Question 1

What is the expected effective yield of the portfolio contemplated by Moore Corporation

Accepted Answer

A)  2.50%. 
B)  2.60%. 
C)  2.40%. 
D)  none of the above 
A)  2.50%. 
B)  2.60%. 
C)  2.40%. 
D)  none of the above

Question 2

The international Fisher effect suggests that:

Accepted Answer

A)  the effective yield on short term foreign securities should, on average, equal the yield on short term domestic securities. 
B)  the effective yield on short term securities of high inflation countries is greater than the yield on short term domestic securities. 
C)  if domestic income grows faster than foreign income, the effective yield on short term foreign securities is higher than short term domestic securities. 
D)  if foreign tax rates equal domestic tax rates, the exchange rates of different currencies will change by the same degree. 
A)  the effective yield on short term foreign securities should, on average, equal the yield on short term domestic securities. 
B)  the effective yield on short term securities of high inflation countries is greater than the yield on short term domestic securities. 
C)  if domestic income grows faster than foreign income, the effective yield on short term foreign securities is higher than short term domestic securities. 
D)  if foreign tax rates equal domestic tax rates, the exchange rates of different currencies will change by the same degree.

Question 3

Assume that a U.S.investor invests in a British CD offering a sixmonth interest rate of 5%.  Over this sixmonth period,the pound depreciates by 9%.  The effective yield on the British CD for the U.S.investor is:

Accepted Answer

A)  14.45%. 
B)  4.45%. 
C)  14.00%. 
D) 4.00%. 
A)  14.45%. 
B)  4.45%. 
C)  14.00%. 
D) 4.00%.

Question 4

If a foreign currency consistently depreciated against the dollar over several periods and had lower interest rates at the beginning of those periods than the U.S.interest rates,then:

Accepted Answer

A)  U.S. firms could have achieved a higher effective yield on foreign deposits than on U.S. deposits during those periods. 
B)  the international Fisher effect is supported by the results. 
C)  A and B 
D)  none of the above 
A)  U.S. firms could have achieved a higher effective yield on foreign deposits than on U.S. deposits during those periods. 
B)  the international Fisher effect is supported by the results. 
C)  A and B 
D)  none of the above

Question 5

What is the expected effective yield of the portfolio Sciorra is contemplating (assume the two currencies move independently from one another)

Accepted Answer

A)  6.47%. 
B)  8.84%. 
C)  8.50%. 
D)  none of the above 
A)  6.47%. 
B)  8.84%. 
C)  8.50%. 
D)  none of the above

Question 6

When investing in a portfolio of foreign currencies,the currencies represented within the portfolio are ideally highly positively correlated.

Accepted Answer

A) True 
 B)False

Question 7

A common purpose of intersubsidiary leading or lagging strategies is to:

Accepted Answer

A)  allow subsidiaries with excess funds to provide financing to subsidiaries with deficient funds. 
B)  assure that the inventory levels at subsidiaries are maintained within tolerable ranges. 
C)  change the prices a high tax rate subsidiary charges a low tax rate subsidiary. 
D)  measure the performance of subsidiaries according to how quickly subsidiaries remit dividend payments to the parent. 
A)  allow subsidiaries with excess funds to provide financing to subsidiaries with deficient funds. 
B)  assure that the inventory levels at subsidiaries are maintained within tolerable ranges. 
C)  change the prices a high tax rate subsidiary charges a low tax rate subsidiary. 
D)  measure the performance of subsidiaries according to how quickly subsidiaries remit dividend payments to the parent.

Question 8

Since exchange rate forecasts are not always accurate,a probability distribution of possible exchange rates may be preferable to a single point estimate.

Accepted Answer

A) True 
 B)False

Question 9

The most useful measure of an MNC's liquidity is its:

Accepted Answer

A)  cash balance. 
B)  amount of securities held as investments. 
C)  political risk rating. 
D)  potential access to funds. 
A)  cash balance. 
B)  amount of securities held as investments. 
C)  political risk rating. 
D)  potential access to funds.

