Question 1

Which of these is the trade agreement between South American countries to create their own free trade zone?

Accepted Answer

A) South American Union 
B) South American Free Trade Agreement (SAFT
A)  
C) South American Monetary Fund (SAMF) 
D) Mercosur 
A) South American Union 
B) South American Free Trade Agreement (SAFT
A)  
C) South American Monetary Fund (SAMF) 
D) Mercosur

Question 2

Compute the amount of foreign currency that can be purchased for $750,000: 1 Israeli shekel = $0.2351

Accepted Answer

A) 926,325 shekel 
B) 750,000 shekel 
C) 176,325 shekel 
D) 3,190,131.859 shekel 
A) 926,325 shekel 
B) 750,000 shekel 
C) 176,325 shekel 
D) 3,190,131.859 shekel

Question 3

International capital budgeting will require that managers:

Accepted Answer

A) recognize all of the risks as well as the rewards. 
B) increase the discount rate to account for any added risks associated with that country. 
C) convert all incremental cash flows to the domestic currency or convert the domestic discount rate to an equivalent rate in the foreign country. 
D) All of the options are required. 
A) recognize all of the risks as well as the rewards. 
B) increase the discount rate to account for any added risks associated with that country. 
C) convert all incremental cash flows to the domestic currency or convert the domestic discount rate to an equivalent rate in the foreign country. 
D) All of the options are required.

Question 4

Which of the following is the definition of political risk?

Accepted Answer

A) The possibility that changes in the corporation will occur that reduce the profitability of doing business in that country. 
B) The possibility that changes in the business environment will occur that reduce the profitability of doing business in that country. 
C) The possibility that changes in the business environment will occur that increase the profitability of doing business in that country. 
D) The possibility that international rules will occur that reduce the profitability of doing business in one particular country. 
A) The possibility that changes in the corporation will occur that reduce the profitability of doing business in that country. 
B) The possibility that changes in the business environment will occur that reduce the profitability of doing business in that country. 
C) The possibility that changes in the business environment will occur that increase the profitability of doing business in that country. 
D) The possibility that international rules will occur that reduce the profitability of doing business in one particular country.

Question 5

The Russian financial crisis of 1998 caused Russia's currency to be dramatically devalued. What is the percentage change in value of a $100 million investment in Russia when the exchange rate changes from $1 = 6 rubles to $1 = 25 rubles?

Accepted Answer

A) (-49 percent) 
B) (-57 percent) 
C) (-069 percent) 
D) (-76 percent) 
A) (-49 percent) 
B) (-57 percent) 
C) (-069 percent) 
D) (-76 percent)

Question 6

In the late 1990s, many East Asian currencies suddenly and dramatically devalued. What is the percentage change in the value of a $75 million investment in Indonesia when the exchange rate changes from $1 = 1,000 rupiah to $1 = 7,000 rupiah?

Accepted Answer

A) 14.29 percent 
B) 85.71 percent 
C) 12.5 percent 
D) 87.5 percent 
A) 14.29 percent 
B) 85.71 percent 
C) 12.5 percent 
D) 87.5 percent

Question 7

Compute the amount of foreign currency that can be purchased for $1,000,000: 1 Malaysian ringget = $0.2875

Accepted Answer

A) 287,500 ringget 
B) 1,287,500 ringget 
C) 3,478,260.87 ringget 
D) 4,478,300 ringget 
A) 287,500 ringget 
B) 1,287,500 ringget 
C) 3,478,260.87 ringget 
D) 4,478,300 ringget

Question 8

Compute the number of dollars that can be bought with 2 million of foreign currency units: $1 = 15,990 Vietnam dong

Accepted Answer

A) $125.0782 
B) $3,198.00 
C) $12,507.82 
D) $198.7577 
A) $125.0782 
B) $3,198.00 
C) $12,507.82 
D) $198.7577

Question 9

Convert the following direct quote to a dollar indirect quote: 1 Korean won = $0.001045

Accepted Answer

A) 0.1045 won 
B) 1.001045 won 
C) 9.5694 won 
D) 956.9378 won 
A) 0.1045 won 
B) 1.001045 won 
C) 9.5694 won 
D) 956.9378 won

Question 10

When Starbucks opens a location in Mexico City, this is an example of:

Accepted Answer

A) foreign direct investment. 
B) arbitrage opportunity. 
C) management of capital budgeting issues. 
D) none of the options. 
A) foreign direct investment. 
B) arbitrage opportunity. 
C) management of capital budgeting issues. 
D) none of the options.

Question 11

Which of these is defined as the possibility that the spot currency exchange rate will change and reduce the value of foreign assets and cash flows?

