Question 1

Using the Markowitz Portfolio Approach,diversification:

Accepted Answer

A) increases risks and low correlation between assets indicates diversification potential,so low correlation between assets suggests that a firm is in a risk-prone position. 
B) increases risks and high correlation between assets indicates low diversification potential,so firms with low correlations have undertaken too much risk. 
C) reduces risk and low correlation between assets indicates diversification potential,so low correlation between assets offers a firm the opportunity to reduce risks. 
D) reduces risk and low correlation between assets indicates a lack of diversification,so low correlation between assets indicates that the firm needs to reconsider its risks. 
A) increases risks and low correlation between assets indicates diversification potential,so low correlation between assets suggests that a firm is in a risk-prone position. 
B) increases risks and high correlation between assets indicates low diversification potential,so firms with low correlations have undertaken too much risk. 
C) reduces risk and low correlation between assets indicates diversification potential,so low correlation between assets offers a firm the opportunity to reduce risks. 
D) reduces risk and low correlation between assets indicates a lack of diversification,so low correlation between assets indicates that the firm needs to reconsider its risks.

Question 2

Consolidation of cash flows occurring at different times is made possible by using the:

Accepted Answer

A) time value principles that determine the present value of cash flow to be received in the future. 
B) absolute values of the cash flow no matter when it is to be received. 
C) principle that future cash flow is unreliable and can be disregarded. 
D) the average of the cash flows to be received. 
A) time value principles that determine the present value of cash flow to be received in the future. 
B) absolute values of the cash flow no matter when it is to be received. 
C) principle that future cash flow is unreliable and can be disregarded. 
D) the average of the cash flows to be received.

Question 3

The use of standard deviation as a measure of currency risk assumes that currency changes are independent.This means that:

Accepted Answer

A) a currency change is not related to the change in value of any other currency. 
B) a currency change is not in the same percentage as the most recent currency change. 
C) each currency change is unrelated to previous or subsequent currency changes. 
D) each currency change occurs in a different time period than the prior currency change. 
A) a currency change is not related to the change in value of any other currency. 
B) a currency change is not in the same percentage as the most recent currency change. 
C) each currency change is unrelated to previous or subsequent currency changes. 
D) each currency change occurs in a different time period than the prior currency change.

Question 4

One of the results of exchange rate changes that operating exposure considers is:

Accepted Answer

A) how currency changes affect manufacturing costs. 
B) how currency changes affect unit sales. 
C) whether currency changes are positive or negative. 
D) if currency changes are short-term or long-term. 
A) how currency changes affect manufacturing costs. 
B) how currency changes affect unit sales. 
C) whether currency changes are positive or negative. 
D) if currency changes are short-term or long-term.

Question 5

One way to infer future currency volatility is to consider:

Accepted Answer

A) the spot rate of the currency since it incorporates all information known about the currency. 
B) currency option prices since they estimate future currency volatility rather than report past currency volatility. 
C) the history of the volatility of the currency since that suggests the future of the currency. 
D) how currency volatility has affected the firm in the past. 
A) the spot rate of the currency since it incorporates all information known about the currency. 
B) currency option prices since they estimate future currency volatility rather than report past currency volatility. 
C) the history of the volatility of the currency since that suggests the future of the currency. 
D) how currency volatility has affected the firm in the past.

Question 6

The impact of currency value on liquid financial assets and contractual cash flow is measured by:

Accepted Answer

A) transaction exposure. 
B) translation exposure. 
C) economic exposure. 
D) operating exposure. 
A) transaction exposure. 
B) translation exposure. 
C) economic exposure. 
D) operating exposure.

Question 7

Economic exposure as an aspect of currency risks involves:

Accepted Answer

A) the impact of worldwide economic changes on a firm's profitability. 
B) the impact of currency changes on a firm's overall cash flow. 
C) how a firm reacts to negative external economic shocks. 
D) the effect of currency changes on a firm's profit and loss statement. 
A) the impact of worldwide economic changes on a firm's profitability. 
B) the impact of currency changes on a firm's overall cash flow. 
C) how a firm reacts to negative external economic shocks. 
D) the effect of currency changes on a firm's profit and loss statement.

Question 8

One way to infer future currency volatility is to consider currency option prices since they estimate future currency volatility rather than report past currency volatility.How do current currency option prices indicate currency volatility?

Accepted Answer

Currency options are agreements that all

Question 9

In the Markowitz Portfolio Approach,risk is reduced by:

Accepted Answer

A) the diversification of assets. 
B) the correlation between assets. 
C) investing in arrangements that return cash to the firm at different times. 
D) investing in real assets rather than derivatives. 
A) the diversification of assets. 
B) the correlation between assets. 
C) investing in arrangements that return cash to the firm at different times. 
D) investing in real assets rather than derivatives.

Question 10

________________ are subject to currency risks.

Accepted Answer

A) All firms 
B) Only MNCs 
C) All MNCs and many domestic firms 
D) Only foreign-based firms 
A) All firms 
B) Only MNCs 
C) All MNCs and many domestic firms 
D) Only foreign-based firms

Using the Markowitz Portfolio Approach,diversification:

Consolidation of cash flows occurring at different times is made possible by using the:

The use of standard deviation as a measure of currency risk assumes that currency changes are independent.This means that:

One of the results of exchange rate changes that operating exposure considers is:

One way to infer future currency volatility is to consider:

The impact of currency value on liquid financial assets and contractual cash flow is measured by:

Economic exposure as an aspect of currency risks involves:

One way to infer future currency volatility is to consider currency option prices since they estimate future currency volatility rather than report past currency volatility.How do current currency option prices indicate currency volatility?

In the Markowitz Portfolio Approach,risk is reduced by:

________________ are subject to currency risks.

Introduction

International Financial Markets: Structure and Innovation

Currency and Eurocurrency Derivatives

Currency Systems and Valuation

Currency Parity Conditions

Currency Exposure Management

Capital Budgeting

Advanced Capital Budgeting

Long-Term Financing

Optimizing and Financing Working Capital

International Alliances and Acquisitions

International Trade

International Taxation and Accounting

International Portfolio Investments

Filters

Exam 6: Currency Risk Exposure Measurement

Using the Markowitz Portfolio Approach,diversification:

Consolidation of cash flows occurring at different times is made possible by using the:

The use of standard deviation as a measure of currency risk assumes that currency changes are independent.This means that:

One of the results of exchange rate changes that operating exposure considers is:

One way to infer future currency volatility is to consider:

The impact of currency value on liquid financial assets and contractual cash flow is measured by:

Economic exposure as an aspect of currency risks involves:

One way to infer future currency volatility is to consider currency option prices since they estimate future currency volatility rather than report past currency volatility.How do current currency option prices indicate currency volatility?

In the Markowitz Portfolio Approach,risk is reduced by:

________________ are subject to currency risks.

Introduction

International Financial Markets: Structure and Innovation

Currency and Eurocurrency Derivatives

Currency Systems and Valuation

Currency Parity Conditions

Currency Exposure Management

Capital Budgeting

Advanced Capital Budgeting

Long-Term Financing

Optimizing and Financing Working Capital

International Alliances and Acquisitions

International Trade

International Taxation and Accounting

International Portfolio Investments

Filters