Question 10

Although netting typically increases the need for foreign exchange conversion,it generally reduces the number of cross border transactions between subsidiaries.

Accepted Answer

A) True 
 B)False

Question 11

According to the text:

Accepted Answer

A)  banks in most non U.S. countries are as capable as the U.S. in facilitating cash transfers and most other cash management operations for MNCs. 
B)  banks in most non U.S. countries are more advanced than the U.S. in facilitating cash transfers for MNCs. 
C)  an MNC with subsidiaries in several different countries has no problems in coordinating its cash transfers since a uniform global banking system exists. 
D)  none of the above 
A)  banks in most non U.S. countries are as capable as the U.S. in facilitating cash transfers and most other cash management operations for MNCs. 
B)  banks in most non U.S. countries are more advanced than the U.S. in facilitating cash transfers for MNCs. 
C)  an MNC with subsidiaries in several different countries has no problems in coordinating its cash transfers since a uniform global banking system exists. 
D)  none of the above

Question 12

Assume the U.S.oneyear interest rate is 11% and the French oneyear interest rate is 18%.  The breakeven level of depreciation in the euro at which the U.S.and French investments would exhibit the same return to a U.S.investor is:

Accepted Answer

A)  about 5.1%. 
B)  about 6.8%. 
C)  about 6.3%. 
D)  about 5.9%. 
A)  about 5.1%. 
B)  about 6.8%. 
C)  about 6.3%. 
D)  about 5.9%.

Question 13

The Mexican oneyear interest rate is 27 percent,while the U.S.oneyear interest rate is 9 percent.  If a U.S.firm creates a oneyear deposit in Mexico,the Mexican peso would have to _______ against the U.S.dollar by _______ in order to make that investment have an effective yield that is achievable in the U.S.

Accepted Answer

A)  appreciate;18% 
B)  depreciate;36% 
C)  depreciate;14% 
D)  appreciate;14% 
E)  depreciate;8.5% 
A)  appreciate;18% 
B)  depreciate;36% 
C)  depreciate;14% 
D)  appreciate;14% 
E)  depreciate;8.5%

Question 14

Lockboxes are post office box numbers assigned to employees for picking up their paychecks.

Accepted Answer

A) True 
 B)False

Question 15

Assume that Subsidiaries "X" and "Y" often trade with each other.  Assume that Subsidiary "X" has excess cash while Subsidiary "Y" is short on cash.  How can Subsidiary "X" help out Subsidiary "Y"

Accepted Answer

A)  "X" should lag its payments sent to "Y" to pay for imports from "Y." 
B)  "X" should request that "Y" lead its payments to be sent for goods that "Y" sent to "X." 
C)  A and B 
D)  None of the above 
A)  "X" should lag its payments sent to "Y" to pay for imports from "Y." 
B)  "X" should request that "Y" lead its payments to be sent for goods that "Y" sent to "X." 
C)  A and B 
D)  None of the above

Question 16

According to the international Fisher effect:

Accepted Answer

A)  exchange rates adjust to compensate for income differen tials between countries. 
B)  interest rates adjust to compensate for income differen tials between countries. 
C)  exchange rates adjust to compensate for interest rate differentials between countries. 
D)  exchange rates adjust to compensate for risk differ entials between countries. 
A)  exchange rates adjust to compensate for income differen tials between countries. 
B)  interest rates adjust to compensate for income differen tials between countries. 
C)  exchange rates adjust to compensate for interest rate differentials between countries. 
D)  exchange rates adjust to compensate for risk differ entials between countries.

Question 17

___________________ may complicate cash flow optimization.

Accepted Answer

A)  The use of a zero-balance account 
B)  Government restrictions 
C)  Leading and lagging 
D)  None of the above 
A)  The use of a zero-balance account 
B)  Government restrictions 
C)  Leading and lagging 
D)  None of the above

Question 18

Leading refers to the payment of supplies earlier than necessary;lagging refers to the payment of supplies later than allowed.