Accepted Answer

A) Foreign rate risk 
B) Exchange rate risk 
C) Spot rate risk 
D) Value rate risk 
A) Foreign rate risk 
B) Exchange rate risk 
C) Spot rate risk 
D) Value rate risk

Question 12

Convert the following indirect quote to a dollar direct quote: $1 = 3.8249 Saudi Arabian riyal

Accepted Answer

A) $0.2614 
B) $4.8249 
C) $0.38249 
D) $1.00 
A) $0.2614 
B) $4.8249 
C) $0.38249 
D) $1.00

Question 13

The spot rate between the U.S. dollar and the New Zealand dollar is $1 = NZD1.6607. If the interest rate in the United States is 6 percent and in New Zealand is 4 percent, then what should be the three-month forward exchange rate?

Accepted Answer

A) $0.5368 per NZD 
B) $0.6051 per NZD 
C) $0.7614 per NZD 
D) $0.8075 per NZD 
A) $0.5368 per NZD 
B) $0.6051 per NZD 
C) $0.7614 per NZD 
D) $0.8075 per NZD

Question 14

All of the following are ways to conduct international business EXCEPT:

Accepted Answer

A) direct ownership investment. 
B) import/export operations. 
C) partnership arrangements. 
D) all of the options. 
A) direct ownership investment. 
B) import/export operations. 
C) partnership arrangements. 
D) all of the options.

Question 15

A financial manager has determined that the appropriate discount rate for a foreign project is 16 percent. However, that discount rate applies in the United States using dollars. What discount rate should be used in the foreign country using the foreign currency? The inflation rates in the United States and in the foreign country are expected to be 4 percent and 8 percent, respectively.

Accepted Answer

A) 16 percent 
B) 20 percent 
C) 12 percent 
D) 24 percent 
A) 16 percent 
B) 20 percent 
C) 12 percent 
D) 24 percent

Question 16

A golf club costs $143 in the United States. The same club costs AU$100 in Australia. Assume that purchasing power parity holds. What is the exchange rate between the U.S. and Australian dollars?

Accepted Answer

A) AU$1 = $1.43 U.S. 
B) AU$1 = $1.25 U.S. 
C) AU$1 = $0.6993 U.S. 
D) AU$1 = $0.7752U.S. 
A) AU$1 = $1.43 U.S. 
B) AU$1 = $1.25 U.S. 
C) AU$1 = $0.6993 U.S. 
D) AU$1 = $0.7752U.S.

Question 17

If gold is selling in the U.S. for $1,015 per ounce and if 1 peso = $0.35, then gold should sell for _________ in Mexico.

Accepted Answer

A) $2,900 
B) 355.25 pesos 
C) 2,900 pesos 
D) $355.25 
A) $2,900 
B) 355.25 pesos 
C) 2,900 pesos 
D) $355.25

Question 18

If the price of silver in England is £6.25 per ounce, what is the expected price of silver in the United States if the spot exchange rate is $1 = £0.55?

Accepted Answer

A) $11.36 
B) $13.25 
C) $10.17 
D) $14.06 
A) $11.36 
B) $13.25 
C) $10.17 
D) $14.06

Question 19

Which of the following is NOT an example of how a company could hedge to reduce currency risk?

Accepted Answer

A) Buying futures contracts 
B) Buying options 
C) Currency swaps 
D) Fixed peg arrangements 
A) Buying futures contracts 
B) Buying options 
C) Currency swaps 
D) Fixed peg arrangements

Question 20

Compute the number of dollars that can be bought with 5 million of foreign currency units: $1 = 2,150.4 Venezuelan bolivar

Accepted Answer

A) $2,325.1488 
B) $232,514.88 
C) $7,325,000 
D) $43,008,000.00 
A) $2,325.1488 
B) $232,514.88 
C) $7,325,000 
D) $43,008,000.00

Which of these is the trade agreement between South American countries to create their own free trade zone?

Compute the amount of foreign currency that can be purchased for $750,000: 1 Israeli shekel = $0.2351

International capital budgeting will require that managers:

Which of the following is the definition of political risk?

The Russian financial crisis of 1998 caused Russia's currency to be dramatically devalued. What is the percentage change in value of a $100 million investment in Russia when the exchange rate changes from $1 = 6 rubles to $1 = 25 rubles?

In the late 1990s, many East Asian currencies suddenly and dramatically devalued. What is the percentage change in the value of a $75 million investment in Indonesia when the exchange rate changes from $1 = 1,000 rupiah to $1 = 7,000 rupiah?

Compute the amount of foreign currency that can be purchased for $1,000,000: 1 Malaysian ringget = $0.2875

Compute the number of dollars that can be bought with 2 million of foreign currency units: $1 = 15,990 Vietnam dong

Convert the following direct quote to a dollar indirect quote: 1 Korean won = $0.001045

When Starbucks opens a location in Mexico City, this is an example of:

Which of these is defined as the possibility that the spot currency exchange rate will change and reduce the value of foreign assets and cash flows?

