Question 1

China's exchange rate is pegged to the:

Accepted Answer

A) U.S. dollar. 
B) price of a barrel of oil. 
C) euro. 
D) none of the options. 
A) U.S. dollar. 
B) price of a barrel of oil. 
C) euro. 
D) none of the options.

Question 2

If the spot rate between the U.S. dollar and the Brazilian real is $1 = 2.5698 real and the 3-month forward rate is $1 = 2.9841 real, is the forward real selling at a discount or a premium?

Accepted Answer

A) Discount 
B) Premium 
C) Unable to determine with the cross-rates 
A) Discount 
B) Premium 
C) Unable to determine with the cross-rates

Question 3

Over the past decade, China has acquired hundreds of billions of U.S. dollars due to the trade imbalance between the two countries. The Chinese government has used many of these dollars to purchase Treasury bonds. What would be the effect if China suddenly decided to sell the majority of these Treasury bonds and exchange the dollars for pesos?

Accepted Answer

A) The price of Treasury bonds would rise, the yield on the Treasury bonds would fall, the dollar would weaken, and the peso would strengthen. 
B) The price of Treasury bonds would rise, the yield on the Treasury bonds would fall, the dollar would strengthen, and the peso would weaken. 
C) The price of Treasury bonds would fall, the yield on the Treasury bonds would rise, the dollar would weaken, and the peso would strengthen. 
D) The price of Treasury bonds would fall, the yield on the Treasury bonds would fall, the dollar would strengthen, and the peso would weaken. 
A) The price of Treasury bonds would rise, the yield on the Treasury bonds would fall, the dollar would weaken, and the peso would strengthen. 
B) The price of Treasury bonds would rise, the yield on the Treasury bonds would fall, the dollar would strengthen, and the peso would weaken. 
C) The price of Treasury bonds would fall, the yield on the Treasury bonds would rise, the dollar would weaken, and the peso would strengthen. 
D) The price of Treasury bonds would fall, the yield on the Treasury bonds would fall, the dollar would strengthen, and the peso would weaken.

Question 4

Convert the following indirect quote to a dollar direct quote: $1 = 0.5467 Latvian lat

Accepted Answer

A) $1.5467 
B) $0.15467 
C) $0.018292 
D) $1.8292 
A) $1.5467 
B) $0.15467 
C) $0.018292 
D) $1.8292

Question 5

Given these two exchange rates, $1 = 1.3254 Australian dollars and $1 = £0.5233, compute the cross rate between the Australian dollars and the pound. State this exchange rate in Australian dollars and in pounds.

Accepted Answer

A) A$2.5329, 0.3948 pounds 
B) A$0.3948, 2.5329 pounds 
C) A$0.3948, 0.6936 pounds 
D) A$0.6936, 0.3948 pounds 
A) A$2.5329, 0.3948 pounds 
B) A$0.3948, 2.5329 pounds 
C) A$0.3948, 0.6936 pounds 
D) A$0.6936, 0.3948 pounds

Question 6

Which of these seeks to reduce, or even eliminate, trade restrictions and tariffs to ease trade between countries?

Accepted Answer

A) Commerce bureaus 
B) Tariff agreements 
C) Trade agreements 
D) Economic analysts 
A) Commerce bureaus 
B) Tariff agreements 
C) Trade agreements 
D) Economic analysts

Question 7

A golf club costs $100 in the United States. The same club costs AU$129 in Australia. Assume that purchasing power parity holds. What is the exchange rate between the U.S. and Australian dollars?

Accepted Answer

A) $1 U.S. = AU$1.25 
B) $1 U.S. = AU$0.7752 
C) AU$1 = $0.7752 U.S. 
D) AU$1 = $1.50 U.S. 
A) $1 U.S. = AU$1.25 
B) $1 U.S. = AU$0.7752 
C) AU$1 = $0.7752 U.S. 
D) AU$1 = $1.50 U.S.

