the following is true

A share of the ADR of a Dutch firm represents one share of that firm's stock that is traded on a Dutch stock exchange.The share price of the firm was 15 euros when the Dutch market closed.As the U.S.market opens,the euro is worth $1.10.Thus,the price of the ADR should be _____.

The international money market is primarily served by:

Futures contracts are typically _______;forward contracts are typically _______.

Assume a Japanese firm invoices exports to the U.S.in U.S.dollars. Assume that the forward rate and spot rate of the Japanese yen are equal. If the Japanese firm expects the U.S.dollar to _______ against the yen,it would likely wish to hedge. It could hedge by _______ dollars forward.

A put option is the amount or percentage by which the existing spot rate exceeds the forward rate.

As a result of the Smithsonian Agreement,the U.S.dollar was:

A currency put option provides the right,but not the obligation,to buy a specific currency at a specific price within a specific period of time.

The ADR of a British firm is convertible into 3 shares of stock.The share price of the firm was 30 pounds when the British market closed.When the U.S.market opens,the pound is worth $1.63.The price of this ADR should be $_______.

According to the text,the average foreign exchange trading around the world ________ per day.

The interest rate commonly charged for loans between banks is called the cross rate.

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

Futures contracts are typically _;forward contracts are typically _.

Assume a Japanese firm invoices exports to the U.S.in U.S.dollars. Assume that the forward rate and spot rate of the Japanese yen are equal. If the Japanese firm expects the U.S.dollar to _ against the yen,it would likely wish to hedge. It could hedge by _ dollars forward.