Question 1

A direct quote is

Accepted Answer

A) is equal to (1 - Indirect quote). 
B) also called the European quote. 
C) is shown as the Currency per USD in the Wall Street Journal. 
D) the number of U.S.dollars required to purchase one unit of a foreign currency. 
E) generally set at the beginning of each calendar day and held constant during that day. 
A) is equal to (1 - Indirect quote). 
B) also called the European quote. 
C) is shown as the Currency per USD in the Wall Street Journal. 
D) the number of U.S.dollars required to purchase one unit of a foreign currency. 
E) generally set at the beginning of each calendar day and held constant during that day.

Question 2

Which one of these must be true if absolute purchasing power parity is to absolutely hold?

Accepted Answer

A) Customer preferences for an item must be identical across markets. 
B) There must be greater demand for the item in one area as compared to another area. 
C) Forward rates must equal spot rates. 
D) The goods traded must have a feature unique to each individual market. 
E) Transaction costs must be imposed on both ends of a trade. 
A) Customer preferences for an item must be identical across markets. 
B) There must be greater demand for the item in one area as compared to another area. 
C) Forward rates must equal spot rates. 
D) The goods traded must have a feature unique to each individual market. 
E) Transaction costs must be imposed on both ends of a trade.

Question 3

Triangle arbitrage:

Accepted Answer

A) no longer exists as all currencies have obtained equilibrium on an ongoing basis. 
B) prevents exchange markets from obtaining equilibrium. 
C) opportunities can exist in either the spot or the forward market. 
D) requires three currencies that are correctly priced plus one incorrectly priced currency. 
E) is rarely profitable. 
A) no longer exists as all currencies have obtained equilibrium on an ongoing basis. 
B) prevents exchange markets from obtaining equilibrium. 
C) opportunities can exist in either the spot or the forward market. 
D) requires three currencies that are correctly priced plus one incorrectly priced currency. 
E) is rarely profitable.

Question 4

Assume a risk-free asset in the United States is currently yielding 2.14 percent while a Canadian risk-free asset is yielding 2.57 percent.The current spot rate is Can$.9894.What is the approximate 3-year forward rate if interest rate parity holds?

Accepted Answer

A) Can$1.0034 
B) Can$1.0027 
C) Can$1.0022 
D) Can$.9973 
E) Can$.9978 
A) Can$1.0034 
B) Can$1.0027 
C) Can$1.0022 
D) Can$.9973 
E) Can$.9978

Question 5

Which one of these best expresses the value of one currency in terms of a second currency?

Accepted Answer

A) LIBOR 
B) Exchange rate 
C) Depository Rate 
D) Arbitrage rate 
E) Real rate 
A) LIBOR 
B) Exchange rate 
C) Depository Rate 
D) Arbitrage rate 
E) Real rate

Question 6

You want to invest in a riskless project in Sweden that has an initial cost of SKr428,000 and is expected to produce cash inflows of SKr231,000 a year for 2 years.The project will be worthless after 2 years.The expected inflation rate in Sweden is 1.7 percent while it is 2.6 percent in the United States.A risk-free security is paying 3.8 percent in the United States.Assume the current spot rate is $1 = SKr7.51.What is the net present value of this project in U.S dollars using the foreign currency approach?

Accepted Answer

A) $31,811.70 
B) $3,799.21 
C) $1,951.11 
D) $93,684.44 
E) $110,043.00 
A) $31,811.70 
B) $3,799.21 
C) $1,951.11 
D) $93,684.44 
E) $110,043.00

Question 7

You want to import $62,000 worth of rugs from India.How many rupees will you need to pay for this purchase if one rupee is worth $.01606?