Question 8

Compute the number of dollars that can be bought with 1.5 million of foreign currency units: $1 = 0.5467 Latvian lat

Accepted Answer

A) $969,806.68520 
B) $9,698,066.852 
C) $82,003,061.45 
D) $2,743,735.138 
A) $969,806.68520 
B) $9,698,066.852 
C) $82,003,061.45 
D) $2,743,735.138

Question 9

If the price of silver in England is £7.10 per ounce, what is the expected price of silver in the United States if the spot exchange rate is $1 = £0.5275?

Accepted Answer

A) $7.6275 per ounce 
B) $7.429 per ounce 
C) $3.74525 per ounce 
D) $13.4597 per ounce 
A) $7.6275 per ounce 
B) $7.429 per ounce 
C) $3.74525 per ounce 
D) $13.4597 per ounce

Question 10

Convert the following indirect quote to a dollar direct quote: $1 = 48.210 Philippine peso

Accepted Answer

A) $0.0207 
B) $1.0207 
C) $4.8210 
D) $0.4821 
A) $0.0207 
B) $1.0207 
C) $4.8210 
D) $0.4821

Question 11

Which of these is defined as long-term investment in capital in a business operation located in an economy other than that in which the company is based?

Accepted Answer

A) Managed-floating corporation 
B) Multinational investment 
C) Multinational corporation 
D) Foreign direct investment 
A) Managed-floating corporation 
B) Multinational investment 
C) Multinational corporation 
D) Foreign direct investment

Question 12

Compute the number of dollars that can be bought with 8 million of foreign currency units: $1 = 7.2501 South African rand

Accepted Answer

A) $1,103,433.056 
B) $5,800,080.00 
C) $8,000,000.00 
D) $9,103,200.00 
A) $1,103,433.056 
B) $5,800,080.00 
C) $8,000,000.00 
D) $9,103,200.00

Question 13

If the price of copper in Europe is €2.22 per ounce, what is the expected price of copper in the United States if the spot exchange rate is $1 = €0.7802?

Accepted Answer

A) $3.0002 per ounce 
B) $3.514 per ounce 
C) $1.7320 per ounce 
D) $2.8454 per ounce 
A) $3.0002 per ounce 
B) $3.514 per ounce 
C) $1.7320 per ounce 
D) $2.8454 per ounce

Question 14

A golf club costs $112 in the United States. The same club costs AU$78 in Australia. Assume that purchasing power parity holds. What is the exchange rate between the U.S. and Australian dollars?

Accepted Answer

A) $1 U.S. = AU$1.37 
B) $1 U.S. = AU$1.44 
C) AU$1 = $1.37 U.S. 
D) AU$1 = $1.44 U.S. 
A) $1 U.S. = AU$1.37 
B) $1 U.S. = AU$1.44 
C) AU$1 = $1.37 U.S. 
D) AU$1 = $1.44 U.S.

Question 15

Assume the U.S. dollar spot exchange rate with the Canadian dollar is $1 = CA$1.125. The U.S. dollar and Swiss Franc exchange rate is $1 = 1.235. If the cross rate between the franc and Canadian dollar is 1 franc = CA$0.9820, then show that an arbitrage is possible. What positions should be taken to profit from the mispricing?

Accepted Answer

A) Start with U.S. dollars, buy francs and convert them to Canadian dollars, then convert back to U.S. dollars. 
B) Start with francs, buy U.S. dollars and convert them to Canadian dollars, then convert back to francs. 
C) Start with Canadian dollars, buy francs and convert to U.S. dollars, then convert back to Canadian dollars. 
D) Start with U.S. dollars, buy Canadian dollars and convert to francs, then convert back to U.S. dollars. 
A) Start with U.S. dollars, buy francs and convert them to Canadian dollars, then convert back to U.S. dollars. 
B) Start with francs, buy U.S. dollars and convert them to Canadian dollars, then convert back to francs. 
C) Start with Canadian dollars, buy francs and convert to U.S. dollars, then convert back to Canadian dollars. 
D) Start with U.S. dollars, buy Canadian dollars and convert to francs, then convert back to U.S. dollars.

