Question 1

A direct quote of $1.6255 dollars to buy one U.K.pound corresponds to an indirect quote of .6152 pounds per one dollar.

Accepted Answer

A) True 
 B)False  True

Question 2

Forward contracts benefit only the customer due to a reduction in uncertainty.

Accepted Answer

A) True 
 B)False  False

Question 3

Spot exchange markets provide the potential for arbitrage opportunities.

Accepted Answer

A) True 
 B)False  True

Question 4

The efficiency of foreign currency markets is assured,in large measure,by the process of arbitrageurs.

Accepted Answer

A) True 
 B)False

Question 5

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) .01073033 dollars per yen 
B) .01257754 dollars per yen 
C) .01329684 dollars per yen 
D) .01093833 dollars per yen 
A) .01073033 dollars per yen 
B) .01257754 dollars per yen 
C) .01329684 dollars per yen 
D) .01093833 dollars per yen

Question 6

A narrow spread indicates efficiency in the spot exchange market.

Accepted Answer

A) True 
 B)False

Question 7

The Eurodollar market is larger than any financial market in the United States.

Accepted Answer

A) True 
 B)False

Question 8

If you are an importer of goods and you need to make payment for the purchase of inventory before the close of business today,which of the below is the correct term for the exchange rate that you will use?

Accepted Answer

A) indirect rate 
B) spot rate 
C) direct rate 
D) forward rate 
A) indirect rate 
B) spot rate 
C) direct rate 
D) forward rate

Question 9

Which of the following is true?

Accepted Answer

A) The forward rate is the same as the spot rate that will prevail in the future. 
B) The future spot rate is equal to the forward rate less the current spot rate. 
C) The actual spot rate that will prevail in the future is not known today. 
D) The future spot rate is the current spot rate increased by the inflation rate. 
A) The forward rate is the same as the spot rate that will prevail in the future. 
B) The future spot rate is equal to the forward rate less the current spot rate. 
C) The actual spot rate that will prevail in the future is not known today. 
D) The future spot rate is the current spot rate increased by the inflation rate.

Question 10

A major source of long-term capital overseas is in the Eurocurrency market.

Accepted Answer

A) True 
 B)False

Question 11

Suppose a U.S.importer purchases an Italian product today but will not pay for it for 90 days.The cost of the product today is 30,000 euros.The spot exchange rate today is .6233 euros per dollar.If the U.S.importer does not hedge the position,which of the following spot exchange rates in 90 days will yield the highest returns?

Accepted Answer

A) 0.6833 euros per dollar 
B) 0.6499 euros per dollar 
C) $1.4844 per euro 
D) $1.5387 per euro 
A) 0.6833 euros per dollar 
B) 0.6499 euros per dollar 
C) $1.4844 per euro 
D) $1.5387 per euro

Question 12

Which of the following parity conditions is (are)correct?

Accepted Answer

A) The interest-rate parity theory states that the forward premium/discount should be equal and opposite in size to the national interest rate differential. 
B) The purchasing-power parity theory states that in the long run exchange rate changes tend to reflect international differences in inflation rates. 
C) The international Fisher effect states that national interest rate differentials are the result of inflation differentials. 
D) All of the above are correct. 
A) The interest-rate parity theory states that the forward premium/discount should be equal and opposite in size to the national interest rate differential. 
B) The purchasing-power parity theory states that in the long run exchange rate changes tend to reflect international differences in inflation rates. 
C) The international Fisher effect states that national interest rate differentials are the result of inflation differentials. 
D) All of the above are correct.

Question 13

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

Question 14

An indirect quote indicates the number of units of foreign currency that can be bought for one unit of the home currency.

Accepted Answer

A) True 
 B)False

Question 15

The U.S.dollar is the most frequently traded currency in foreign currency markets,accounting for over 40% of total trading.

Accepted Answer

A) True 
 B)False

Question 16

Assume that the British pound is worth 1.6242 U.S.dollars.If a new Jaguar costs $138,000,what is the cost in British pounds?

Accepted Answer

A) 201,000 
B) 84,965 
C) 71,642 
D) 119,998 
A) 201,000 
B) 84,965 
C) 71,642 
D) 119,998

Question 17

Purchasing power parity suggests that interest rates in different countries will adjust so that each currency will have the same purchasing power.

