Question 1

Most major countries in the world have agreed on fixed exchange rates in order to facilitate international trade.

Accepted Answer

A) True 
 B)False

Question 2

The difference between the asked price and the bid price is known as the spread.

Accepted Answer

A) True 
 B)False

Question 3

Exchange rate risk is the risk that exchange rates will be lower in the future than they are today.

Accepted Answer

A) True 
 B)False

Question 4

Exchange rate fluctuations do not increase the riskiness of foreign portfolio investments because changes in exchange rates are compensated for by changes in interest rates and investment returns.

Accepted Answer

A) True 
 B)False

Question 5

Exchange rate risk exists in international trade contracts denominated in a foreign currency,but not in foreign portfolio investments,because the returns on investment securities are adjusted automatically for differences in exchange rates.

Accepted Answer

A) True 
 B)False

Question 6

What is exchange rate risk? Why would a multinational firm be concerned about it?

Accepted Answer

Exchange rate risk is the risk that the

Question 7

The 30-day forward exchange rate is .01073033 dollars per yen.If this forward rate represents a per year discount of 2.5% from the current spot rate,what is the current spot exchange rate?

Accepted Answer

A)  0.01073033 dollars per yen 
B)  0.01257754 dollars per yen 
C)  0.01329684 dollars per yen 
D)  0)01093833 dollars per yen 
A)  0.01073033 dollars per yen 
B)  0.01257754 dollars per yen 
C)  0.01329684 dollars per yen 
D)  0)01093833 dollars per yen

Question 8

Forward contracts are usually quoted for periods greater than 1 year.

Accepted Answer

A) True 
 B)False

Question 9

Due to the dominance of Chinese companies in international trade,the Chinese yuan is the most frequently traded currency.

Accepted Answer

A) True 
 B)False

Question 10

Only purely domestic firms that buy all of their inputs and sell all of their outputs in their home countries are unaffected by events in international financial markets.

Accepted Answer

A) True 
 B)False

Question 11

Foreign currency forward rates aid traders by reducing uncertainty regarding future market fluctuations.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following is true regarding the correct price of the forward contract?

Accepted Answer

A)  If the quote is less than the computed price, the forward contract is undervalued. 
B)  If the quote is greater than the computed price, the forward contract is overvalued. 
C)  Both A and B 
D)  Neither A nor B 
A)  If the quote is less than the computed price, the forward contract is undervalued. 
B)  If the quote is greater than the computed price, the forward contract is overvalued. 
C)  Both A and B 
D)  Neither A nor B

Question 13

With international investing,unlike domestic investing,exchange rate risk could cause a marginally-positive-NPV project to be rejected due to the additional risk.

Accepted Answer

A) True 
 B)False

Question 14

The Euro increased dramatically in value against the U.S.dollar between 2000 and 2009.The result has been that

Accepted Answer

A)  U.S. exports are more competitive in Europe. 
B)  U.S. goods cost more in Europe. 
C)  U.S. travelers are finding it less expensive to travel in Europe. 
D)  European exports to the United States are more competitive. 
A)  U.S. exports are more competitive in Europe. 
B)  U.S. goods cost more in Europe. 
C)  U.S. travelers are finding it less expensive to travel in Europe. 
D)  European exports to the United States are more competitive.

Question 15

Commercial centers for foreign exchange exist only in New York and London in order to make it possible for arbitrage to work.

Accepted Answer

A) True 
 B)False

Question 16

What is a spot transaction? What is a direct quote? An indirect quote?

Accepted Answer

The spot exchange rate is simply the pri

Question 17

Exchange rate risk

Accepted Answer

A)  arises from the fact that the spot exchange rate on a future date is a random variable. 
B)  applies only to certain types of international businesses. 
C)  has been phased out due to recent international legislation. 
D)  has been reduced by the adoption of floating exchange rates. 
A)  arises from the fact that the spot exchange rate on a future date is a random variable. 
B)  applies only to certain types of international businesses. 
C)  has been phased out due to recent international legislation. 
D)  has been reduced by the adoption of floating exchange rates.

Question 18

The current direct quote in New York is .01075 dollars per yen.Suppose the current direct quote in Tokyo is 91 yen per dollar.What is the appropriate indirect quote in New York? What will arbitrageurs do to eliminate the differential rates in these markets?

Accepted Answer

Indirect quote in New York = 1/.01075 =

Question 19

Triangular arbitrage eliminates exchange rate differentials across three markets for three currencies.

Accepted Answer

A) True 
 B)False

Question 20

The value of the euro floats against other major international currencies,but has a fixed value when compared to the currencies of the countries in the European Union,such as the French franc and the German mark.

Accepted Answer

A) True 
 B)False

Most major countries in the world have agreed on fixed exchange rates in order to facilitate international trade.

The difference between the asked price and the bid price is known as the spread.

Exchange rate risk is the risk that exchange rates will be lower in the future than they are today.

Exchange rate fluctuations do not increase the riskiness of foreign portfolio investments because changes in exchange rates are compensated for by changes in interest rates and investment returns.