Accepted Answer

A) 3,860,523RS 
B) 2,803,006RS 
C) 821,048RS 
D) 996RS 
E) 909RS 
A) 3,860,523RS 
B) 2,803,006RS 
C) 821,048RS 
D) 996RS 
E) 909RS

Question 8

The foreign currency approach to capital budgeting analysis

Accepted Answer

A) is computationally harder to use than the home currency approach. 
B) produces different results than the home currency approach. 
C) computes the NPV of a project in both the foreign and the domestic currency. 
D) relies on the international Fisher effect for the exchange rate. 
E) relies on the uncovered interest rate parity to project multiple exchange rates. 
A) is computationally harder to use than the home currency approach. 
B) produces different results than the home currency approach. 
C) computes the NPV of a project in both the foreign and the domestic currency. 
D) relies on the international Fisher effect for the exchange rate. 
E) relies on the uncovered interest rate parity to project multiple exchange rates.

Question 9

You just returned from some extensive traveling.You started your trip with $25,000 in your pocket.You spent €7,800 traveling throughout the European Union,5,500NKr in Norway,and £9,100 in the United Kingdom.The exchange rates were $1 = €.8031,1NKr = $.1422,and £1 = $1.5649.How many dollars did you have left by the time you returned to the United States?

Accepted Answer

A) $9,404.58 
B) $7,211.38 
C) $5,304.49 
D) $264.95 
E) $3.87 
A) $9,404.58 
B) $7,211.38 
C) $5,304.49 
D) $264.95 
E) $3.87

Question 10

The forward rate market is dependent upon

Accepted Answer

A) current forward rates exceeding current spot rates. 
B) current spot rates exceeding current forward rates over time. 
C) current spot rates equalling current forward rates on average over time. 
D) current spot rates equalling the actual future spot rates on average over time. 
E) forward rates equalling the actual future spot rates on average over time. 
A) current forward rates exceeding current spot rates. 
B) current spot rates exceeding current forward rates over time. 
C) current spot rates equalling current forward rates on average over time. 
D) current spot rates equalling the actual future spot rates on average over time. 
E) forward rates equalling the actual future spot rates on average over time.

Question 11

Which one of these combinations of country,currency,and currency symbol is incorrect?

Accepted Answer

A) Mexico,peso,Ps 
B) Japan,yen,¥ 
C) United Kingdom,pound,£ 
D) Saudi Arabia,riyal,Ry 
E) EMU,euro,€ 
A) Mexico,peso,Ps 
B) Japan,yen,¥ 
C) United Kingdom,pound,£ 
D) Saudi Arabia,riyal,Ry 
E) EMU,euro,€

Question 12

Which one of these presents the idea that forward rates are equal to expected future spot rates?

Accepted Answer

A) International Fisher effect 
B) Interest rate parity 
C) Uncovered interest rate parity 
D) Triangle arbitrage 
E) Unbiased forward rate condition 
A) International Fisher effect 
B) Interest rate parity 
C) Uncovered interest rate parity 
D) Triangle arbitrage 
E) Unbiased forward rate condition

Question 13

Assume $1 will buy Can$1.1417 while $1.2452 will buy €1.What is the Canadian dollar/euro exchange rate?

Accepted Answer

A) Can$.9169 = €1 
B) Can$1.0907 = €1 
C) Can$1.2619 = €1 
D) Can$1.4216 = €1 
E) Can$1.1358 = €1 
A) Can$.9169 = €1 
B) Can$1.0907 = €1 
C) Can$1.2619 = €1 
D) Can$1.4216 = €1 
E) Can$1.1358 = €1

Question 14

How many Singapore dollars can you get for $3,600 if the indirect quote is 1.3043?

Accepted Answer

A) S$3,661.20 
B) S$3,911.15 
C) S$4,695.48 
D) S$2,760.10 
E) S$2,922.01 
A) S$3,661.20 
B) S$3,911.15 
C) S$4,695.48 
D) S$2,760.10 
E) S$2,922.01

Question 15

Which one of the following statements is correct?

