Question 1

Purchasing price parity is more likely to be the case for common commodities than for personal services.

Accepted Answer

A) True 
 B)False  True

Question 2

Capital markets in foreign countries:

Accepted Answer

A) offer lower returns than those obtainable in the domestic capital markets. 
B) provide international diversification. 
C) in general are becoming less integrated due to the widespread availability of interest rate and currency swaps. 
D) increase portfolio betas. 
A) offer lower returns than those obtainable in the domestic capital markets. 
B) provide international diversification. 
C) in general are becoming less integrated due to the widespread availability of interest rate and currency swaps. 
D) increase portfolio betas. B

Question 3

Assume that a buyer of Italian wine saw the following quotes: spot rate of .75 euros to the U.S.dollar;30-day forward rate of .747 euros to the U.S.dollar;90-day forward rate of .744 euros to the U.S.dollar.What does this information imply?

Accepted Answer

A) The forward euro is selling at a premium as compared with the spot euro. 
B) The dollar is expected to maintain the same value in the near future relative to the euro. 
C) The forward euro is selling at a discount as compared with the spot euro. 
D) None of the above. 
A) The forward euro is selling at a premium as compared with the spot euro. 
B) The dollar is expected to maintain the same value in the near future relative to the euro. 
C) The forward euro is selling at a discount as compared with the spot euro. 
D) None of the above. A

Question 4

Which of the following is a conceptual method for keeping the foreign currency market in equilibrium?

Accepted Answer

A) The purchasing power parity mechanisms 
B) The balance of trade mechanisms 
C) Government intervention through central banks 
D) The interest rate parity mechanisms 
A) The purchasing power parity mechanisms 
B) The balance of trade mechanisms 
C) Government intervention through central banks 
D) The interest rate parity mechanisms

Question 5

An investor purchased 200,000,000 Japanese yen at an exchange rate of 93 yen to the dollar.the yen cost her ________.

Accepted Answer

A) $18,600 
B) $10,752.70 
C) $21,505.30 
D) $186,000 
A) $18,600 
B) $10,752.70 
C) $21,505.30 
D) $186,000

Question 6

Spot exchange markets have the potential for arbitrage opportunities for a long period of time.

Accepted Answer

A) True 
 B)False

Question 7

Prices differences of identical items in different currencies can best be explained by the international Fisher effect.

Accepted Answer

A) True 
 B)False

Question 8

One reason for international investment is that:

Accepted Answer

A) the economies of many countries are growing faster than the U.S. 
B) price-earnings (P/
E) ratios are higher in foreign countries. 
C) doing business in foreign countries is simpler than in the U.S. 
D) raw materials are typically cheaper in other countries than in the U.S. 
A) the economies of many countries are growing faster than the U.S. 
B) price-earnings (P/
E) ratios are higher in foreign countries. 
C) doing business in foreign countries is simpler than in the U.S. 
D) raw materials are typically cheaper in other countries than in the U.S.

Question 9

A direct quote in Bombay tells one how many British pounds can buy one Indian rupee.

Accepted Answer

A) True 
 B)False

Question 10

If a currency's forward price in U.S.dollars is higher than the spot price,interest rates are higher in the foreign country than they are in the U.S.

Accepted Answer

A) True 
 B)False

Question 11

If a country is has high interest rates because of inflation,the forward price of its currency will be higher than the spot price.

Accepted Answer

A) True 
 B)False

Question 12

If a currency's forward price in U.S.dollars is lower than the spot price,interest rates are higher in the foreign country than they are in the U.S.

Accepted Answer

A) True 
 B)False

Question 13

Participants in foreign exchange trading include:

Accepted Answer

A) importers and exporters. 
B) investors and portfolio managers. 
C) currency traders. 
D) all of the above. 
A) importers and exporters. 
B) investors and portfolio managers. 
C) currency traders. 
D) all of the above.

Question 14

One U.S.dollar buys 92.61 yen and 12.707 Mexican pesos.What is price of pesos in yen?

Accepted Answer

A) 7.2881 
B) .1372 
C) .0787 
D) 1.0798 
A) 7.2881 
B) .1372 
C) .0787 
D) 1.0798

Question 15

When banks transact in foreign currencies,the direct bid quote is greater than the direct asked quote.

Accepted Answer

A) True 
 B)False

Question 16

What keeps foreign exchange quotes in two different countries in line with each other?

Accepted Answer

A) Cross rates 
B) Forward rates 
C) Arbitrage 
D) Spot rates 
A) Cross rates 
B) Forward rates 
C) Arbitrage 
D) Spot rates

Question 17

The foreign exchange market is similar in form to the New York Stock Exchange.

Accepted Answer

A) True 
 B)False

Question 18

Because a large part of a subsidiary's equity funds comes from the parent,the subsidiary should use the same cost of equity as the parent.

Accepted Answer

A) True 
 B)False

Question 19

Briefly discuss the factors that multinational firms consider in arriving at capital structure decisions.