Accepted Answer

A) True 
 B)False

Question 18

The spot exchange rate is 1.57 dollars per pound.The 30-day forward exchange rate is .6211 pounds per dollar.Therefore,pounds in the forward market are selling at a ________ to the current spot rate.

Accepted Answer

A) .958 discount 
B) .958 premium 
C) .04 discount 
D) .04 premium 
A) .958 discount 
B) .958 premium 
C) .04 discount 
D) .04 premium

Question 19

Exchange rate risk exists in International Trade Contracts,Foreign Portfolio Investments,and in Direct Foreign Investments.

Accepted Answer

A) True 
 B)False

Question 20

WSM Wine Importers,Inc.purchased 75,000 cases of French wine at a cost of 6,000,000 Euros.If the current exchange rate is 0.7576 Euros to the U.S.dollar,what is the purchase price of the wine in U.S.dollars?

Accepted Answer

A) $9,684,148 
B) $9,328,651 
C) $8,350,012 
D) $ 7,919,747 
A) $9,684,148 
B) $9,328,651 
C) $8,350,012 
D) $ 7,919,747

A direct quote of $1.6255 dollars to buy one U.K.pound corresponds to an indirect quote of .6152 pounds per one dollar.

Forward contracts benefit only the customer due to a reduction in uncertainty.

Spot exchange markets provide the potential for arbitrage opportunities.

The efficiency of foreign currency markets is assured,in large measure,by the process of arbitrageurs.

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?

A narrow spread indicates efficiency in the spot exchange market.

The Eurodollar market is larger than any financial market in the United States.

If you are an importer of goods and you need to make payment for the purchase of inventory before the close of business today,which of the below is the correct term for the exchange rate that you will use?

Which of the following is true?

A major source of long-term capital overseas is in the Eurocurrency market.

Which of the following parity conditions is (are)correct?

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 indirect quote indicates the number of units of foreign currency that can be bought for one unit of the home currency.

The U.S.dollar is the most frequently traded currency in foreign currency markets,accounting for over 40% of total trading.

Assume that the British pound is worth 1.6242 U.S.dollars.If a new Jaguar costs $138,000,what is the cost in British pounds?

Purchasing power parity suggests that interest rates in different countries will adjust so that each currency will have the same purchasing power.

The spot exchange rate is 1.57 dollars per pound.The 30-day forward exchange rate is .6211 pounds per dollar.Therefore,pounds in the forward market are selling at a ________ to the current spot rate.

Exchange rate risk exists in International Trade Contracts,Foreign Portfolio Investments,and in Direct Foreign Investments.

WSM Wine Importers,Inc.purchased 75,000 cases of French wine at a cost of 6,000,000 Euros.If the current exchange rate is 0.7576 Euros to the U.S.dollar,what is the purchase price of the wine in U.S.dollars?

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

A direct quote of $1.6255 dollars to buy one U.K.pound corresponds to an indirect quote of .6152 pounds per one dollar.

Forward contracts benefit only the customer due to a reduction in uncertainty.

Spot exchange markets provide the potential for arbitrage opportunities.

The efficiency of foreign currency markets is assured,in large measure,by the process of arbitrageurs.

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?

A narrow spread indicates efficiency in the spot exchange market.

The Eurodollar market is larger than any financial market in the United States.

If you are an importer of goods and you need to make payment for the purchase of inventory before the close of business today,which of the below is the correct term for the exchange rate that you will use?

Which of the following is true?

A major source of long-term capital overseas is in the Eurocurrency market.

Which of the following parity conditions is (are)correct?

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 indirect quote indicates the number of units of foreign currency that can be bought for one unit of the home currency.

The U.S.dollar is the most frequently traded currency in foreign currency markets,accounting for over 40% of total trading.

Assume that the British pound is worth 1.6242 U.S.dollars.If a new Jaguar costs $138,000,what is the cost in British pounds?

Purchasing power parity suggests that interest rates in different countries will adjust so that each currency will have the same purchasing power.

The spot exchange rate is 1.57 dollars per pound.The 30-day forward exchange rate is .6211 pounds per dollar.Therefore,pounds in the forward market are selling at a ________ to the current spot rate.

Exchange rate risk exists in International Trade Contracts,Foreign Portfolio Investments,and in Direct Foreign Investments.

WSM Wine Importers,Inc.purchased 75,000 cases of French wine at a cost of 6,000,000 Euros.If the current exchange rate is 0.7576 Euros to the U.S.dollar,what is the purchase price of the wine in U.S.dollars?

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