Question 1

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 2

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 3

Assume that a bank's bid rate on Japanese yen is $.0041 and its ask rate is $.0043. Its bid/ask 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 4

The interest rate in developing countries is usually very low.

Accepted Answer

A) True 
 B)False

Question 5

Eurodollar deposits consisting of the oil revenues of oil-producing countries are known as:​

Accepted Answer

A) euros. 
B) petro-euros. 
C) petrodollars. 
D) petro deposits. 
A) euros. 
B) petro-euros. 
C) petrodollars. 
D) petro deposits.

Question 6

Which of the following is true of international money market securities?​

Accepted Answer

A) The securities may be exposed to exchange rate risk. 
B) The securities are perceived to be very risky. 
C) The securities issued by corporations are not subject to credit (default) risk. 
D) The securities have a maturity of one to five years. 
A) The securities may be exposed to exchange rate risk. 
B) The securities are perceived to be very risky. 
C) The securities issued by corporations are not subject to credit (default) risk. 
D) The securities have a maturity of one to five years.

Question 7

The international money market is frequently accessed by MNCs for short-term investment and financing needs, while longer-term financing needs are met in the international credit market or the international bond market and in international stock markets.

Accepted Answer

A) True 
 B)False

Question 8

An MNC with receivables in Japanese yen purchases yen forward to hedge its exposure to exchange rate fluctuations.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following is probably not an example of the use of forward contracts by an MNC?​

Accepted Answer

A) Hedging pound payables by selling pounds forward 
B) Hedging peso receivables by selling pesos forward 
C) Hedging yen payables by purchasing yen forward 
D) Hedging peso payables by purchasing pesos forward 
E) All of the above are examples of using forward contracts. 
A) Hedging pound payables by selling pounds forward 
B) Hedging peso receivables by selling pesos forward 
C) Hedging yen payables by purchasing yen forward 
D) Hedging peso payables by purchasing pesos forward 
E) All of the above are examples of using forward contracts.

Question 10

The U.S. dollar is not accepted as a medium of exchange in:​

Accepted Answer

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

Question 11

The bid/ask spread on an exchange rate can be used to directly determine:​

Accepted Answer

A) how an exchange rate will change. 
B) the transaction cost of foreign exchange. 
C) the forward premium. 
D) the currency option premium. 
A) how an exchange rate will change. 
B) the transaction cost of foreign exchange. 
C) the forward premium. 
D) the currency option premium.

Question 12

Shareholders in some countries may have more power to effectively sue publicly traded firms if their executives or directors commit financial fraud.

Accepted Answer

A) True 
 B)False

Question 13

Large commercial banks play a major role in the international money market by accepting short-term deposits in various currencies, and channeling the money to corporations and government agencies that need to borrow those short-term funds in the desired currencies.

Accepted Answer

A) True 
 B)False

Question 14

Eurobonds are certificates representing bundles of stock.

Accepted Answer

A) True 
 B)False

Question 15

The strike price on a currency option is also known as the exercise price.

Accepted Answer

A) True 
 B)False

Question 16

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 promote 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 promote 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 17

You observe a quotation of the Japanese yen (¥) of $0.007. You are, however, interested in the number of yen per dollar. Thus, you calculate the ____ quotation of ____ ¥/$.

Accepted Answer

A) direct; 142.86 
B) indirect; 142.86 
C) indirect; 150 
D) direct; 150 
E) indirect; 0 
A) direct; 142.86 
B) indirect; 142.86 
C) indirect; 150 
D) direct; 150 
E) indirect; 0

Question 18

The legal protection of shareholders is the same among countries.

Accepted Answer

A) True 
 B)False

Question 19

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 20

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

Exam 3: International Financial Markets

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

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 $____.

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

The interest rate in developing countries is usually very low.

Eurodollar deposits consisting of the oil revenues of oil-producing countries are known as:​

Which of the following is true of international money market securities?​

The international money market is frequently accessed by MNCs for short-term investment and financing needs, while longer-term financing needs are met in the international credit market or the international bond market and in international stock markets.

An MNC with receivables in Japanese yen purchases yen forward to hedge its exposure to exchange rate fluctuations.

Which of the following is probably not an example of the use of forward contracts by an MNC?​

The U.S. dollar is not accepted as a medium of exchange in:​

The bid/ask spread on an exchange rate can be used to directly determine:​

Shareholders in some countries may have more power to effectively sue publicly traded firms if their executives or directors commit financial fraud.

Large commercial banks play a major role in the international money market by accepting short-term deposits in various currencies, and channeling the money to corporations and government agencies that need to borrow those short-term funds in the desired currencies.

Eurobonds are certificates representing bundles of stock.

The strike price on a currency option is also known as the exercise price.

The international money market is primarily served by:​

You observe a quotation of the Japanese yen (¥) of $0.007. You are, however, interested in the number of yen per dollar. Thus, you calculate the ____ quotation of ____ ¥/$.

The legal protection of shareholders is the same among countries.

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.

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

International Corporate Governance and Control

Country Risk Analysis

Multinational Cost of Capital and Capital Structure

Long-Term Debt Financing

Financing International Trade

Short-Term Financing

International Cash Management

Filters

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

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

Eurodollar deposits consisting of the oil revenues of oil-producing countries are known as:

Which of the following is true of international money market securities?

Which of the following is probably not an example of the use of forward contracts by an MNC?

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

The bid/ask spread on an exchange rate can be used to directly determine:

The international money market is primarily served by:

You observe a quotation of the Japanese yen (¥) of $0.007. You are, however, interested in the number of yen per dollar. Thus, you calculate the quotation of ¥/$.

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