Accepted Answer

A) A firm's long-run exchange rate risk can be reduced by borrowing money in the foreign country where it has operations. 
B) FASB requires that all translation gains and losses be recorded annually on the firm's income statement. 
C) Unexpected changes in economic conditions are classified as short-run exposure to exchange rate risk. 
D) Foreign assets are recorded on the parent firm's balance sheet based on the exchange rate at the time each asset is acquired. 
E) The usage of forward rates primarily addresses the long-run exposure to exchange rate risk. 
A) A firm's long-run exchange rate risk can be reduced by borrowing money in the foreign country where it has operations. 
B) FASB requires that all translation gains and losses be recorded annually on the firm's income statement. 
C) Unexpected changes in economic conditions are classified as short-run exposure to exchange rate risk. 
D) Foreign assets are recorded on the parent firm's balance sheet based on the exchange rate at the time each asset is acquired. 
E) The usage of forward rates primarily addresses the long-run exposure to exchange rate risk.

Question 16

Which of the following are means of repatriating funds from a foreign operation?

Accepted Answer

A) Nationalization,confiscation,and exploitation 
B) Blocked funds,home office fees,and dividend payments 
C) Interest payments on foreign debt,dividend payments,and management fees 
D) Royalties,management fees,and dividend payments 
E) Wages to foreign employees,interest payments on foreign debt,and sales fees to foreign agents 
A) Nationalization,confiscation,and exploitation 
B) Blocked funds,home office fees,and dividend payments 
C) Interest payments on foreign debt,dividend payments,and management fees 
D) Royalties,management fees,and dividend payments 
E) Wages to foreign employees,interest payments on foreign debt,and sales fees to foreign agents

Question 17

You are considering a project in India which has an initial cost of 250,000RS.The project is expected to return a one-time payment of 425,000RS 5 years from now.The risk-free rate of return is 2.7 percent in the United States and 4.3 percent in India.The inflation rate is 2.2 percent in the United States and 5.3 percent in India.Currently,you can buy 6,300RS for $100.How much will the payment 5 years from now be worth in U.S.dollars?

Accepted Answer

A) $6,231 
B) $7,060 
C) $7,201 
D) $7,313 
E) $6,515 
A) $6,231 
B) $7,060 
C) $7,201 
D) $7,313 
E) $6,515

Question 18

Assume the spot rate for the Japanese yen currently is ¥111.04 per $1.The 1-year forward rate is ¥111.62 per $1.Also assume a risk-free asset in Japan is currently earning 3.4 percent.If interest rate parity holds,approximately what rate can you earn on a 1-year risk-free U.S.security?

Accepted Answer

A) 4)15% 
B) 3)08% 
C) 2)86% 
D) 2)46% 
E) 3)94% 
A) 4)15% 
B) 3)08% 
C) 2)86% 
D) 2)46% 
E) 3)94%

Question 19

Assume today you can exchange $1 for £.7998,while last week £1 was worth $1.2506.Also assume you converted £500 into dollars last week and then converted your dollars back to pounds this week.What is your net profit or loss in pounds?

Accepted Answer

A) £)1708 
B) £)1149 
C) £)3018 
D) £)3302 
E) £)2108 
A) £)1708 
B) £)1149 
C) £)3018 
D) £)3302 
E) £)2108

A direct quote is

Which one of these must be true if absolute purchasing power parity is to absolutely hold?

Triangle arbitrage:

Assume a risk-free asset in the United States is currently yielding 2.14 percent while a Canadian risk-free asset is yielding 2.57 percent.The current spot rate is Can$.9894.What is the approximate 3-year forward rate if interest rate parity holds?

Which one of these best expresses the value of one currency in terms of a second currency?

You want to import $62,000 worth of rugs from India.How many rupees will you need to pay for this purchase if one rupee is worth $.01606?

The foreign currency approach to capital budgeting analysis

The forward rate market is dependent upon

Which one of these combinations of country,currency,and currency symbol is incorrect?

Which one of these presents the idea that forward rates are equal to expected future spot rates?

Assume $1 will buy Can$1.1417 while $1.2452 will buy €1.What is the Canadian dollar/euro exchange rate?

How many Singapore dollars can you get for $3,600 if the indirect quote is 1.3043?