Question 16

The U.S. dollar spot exchange rate with the Canadian dollar is $1 = CA$1.12. The U.S. dollar and Swiss franc exchange rate is $1 =1.275. If the cross-rate between the franc and Canadian dollar is 1 franc = CA$0.9750, which of the following statements is correct?

Accepted Answer

A) Starting with U.S. dollars, buy Swiss francs and convert them to Canadian dollars, and then convert back to U.S. dollars. 
B) Starting with Canadian dollars, buy Swiss francs and convert them to U.S. dollars, and then convert back to Swiss francs. 
C) Starting with Swiss francs, buy Canadian dollars and convert them to Swiss francs, and then convert back to U.S. dollars. 
D) Starting with Canadian dollars, buy U.S. dollars and convert them to Swiss francs, and then convert back to U.S. dollars. 
A) Starting with U.S. dollars, buy Swiss francs and convert them to Canadian dollars, and then convert back to U.S. dollars. 
B) Starting with Canadian dollars, buy Swiss francs and convert them to U.S. dollars, and then convert back to Swiss francs. 
C) Starting with Swiss francs, buy Canadian dollars and convert them to Swiss francs, and then convert back to U.S. dollars. 
D) Starting with Canadian dollars, buy U.S. dollars and convert them to Swiss francs, and then convert back to U.S. dollars.

Question 17

Compute the amount of foreign currency that can be purchased for $400,000: 1 Indian rupee = $0.02250

Accepted Answer

A) 400,000 rupee 
B) 360,000,000 rupee 
C) 9,000 rupee 
D) 17,777,777.78 rupee 
A) 400,000 rupee 
B) 360,000,000 rupee 
C) 9,000 rupee 
D) 17,777,777.78 rupee

Question 18

What is the percentage change in the value of a $50 million investment in Russia when the exchange rate changes from $1 = 7 rubles to $1 = 12 rubles?

Accepted Answer

A) 41.67 percent 
B) 58.33 percent 
C) 36.84 percent 
D) 63.16 percent 
A) 41.67 percent 
B) 58.33 percent 
C) 36.84 percent 
D) 63.16 percent

Question 19

The U.S. dollar spot exchange rate with the Australian dollar is $1 = AU$1.2219. The U.S. dollar and euro exchange rate is $1 = €0.7595. If the cross-rate between the euro and Australian dollar is €1 = AU$1.575 then show that an arbitrage is possible. What positions should be taken to profit from the mispricing?

Accepted Answer

A) Starting with U.S. dollars, buy Australian dollars and convert them to euros, then convert back to U.S. dollars. 
B) Starting with U.S. dollars, buy euros and convert them to Australian dollars, then convert back to U.S. dollars. 
C) Starting with euros, buy U.S. dollars and convert them to Australian dollars, then convert back to euros. 
D) Starting with Australian dollars, buy euros and convert them to U.S. dollars, then convert back to Australian dollars. 
A) Starting with U.S. dollars, buy Australian dollars and convert them to euros, then convert back to U.S. dollars. 
B) Starting with U.S. dollars, buy euros and convert them to Australian dollars, then convert back to U.S. dollars. 
C) Starting with euros, buy U.S. dollars and convert them to Australian dollars, then convert back to euros. 
D) Starting with Australian dollars, buy euros and convert them to U.S. dollars, then convert back to Australian dollars.

Question 20

Purchasing power parity (PPP) may not hold exactly because of which of the following?

Accepted Answer

A) Shipping costs 
B) Insurance costs 
C) Trading costs 
D) All of the options are transaction costs that may not allow PPP to hold exactly. 
A) Shipping costs 
B) Insurance costs 
C) Trading costs 
D) All of the options are transaction costs that may not allow PPP to hold exactly.

China's exchange rate is pegged to the:

If the spot rate between the U.S. dollar and the Brazilian real is $1 = 2.5698 real and the 3-month forward rate is $1 = 2.9841 real, is the forward real selling at a discount or a premium?

Convert the following indirect quote to a dollar direct quote: $1 = 0.5467 Latvian lat

Given these two exchange rates, $1 = 1.3254 Australian dollars and $1 = £0.5233, compute the cross rate between the Australian dollars and the pound. State this exchange rate in Australian dollars and in pounds.