Accepted Answer

A) True 
 B)False

What is the expected effective yield of the portfolio contemplated by Moore Corporation

The international Fisher effect suggests that:

Assume that a U.S.investor invests in a British CD offering a sixmonth interest rate of 5%. Over this sixmonth period,the pound depreciates by 9%. The effective yield on the British CD for the U.S.investor is:

If a foreign currency consistently depreciated against the dollar over several periods and had lower interest rates at the beginning of those periods than the U.S.interest rates,then:

What is the expected effective yield of the portfolio Sciorra is contemplating (assume the two currencies move independently from one another)

When investing in a portfolio of foreign currencies,the currencies represented within the portfolio are ideally highly positively correlated.

A common purpose of intersubsidiary leading or lagging strategies is to:

Since exchange rate forecasts are not always accurate,a probability distribution of possible exchange rates may be preferable to a single point estimate.

The most useful measure of an MNC's liquidity is its:

Although netting typically increases the need for foreign exchange conversion,it generally reduces the number of cross border transactions between subsidiaries.

According to the text:

Assume the U.S.oneyear interest rate is 11% and the French oneyear interest rate is 18%. The breakeven level of depreciation in the euro at which the U.S.and French investments would exhibit the same return to a U.S.investor is:

The Mexican oneyear interest rate is 27 percent,while the U.S.oneyear interest rate is 9 percent. If a U.S.firm creates a oneyear deposit in Mexico,the Mexican peso would have to _ against the U.S.dollar by _ in order to make that investment have an effective yield that is achievable in the U.S.

Lockboxes are post office box numbers assigned to employees for picking up their paychecks.

Assume that Subsidiaries "X" and "Y" often trade with each other. Assume that Subsidiary "X" has excess cash while Subsidiary "Y" is short on cash. How can Subsidiary "X" help out Subsidiary "Y"

According to the international Fisher effect:

___________________ may complicate cash flow optimization.

Leading refers to the payment of supplies earlier than necessary;lagging refers to the payment of supplies later than allowed.

Multinational Financial Management: An Overview

International Flow of Funds

International Financial Markets

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

Filters

Exam 21: International Cash Management

What is the expected effective yield of the portfolio contemplated by Moore Corporation

The international Fisher effect suggests that:

Assume that a U.S.investor invests in a British CD offering a sixmonth interest rate of 5%. Over this sixmonth period,the pound depreciates by 9%. The effective yield on the British CD for the U.S.investor is:

If a foreign currency consistently depreciated against the dollar over several periods and had lower interest rates at the beginning of those periods than the U.S.interest rates,then:

What is the expected effective yield of the portfolio Sciorra is contemplating (assume the two currencies move independently from one another)

When investing in a portfolio of foreign currencies,the currencies represented within the portfolio are ideally highly positively correlated.

A common purpose of intersubsidiary leading or lagging strategies is to:

Since exchange rate forecasts are not always accurate,a probability distribution of possible exchange rates may be preferable to a single point estimate.

The most useful measure of an MNC's liquidity is its:

Although netting typically increases the need for foreign exchange conversion,it generally reduces the number of cross border transactions between subsidiaries.

According to the text:

Assume the U.S.oneyear interest rate is 11% and the French oneyear interest rate is 18%. The breakeven level of depreciation in the euro at which the U.S.and French investments would exhibit the same return to a U.S.investor is:

Lockboxes are post office box numbers assigned to employees for picking up their paychecks.

Assume that Subsidiaries "X" and "Y" often trade with each other. Assume that Subsidiary "X" has excess cash while Subsidiary "Y" is short on cash. How can Subsidiary "X" help out Subsidiary "Y"

According to the international Fisher effect:

___________________ may complicate cash flow optimization.

Leading refers to the payment of supplies earlier than necessary;lagging refers to the payment of supplies later than allowed.

Multinational Financial Management: An Overview

International Flow of Funds

International Financial Markets

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

Filters