A) exists when the contract is written in terms of the foreign currency. B) exists also in direct foreign investments and foreign portfolio investments. C) does not exist if the international trade contract is written in terms of the domestic currency. D) all of the above. A) exists when the contract is written in terms of the foreign currency. B) exists also in direct foreign investments and foreign portfolio investments. C) does not exist if the international trade contract is written in terms of the domestic currency. D) all of the above.

Exam 16: International Business Finance

Covered interest arbitrage can be taken advantage of when premiums in forward rates are not exactly equal to the interest rate differential between two countries.

(True/False)

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Question 61

Exchange rate risk

(Multiple Choice)

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Question 62

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

(True/False)

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Question 63

A currency swap is the exchange of principal and interest in one currency for the same in another currency for an agreed period of time.

(True/False)

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Question 64

The forward-spot differential is the difference between the forward rate and the expected future spot rate.

(True/False)

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Question 65

Suppose the 360-day forward exchange rate is 1.657 dollars per British Pound,and the current spot rate is 1.625 dollars per British Pound.If the 360-day interest rate in the United States is 5% and the 360-day interest rate in Great Britain is 3%,is the market in equilibrium according to the interest rate parity theory?

(Multiple Choice)

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Question 66

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

(True/False)

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Question 67

In an international trade contract involving one buyer and one seller,both parties may be exposed to exchange rate risk if the contract is denominated in a third currency.

(True/False)

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Question 68

If a U.S.company enters into a purchase agreement with a European company and the contract is denominated in euros,then direct exchange rate risk exists for both companies.

(True/False)

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Question 69

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

(True/False)

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Question 70

Since 1973 the exchange rates between the major currencies of the world are

(Multiple Choice)

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Question 71

Forward rates,like spot rates,are quoted in both direct and indirect form.

(True/False)

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Question 72

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 85,000 euros.The spot exchange rate today is .7559 euros per dollar.How much is the cost today in dollars?

(Multiple Choice)

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Question 73

The spot exchange rate is 1.57 dollars per pound.The 30-day forward exchange rate is .6211 pounds per dollar.The percent-per-year discount on the 30-day pound is

(Multiple Choice)

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Question 74

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

(Multiple Choice)

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Question 75

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.

(True/False)

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Question 76

All of the following are examples of political risk for a U.S.company investing in a foreign country EXCEPT

(Multiple Choice)

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Question 77

If you are an importer of goods and you will make payment for the purchase of inventory on 90-day terms,which of the below is the correct term for the exchange rate that you will use?

(Multiple Choice)

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Question 78

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 35,000 euros.The spot exchange rate today is .6233 euros per dollar.The importer creates a forward-market hedge.The 90-day forward rate is .6100 euros per dollar.The amount the U.S.importer will pay in 90 days is

(Multiple Choice)

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Question 79

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

(Multiple Choice)

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Question 80

Showing 61 - 80 of 109

Covered interest arbitrage can be taken advantage of when premiums in forward rates are not exactly equal to the interest rate differential between two countries.

Exchange rate risk

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

A currency swap is the exchange of principal and interest in one currency for the same in another currency for an agreed period of time.

The forward-spot differential is the difference between the forward rate and the expected future spot rate.

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

In an international trade contract involving one buyer and one seller,both parties may be exposed to exchange rate risk if the contract is denominated in a third currency.

If a U.S.company enters into a purchase agreement with a European company and the contract is denominated in euros,then direct exchange rate risk exists for both companies.

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

Since 1973 the exchange rates between the major currencies of the world are

Forward rates,like spot rates,are quoted in both direct and indirect form.

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 85,000 euros.The spot exchange rate today is .7559 euros per dollar.How much is the cost today in dollars?

The spot exchange rate is 1.57 dollars per pound.The 30-day forward exchange rate is .6211 pounds per dollar.The percent-per-year discount on the 30-day pound is

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

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.

All of the following are examples of political risk for a U.S.company investing in a foreign country EXCEPT

If you are an importer of goods and you will make payment for the purchase of inventory on 90-day terms,which of the below is the correct term for the exchange rate that you will use?

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

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

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