Exchange rate risk exists in international trade contracts denominated in a foreign currency,but not in foreign portfolio investments,because the returns on investment securities are adjusted automatically for differences in exchange rates.

What is exchange rate risk? Why would a multinational firm be concerned about it?

The 30-day forward exchange rate is .01073033 dollars per yen.If this forward rate represents a per year discount of 2.5% from the current spot rate,what is the current spot exchange rate?

Forward contracts are usually quoted for periods greater than 1 year.

Due to the dominance of Chinese companies in international trade,the Chinese yuan is the most frequently traded currency.

Only purely domestic firms that buy all of their inputs and sell all of their outputs in their home countries are unaffected by events in international financial markets.

Foreign currency forward rates aid traders by reducing uncertainty regarding future market fluctuations.

Which of the following is true regarding the correct price of the forward contract?

With international investing,unlike domestic investing,exchange rate risk could cause a marginally-positive-NPV project to be rejected due to the additional risk.

The Euro increased dramatically in value against the U.S.dollar between 2000 and 2009.The result has been that

Commercial centers for foreign exchange exist only in New York and London in order to make it possible for arbitrage to work.

What is a spot transaction? What is a direct quote? An indirect quote?

Exchange rate risk

The current direct quote in New York is .01075 dollars per yen.Suppose the current direct quote in Tokyo is 91 yen per dollar.What is the appropriate indirect quote in New York? What will arbitrageurs do to eliminate the differential rates in these markets?

Triangular arbitrage eliminates exchange rate differentials across three markets for three currencies.

The value of the euro floats against other major international currencies,but has a fixed value when compared to the currencies of the countries in the European Union,such as the French franc and the German mark.

An Introduction to the Foundations of Financial Management

The Financial Markets and Interest Rates

Understanding Financial Statements and Cash Flows

Evaluating a Firms Financial Performance

The Time Value of Money

The Meaning and Measurement of Risk and Return

The Valuation and Characteristics of Bonds

The Valuation and Characteristics of Stock

The Cost of Capital

Capital-Budgeting Techniques and Practice

Cash Flows and Other Topics in Capital Budgeting

Determining the Financing Mix

Dividend Policy and Internal Financing

Short-Term Financial Planning

Working-Capital Management

Cash,receivables,and Inventory Management

Filters

Exam 16: International Business Finance

Most major countries in the world have agreed on fixed exchange rates in order to facilitate international trade.

The difference between the asked price and the bid price is known as the spread.

Exchange rate risk is the risk that exchange rates will be lower in the future than they are today.

Exchange rate fluctuations do not increase the riskiness of foreign portfolio investments because changes in exchange rates are compensated for by changes in interest rates and investment returns.

Exchange rate risk exists in international trade contracts denominated in a foreign currency,but not in foreign portfolio investments,because the returns on investment securities are adjusted automatically for differences in exchange rates.

What is exchange rate risk? Why would a multinational firm be concerned about it?

The 30-day forward exchange rate is .01073033 dollars per yen.If this forward rate represents a per year discount of 2.5% from the current spot rate,what is the current spot exchange rate?

Forward contracts are usually quoted for periods greater than 1 year.

Due to the dominance of Chinese companies in international trade,the Chinese yuan is the most frequently traded currency.

Only purely domestic firms that buy all of their inputs and sell all of their outputs in their home countries are unaffected by events in international financial markets.

Foreign currency forward rates aid traders by reducing uncertainty regarding future market fluctuations.

Which of the following is true regarding the correct price of the forward contract?

With international investing,unlike domestic investing,exchange rate risk could cause a marginally-positive-NPV project to be rejected due to the additional risk.

The Euro increased dramatically in value against the U.S.dollar between 2000 and 2009.The result has been that

Commercial centers for foreign exchange exist only in New York and London in order to make it possible for arbitrage to work.

What is a spot transaction? What is a direct quote? An indirect quote?

Exchange rate risk

The current direct quote in New York is .01075 dollars per yen.Suppose the current direct quote in Tokyo is 91 yen per dollar.What is the appropriate indirect quote in New York? What will arbitrageurs do to eliminate the differential rates in these markets?

Triangular arbitrage eliminates exchange rate differentials across three markets for three currencies.

The value of the euro floats against other major international currencies,but has a fixed value when compared to the currencies of the countries in the European Union,such as the French franc and the German mark.

An Introduction to the Foundations of Financial Management

The Financial Markets and Interest Rates

Understanding Financial Statements and Cash Flows

Evaluating a Firms Financial Performance

The Time Value of Money

The Meaning and Measurement of Risk and Return

The Valuation and Characteristics of Bonds

The Valuation and Characteristics of Stock

The Cost of Capital

Capital-Budgeting Techniques and Practice

Cash Flows and Other Topics in Capital Budgeting

Determining the Financing Mix

Dividend Policy and Internal Financing

Short-Term Financial Planning

Working-Capital Management

Cash,receivables,and Inventory Management

Filters