Convert the following indirect quote to a dollar direct quote: $1 = 3.8249 Saudi Arabian riyal

The spot rate between the U.S. dollar and the New Zealand dollar is $1 = NZD1.6607. If the interest rate in the United States is 6 percent and in New Zealand is 4 percent, then what should be the three-month forward exchange rate?

All of the following are ways to conduct international business EXCEPT:

A golf club costs $143 in the United States. The same club costs AU$100 in Australia. Assume that purchasing power parity holds. What is the exchange rate between the U.S. and Australian dollars?

If gold is selling in the U.S. for $1,015 per ounce and if 1 peso = $0.35, then gold should sell for _________ in Mexico.

If the price of silver in England is £6.25 per ounce, what is the expected price of silver in the United States if the spot exchange rate is $1 = £0.55?

Which of the following is NOT an example of how a company could hedge to reduce currency risk?

Compute the number of dollars that can be bought with 5 million of foreign currency units: $1 = 2,150.4 Venezuelan bolivar

Introduction to Financial Management

Reviewing Financial Statements

Analyzing Financial Statements

Time Value of Money 1: Analyzing Single Cash Flows

Time Value of Money 2: Analyzing Annuity Cash Flows

Understanding Financial Markets and Institutions

Valuing Bonds

Valuing Stocks

Characterizing Risk and Return

Estimating Risk and Return

Calculating the Cost of Capital

Estimating Cash Flows on Capital Budgeting Projects

Weighing Net Present Value and Other Capital Budgeting Criteria

Working Capital Management and Policies

Financial Planning and Forecasting

Assessing Long-Term Debt, Equity, and Capital Structure

Sharing Firm Wealth: Dividends, Share Repurchases, and Other Payouts

Issuing Capital and the Investment Banking Process

Mergers and Acquisitions and Financial Distress

Filters

Exam 19: International Corporate Finance

Which of these is the trade agreement between South American countries to create their own free trade zone?

Compute the amount of foreign currency that can be purchased for $750,000: 1 Israeli shekel = $0.2351

International capital budgeting will require that managers:

Which of the following is the definition of political risk?

The Russian financial crisis of 1998 caused Russia's currency to be dramatically devalued. What is the percentage change in value of a $100 million investment in Russia when the exchange rate changes from $1 = 6 rubles to $1 = 25 rubles?

In the late 1990s, many East Asian currencies suddenly and dramatically devalued. What is the percentage change in the value of a $75 million investment in Indonesia when the exchange rate changes from $1 = 1,000 rupiah to $1 = 7,000 rupiah?

Compute the amount of foreign currency that can be purchased for $1,000,000: 1 Malaysian ringget = $0.2875

Compute the number of dollars that can be bought with 2 million of foreign currency units: $1 = 15,990 Vietnam dong

Convert the following direct quote to a dollar indirect quote: 1 Korean won = $0.001045

When Starbucks opens a location in Mexico City, this is an example of:

Which of these is defined as the possibility that the spot currency exchange rate will change and reduce the value of foreign assets and cash flows?

Convert the following indirect quote to a dollar direct quote: $1 = 3.8249 Saudi Arabian riyal

The spot rate between the U.S. dollar and the New Zealand dollar is $1 = NZD1.6607. If the interest rate in the United States is 6 percent and in New Zealand is 4 percent, then what should be the three-month forward exchange rate?

All of the following are ways to conduct international business EXCEPT:

A golf club costs $143 in the United States. The same club costs AU$100 in Australia. Assume that purchasing power parity holds. What is the exchange rate between the U.S. and Australian dollars?

If gold is selling in the U.S. for $1,015 per ounce and if 1 peso = $0.35, then gold should sell for _________ in Mexico.

If the price of silver in England is £6.25 per ounce, what is the expected price of silver in the United States if the spot exchange rate is $1 = £0.55?

Which of the following is NOT an example of how a company could hedge to reduce currency risk?

Compute the number of dollars that can be bought with 5 million of foreign currency units: $1 = 2,150.4 Venezuelan bolivar

Introduction to Financial Management

Reviewing Financial Statements

Analyzing Financial Statements

Time Value of Money 1: Analyzing Single Cash Flows

Time Value of Money 2: Analyzing Annuity Cash Flows

Understanding Financial Markets and Institutions

Valuing Bonds

Valuing Stocks

Characterizing Risk and Return

Estimating Risk and Return

Calculating the Cost of Capital

Estimating Cash Flows on Capital Budgeting Projects

Weighing Net Present Value and Other Capital Budgeting Criteria

Working Capital Management and Policies

Financial Planning and Forecasting

Assessing Long-Term Debt, Equity, and Capital Structure

Sharing Firm Wealth: Dividends, Share Repurchases, and Other Payouts

Issuing Capital and the Investment Banking Process

Mergers and Acquisitions and Financial Distress

Filters