Question 1

Which of the following is not true regarding electronic communications networks (ECNs)?​

Accepted Answer

A) They have a visible trading floor. 
B) Trades are executed by a computer network. 
C) They have been created in many countries to match orders between buyers and sellers. 
D) They allow investors to place orders on their computers. 
E) All of the above are true. 
A) They have a visible trading floor. 
B) Trades are executed by a computer network. 
C) They have been created in many countries to match orders between buyers and sellers. 
D) They allow investors to place orders on their computers. 
E) All of the above are true.

Question 2

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 3

In general, stock markets allow for more governance and attract more investors when they have all of the following except:​

Accepted Answer

A) more voting rights for shareholders. 
B) more legal protection for shareholders. 
C) more enforcement of the laws. 
D) less stringent accounting requirements. 
A) more voting rights for shareholders. 
B) more legal protection for shareholders. 
C) more enforcement of the laws. 
D) less stringent accounting requirements.

Question 4

Global regulations require that shareholders in all countries have the same rights wherever there are stock markets.

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

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 7

Assume a Japanese firm invoices exports to the United States 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 8

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 9

A syndicated 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

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 11

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

Accepted Answer

A) True 
 B)False

Question 12

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 13

Which of the following is not a possible bid/ask quotation for the Barbados dollar?​

Accepted Answer

A) $.50/$.51 
B) $.49/$.50 
C) $.52/$.51 
D) $.51/$.52 
E) All of the above are possible bid/ask quotations. 
A) $.50/$.51 
B) $.49/$.50 
C) $.52/$.51 
D) $.51/$.52 
E) All of the above are possible bid/ask quotations.

Question 14

If there is a strong demand to borrow a currency, and a low supply of savings in that currency, the interest rate will be relatively low.

Accepted Answer

A) True 
 B)False

Question 15

An obligation to purchase a specific amount of currency at a specific exchange rate at a future point in time is called a:​

Accepted Answer

A) call option 
B) spot contract 
C) put option 
D) forward contract 
E) both B and D 
A) call option 
B) spot contract 
C) put option 
D) forward contract 
E) both B and D

Question 16

The bid/ask spreads quoted on more liquid, heavily traded currencies are larger than the spreads on less liquid, less traded currencies.

Accepted Answer

A) True 
 B)False

Question 17

Futures contracts are typically ____; forward contracts are typically ____.

Accepted Answer

A) sold on an exchange; sold on an exchange 
B) sold in an over-the-counter market; sold on an exchange 
C) sold on an exchange; sold in an over-the-counter market 
D) offered by commercial banks; offered by commercial banks 
A) sold on an exchange; sold on an exchange 
B) sold in an over-the-counter market; sold on an exchange 
C) sold on an exchange; sold in an over-the-counter market 
D) offered by commercial banks; offered by commercial banks

Question 18

In general, investors are attracted to stock markets in countries that allow very limited voting rights for shareholders.

Accepted Answer

A) True 
 B)False

Question 19

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 20

The interest rate on the syndicated loan depends all of the following except:

Accepted Answer

A) currency denominating the loan. 
B) maturity of the loan. 
C) creditworthiness of the borrower. 
D) loan provisions set by the International Monetary Fund 
A) currency denominating the loan. 
B) maturity of the loan. 
C) creditworthiness of the borrower. 
D) loan provisions set by the International Monetary Fund

Exam 3: International Financial Markets

Which of the following is not true regarding electronic communications networks (ECNs)?​

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 ____.

In general, stock markets allow for more governance and attract more investors when they have all of the following except:​

Global regulations require that shareholders in all countries have the same rights wherever there are stock markets.

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

LIBOR is:​

Assume a Japanese firm invoices exports to the United States 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.

Eurobonds:​

A syndicated loan:​

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.

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

The international money market primarily concentrates on:​

Which of the following is not a possible bid/ask quotation for the Barbados dollar?​

If there is a strong demand to borrow a currency, and a low supply of savings in that currency, the interest rate will be relatively low.

An obligation to purchase a specific amount of currency at a specific exchange rate at a future point in time is called a:​

The bid/ask spreads quoted on more liquid, heavily traded currencies are larger than the spreads on less liquid, less traded currencies.

Futures contracts are typically ____; forward contracts are typically ____.

In general, investors are attracted to stock markets in countries that allow very limited voting rights for shareholders.

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

The interest rate on the syndicated loan depends all of the following except:

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

Which of the following is not true regarding electronic communications networks (ECNs)?

In general, stock markets allow for more governance and attract more investors when they have all of the following except:

LIBOR is:

Assume a Japanese firm invoices exports to the United States 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.

Eurobonds:

A syndicated loan:

The international money market primarily concentrates on:

Which of the following is not a possible bid/ask quotation for the Barbados dollar?

An obligation to purchase a specific amount of currency at a specific exchange rate at a future point in time is called a:

Futures contracts are typically ; forward contracts are typically .

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