Which one of the following statements is correct?

Which of the following are means of repatriating funds from a foreign operation?

Assume the spot rate for the Japanese yen currently is ¥111.04 per $1.The 1-year forward rate is ¥111.62 per $1.Also assume a risk-free asset in Japan is currently earning 3.4 percent.If interest rate parity holds,approximately what rate can you earn on a 1-year risk-free U.S.security?

Assume today you can exchange $1 for £.7998,while last week £1 was worth $1.2506.Also assume you converted £500 into dollars last week and then converted your dollars back to pounds this week.What is your net profit or loss in pounds?

Introduction to Corporate Finance

Financial Statements AMCQ Cash Flow

Financial Statements Analysis Amcq Financial Models

Discounted Cash Flow Valuation

Interest Rates AMCQ Bomcq Valuation

Stock Valuation

Net Present Value AMCQ Other Investment Rules

Making Capital Investment Decisions

Risk Analysis, Real Options, AMCQ Capital Budgeting

Risk Amcq Return: Lessons From Market History

Return Amcq Risk: the Capital Asset Pricing Model Capm

Risk, cost of Capital, AMCQ Valuation

Efficient Capital Markets Amcq Behavioral Challenges

Capital Structure: Basic Concepts

Capital Structure: Limits to the Use of Debt

Dividemcqs AMCQ Other Payouts

Options Amcq Corporate Finance

Short-Term Finance Amcq Planning

Raising Capital

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Exam 20: International Corporate Finance

A direct quote is

Which one of these must be true if absolute purchasing power parity is to absolutely hold?

Triangle arbitrage:

Assume a risk-free asset in the United States is currently yielding 2.14 percent while a Canadian risk-free asset is yielding 2.57 percent.The current spot rate is Can$.9894.What is the approximate 3-year forward rate if interest rate parity holds?

Which one of these best expresses the value of one currency in terms of a second currency?

You want to import $62,000 worth of rugs from India.How many rupees will you need to pay for this purchase if one rupee is worth $.01606?

The foreign currency approach to capital budgeting analysis

The forward rate market is dependent upon

Which one of these combinations of country,currency,and currency symbol is incorrect?

Which one of these presents the idea that forward rates are equal to expected future spot rates?

Assume $1 will buy Can$1.1417 while $1.2452 will buy €1.What is the Canadian dollar/euro exchange rate?

How many Singapore dollars can you get for $3,600 if the indirect quote is 1.3043?

Which one of the following statements is correct?

Which of the following are means of repatriating funds from a foreign operation?

Assume the spot rate for the Japanese yen currently is ¥111.04 per $1.The 1-year forward rate is ¥111.62 per $1.Also assume a risk-free asset in Japan is currently earning 3.4 percent.If interest rate parity holds,approximately what rate can you earn on a 1-year risk-free U.S.security?

Assume today you can exchange $1 for £.7998,while last week £1 was worth $1.2506.Also assume you converted £500 into dollars last week and then converted your dollars back to pounds this week.What is your net profit or loss in pounds?

Introduction to Corporate Finance

Financial Statements AMCQ Cash Flow

Financial Statements Analysis Amcq Financial Models

Discounted Cash Flow Valuation

Interest Rates AMCQ Bomcq Valuation

Stock Valuation

Net Present Value AMCQ Other Investment Rules

Making Capital Investment Decisions

Risk Analysis, Real Options, AMCQ Capital Budgeting

Risk Amcq Return: Lessons From Market History

Return Amcq Risk: the Capital Asset Pricing Model Capm

Risk, cost of Capital, AMCQ Valuation

Efficient Capital Markets Amcq Behavioral Challenges

Capital Structure: Basic Concepts

Capital Structure: Limits to the Use of Debt

Dividemcqs AMCQ Other Payouts

Options Amcq Corporate Finance

Short-Term Finance Amcq Planning

Raising Capital

Mergers Amcq Acquisitions Web Only

Filters