Which of these seeks to reduce, or even eliminate, trade restrictions and tariffs to ease trade between countries?

A golf club costs $100 in the United States. The same club costs AU$129 in Australia. Assume that purchasing power parity holds. What is the exchange rate between the U.S. and Australian dollars?

Compute the number of dollars that can be bought with 1.5 million of foreign currency units: $1 = 0.5467 Latvian lat

If the price of silver in England is £7.10 per ounce, what is the expected price of silver in the United States if the spot exchange rate is $1 = £0.5275?

Convert the following indirect quote to a dollar direct quote: $1 = 48.210 Philippine peso

Which of these is defined as long-term investment in capital in a business operation located in an economy other than that in which the company is based?

Compute the number of dollars that can be bought with 8 million of foreign currency units: $1 = 7.2501 South African rand

If the price of copper in Europe is €2.22 per ounce, what is the expected price of copper in the United States if the spot exchange rate is $1 = €0.7802?

A golf club costs $112 in the United States. The same club costs AU$78 in Australia. Assume that purchasing power parity holds. What is the exchange rate between the U.S. and Australian dollars?

The U.S. dollar spot exchange rate with the Canadian dollar is $1 = CA$1.12. The U.S. dollar and Swiss franc exchange rate is $1 =1.275. If the cross-rate between the franc and Canadian dollar is 1 franc = CA$0.9750, which of the following statements is correct?

Compute the amount of foreign currency that can be purchased for $400,000: 1 Indian rupee = $0.02250

What is the percentage change in the value of a $50 million investment in Russia when the exchange rate changes from $1 = 7 rubles to $1 = 12 rubles?

Purchasing power parity (PPP) may not hold exactly because of which of the following?

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

China's exchange rate is pegged to the:

If the spot rate between the U.S. dollar and the Brazilian real is $1 = 2.5698 real and the 3-month forward rate is $1 = 2.9841 real, is the forward real selling at a discount or a premium?

Convert the following indirect quote to a dollar direct quote: $1 = 0.5467 Latvian lat

Given these two exchange rates, $1 = 1.3254 Australian dollars and $1 = £0.5233, compute the cross rate between the Australian dollars and the pound. State this exchange rate in Australian dollars and in pounds.

Which of these seeks to reduce, or even eliminate, trade restrictions and tariffs to ease trade between countries?

A golf club costs $100 in the United States. The same club costs AU$129 in Australia. Assume that purchasing power parity holds. What is the exchange rate between the U.S. and Australian dollars?

Compute the number of dollars that can be bought with 1.5 million of foreign currency units: $1 = 0.5467 Latvian lat

If the price of silver in England is £7.10 per ounce, what is the expected price of silver in the United States if the spot exchange rate is $1 = £0.5275?

Convert the following indirect quote to a dollar direct quote: $1 = 48.210 Philippine peso

Which of these is defined as long-term investment in capital in a business operation located in an economy other than that in which the company is based?

Compute the number of dollars that can be bought with 8 million of foreign currency units: $1 = 7.2501 South African rand

If the price of copper in Europe is €2.22 per ounce, what is the expected price of copper in the United States if the spot exchange rate is $1 = €0.7802?

A golf club costs $112 in the United States. The same club costs AU$78 in Australia. Assume that purchasing power parity holds. What is the exchange rate between the U.S. and Australian dollars?

The U.S. dollar spot exchange rate with the Canadian dollar is $1 = CA$1.12. The U.S. dollar and Swiss franc exchange rate is $1 =1.275. If the cross-rate between the franc and Canadian dollar is 1 franc = CA$0.9750, which of the following statements is correct?

Compute the amount of foreign currency that can be purchased for $400,000: 1 Indian rupee = $0.02250

What is the percentage change in the value of a $50 million investment in Russia when the exchange rate changes from $1 = 7 rubles to $1 = 12 rubles?

Purchasing power parity (PPP) may not hold exactly because of which of the following?

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