Question 1

A direct quote of $1.6 per British Pound in the United States is equivalent to a direct quote of .625 British Pounds per U.S.dollar in Great Britain.

Accepted Answer

A) True 
 B)False

Question 2

A U.S.-based multinational corporation has 100% owned subsidiary in Argentina.The subsidiary operates only domestically,that is,all transactions occur within Argentina.Therefore,the U.S.multinational corporation

Accepted Answer

A)  is exposed to translation risk only. 
B)  is not exposed to exchange rate risk because the subsidiary operates 100% domestically. 
C)  is exposed to both translation exposure and economic exposure. 
D)  is most concerned with transactions exposure. 
A)  is exposed to translation risk only. 
B)  is not exposed to exchange rate risk because the subsidiary operates 100% domestically. 
C)  is exposed to both translation exposure and economic exposure. 
D)  is most concerned with transactions exposure.

Question 3

Exchange rate fluctuations increase the variability of returns for investment portfolios that include foreign securities.

Accepted Answer

A) True 
 B)False

Question 4

The transfer of funds among subsidiaries and the parent company of a multinational corporation is achieved by which of the following methods?

Accepted Answer

A)  money-market hedge 
B)  royalties 
C)  forward-market hedge 
D)  leading and lagging 
A)  money-market hedge 
B)  royalties 
C)  forward-market hedge 
D)  leading and lagging

Question 5

Billings,Inc.,a U.S.-based multinational,has just sold equipment to a French company for $1 million.The French company will pay for the order in 60 days.Billings is now exposed to which kind of risk

Accepted Answer

A)  hedging risk. 
B)  transaction risk. 
C)  business risk. 
D)  forward exchange risk. 
A)  hedging risk. 
B)  transaction risk. 
C)  business risk. 
D)  forward exchange risk.

Question 6

Firms generally do not hedge against which type of exposure

Accepted Answer

A)  transaction. 
B)  translation. 
C)  economic. 
D)  financial. 
A)  transaction. 
B)  translation. 
C)  economic. 
D)  financial.

Question 7

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 8

If a firm had plant and equipment expropriated without compensation,this would be referred to as

Accepted Answer

A)  financial risk. 
B)  business risk. 
C)  political risk. 
D)  exchange rate risk. 
A)  financial risk. 
B)  business risk. 
C)  political risk. 
D)  exchange rate risk.

Question 9

Arbitrage is the process of buying in one market and selling in another market in order to make a riskless profit.

Accepted Answer

A) True 
 B)False

Question 10

Exchange rate changes tend to reflect international differences in inflation rates.What is the name of this theory?

Accepted Answer

A)  the purchasing power parity theory 
B)  the IMF effect 
C)  interest rate parity theory 
D)  the law of one price 
A)  the purchasing power parity theory 
B)  the IMF effect 
C)  interest rate parity theory 
D)  the law of one price

Question 11

Exchange rate risk exists in international trade contracts denominated in a foreign currency,but not in foreign portfolio investments,because the returns on investment securities are adjusted automatically for differences in exchange rates.

Accepted Answer

A) True 
 B)False

Question 12

The objective of hedging strategy is to have a zero net asset position in a foreign currency.

Accepted Answer

A) True 
 B)False

Question 13

An exchange rate of $1.6 per British Pound is an example of a direct quote in the United States.

Accepted Answer

A) True 
 B)False

Question 14

A narrow spread indicates efficiency in the spot exchange market.

Accepted Answer

A) True 
 B)False

A direct quote of $1.6 per British Pound in the United States is equivalent to a direct quote of .625 British Pounds per U.S.dollar in Great Britain.

A U.S.-based multinational corporation has 100% owned subsidiary in Argentina.The subsidiary operates only domestically,that is,all transactions occur within Argentina.Therefore,the U.S.multinational corporation

Exchange rate fluctuations increase the variability of returns for investment portfolios that include foreign securities.

The transfer of funds among subsidiaries and the parent company of a multinational corporation is achieved by which of the following methods?

Billings,Inc.,a U.S.-based multinational,has just sold equipment to a French company for $1 million.The French company will pay for the order in 60 days.Billings is now exposed to which kind of risk

Firms generally do not hedge against which type of exposure

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?

If a firm had plant and equipment expropriated without compensation,this would be referred to as

Arbitrage is the process of buying in one market and selling in another market in order to make a riskless profit.

Exchange rate changes tend to reflect international differences in inflation rates.What is the name of this theory?

Exchange rate risk exists in international trade contracts denominated in a foreign currency,but not in foreign portfolio investments,because the returns on investment securities are adjusted automatically for differences in exchange rates.

The objective of hedging strategy is to have a zero net asset position in a foreign currency.

An exchange rate of $1.6 per British Pound is an example of a direct quote in the United States.

A narrow spread indicates efficiency in the spot exchange market.

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

Current Asset Management

Filters

Exam 17: International Business Finance

A direct quote of $1.6 per British Pound in the United States is equivalent to a direct quote of .625 British Pounds per U.S.dollar in Great Britain.

A U.S.-based multinational corporation has 100% owned subsidiary in Argentina.The subsidiary operates only domestically,that is,all transactions occur within Argentina.Therefore,the U.S.multinational corporation

Exchange rate fluctuations increase the variability of returns for investment portfolios that include foreign securities.

The transfer of funds among subsidiaries and the parent company of a multinational corporation is achieved by which of the following methods?

Billings,Inc.,a U.S.-based multinational,has just sold equipment to a French company for $1 million.The French company will pay for the order in 60 days.Billings is now exposed to which kind of risk

Firms generally do not hedge against which type of exposure

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?

If a firm had plant and equipment expropriated without compensation,this would be referred to as

Arbitrage is the process of buying in one market and selling in another market in order to make a riskless profit.

Exchange rate changes tend to reflect international differences in inflation rates.What is the name of this theory?

Exchange rate risk exists in international trade contracts denominated in a foreign currency,but not in foreign portfolio investments,because the returns on investment securities are adjusted automatically for differences in exchange rates.

The objective of hedging strategy is to have a zero net asset position in a foreign currency.

An exchange rate of $1.6 per British Pound is an example of a direct quote in the United States.

A narrow spread indicates efficiency in the spot exchange market.

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

Current Asset Management

Filters