Accepted Answer

Multinational firms should consider seve

Question 20

Use the following information to answer the following question(s).
Below is an excerpt from Table 19.1,Foreign Exchange Ratrd (January 8,2010)that appears in your text.(Sources The Wall Street Journal and Reuters)
  
-The number of pounds you can purchase per U.S.dollar is:

Accepted Answer

A) 1.6008. 
B) 6.239. 
C) 0.6239. 
D) 1.6028. 
A) 1.6008. 
B) 6.239. 
C) 0.6239. 
D) 1.6028.

Purchasing price parity is more likely to be the case for common commodities than for personal services.

Capital markets in foreign countries:

Assume that a buyer of Italian wine saw the following quotes: spot rate of .75 euros to the U.S.dollar;30-day forward rate of .747 euros to the U.S.dollar;90-day forward rate of .744 euros to the U.S.dollar.What does this information imply?

Which of the following is a conceptual method for keeping the foreign currency market in equilibrium?

An investor purchased 200,000,000 Japanese yen at an exchange rate of 93 yen to the dollar.the yen cost her ________.

Spot exchange markets have the potential for arbitrage opportunities for a long period of time.

Prices differences of identical items in different currencies can best be explained by the international Fisher effect.

One reason for international investment is that:

A direct quote in Bombay tells one how many British pounds can buy one Indian rupee.

If a currency's forward price in U.S.dollars is higher than the spot price,interest rates are higher in the foreign country than they are in the U.S.

If a country is has high interest rates because of inflation,the forward price of its currency will be higher than the spot price.

If a currency's forward price in U.S.dollars is lower than the spot price,interest rates are higher in the foreign country than they are in the U.S.

Participants in foreign exchange trading include:

One U.S.dollar buys 92.61 yen and 12.707 Mexican pesos.What is price of pesos in yen?

When banks transact in foreign currencies,the direct bid quote is greater than the direct asked quote.

What keeps foreign exchange quotes in two different countries in line with each other?

The foreign exchange market is similar in form to the New York Stock Exchange.

Because a large part of a subsidiary's equity funds comes from the parent,the subsidiary should use the same cost of equity as the parent.

Briefly discuss the factors that multinational firms consider in arriving at capital structure decisions.

Use the following information to answer the following question(s). Below is an excerpt from Table 19.1,Foreign Exchange Ratrd (January 8,2010)that appears in your text.(Sources The Wall Street Journal and Reuters) -The number of pounds you can purchase per U.S.dollar is:

Getting Started-Principles of Finance

Firms and the Financial Market

Understanding Financial Statements, taxes, and Cash Flows

Financial Analysis-Sizing up Firm Performance

Time Value of Money-The Basics

The Time Value of Money-Annuities and Other Topics

An Introduction to Risk and Return-History of Financial Market Returns

Risk and Return-Capital Market Theory

Debt Valuation and Interest Rates

Stock Valuation

Investment Decision Criteria

Analyzing Project Cash Flows

Risk Analysis and Project Evaluation

The Cost of Capital

Capital Structure Policy

Dividend Policy

Financial Forecasting and Planning

Working Capital Management

Corporate Risk Management

Filters

Exam 19: International Business Finance

Purchasing price parity is more likely to be the case for common commodities than for personal services.

Capital markets in foreign countries:

Assume that a buyer of Italian wine saw the following quotes: spot rate of .75 euros to the U.S.dollar;30-day forward rate of .747 euros to the U.S.dollar;90-day forward rate of .744 euros to the U.S.dollar.What does this information imply?

Which of the following is a conceptual method for keeping the foreign currency market in equilibrium?

An investor purchased 200,000,000 Japanese yen at an exchange rate of 93 yen to the dollar.the yen cost her ________.

Spot exchange markets have the potential for arbitrage opportunities for a long period of time.

Prices differences of identical items in different currencies can best be explained by the international Fisher effect.

One reason for international investment is that:

A direct quote in Bombay tells one how many British pounds can buy one Indian rupee.

If a currency's forward price in U.S.dollars is higher than the spot price,interest rates are higher in the foreign country than they are in the U.S.

If a country is has high interest rates because of inflation,the forward price of its currency will be higher than the spot price.

If a currency's forward price in U.S.dollars is lower than the spot price,interest rates are higher in the foreign country than they are in the U.S.

Participants in foreign exchange trading include:

One U.S.dollar buys 92.61 yen and 12.707 Mexican pesos.What is price of pesos in yen?

When banks transact in foreign currencies,the direct bid quote is greater than the direct asked quote.

What keeps foreign exchange quotes in two different countries in line with each other?

The foreign exchange market is similar in form to the New York Stock Exchange.

Because a large part of a subsidiary's equity funds comes from the parent,the subsidiary should use the same cost of equity as the parent.

Briefly discuss the factors that multinational firms consider in arriving at capital structure decisions.

Use the following information to answer the following question(s). Below is an excerpt from Table 19.1,Foreign Exchange Ratrd (January 8,2010)that appears in your text.(Sources The Wall Street Journal and Reuters) -The number of pounds you can purchase per U.S.dollar is:

Getting Started-Principles of Finance

Firms and the Financial Market

Understanding Financial Statements, taxes, and Cash Flows

Financial Analysis-Sizing up Firm Performance

Time Value of Money-The Basics

The Time Value of Money-Annuities and Other Topics

An Introduction to Risk and Return-History of Financial Market Returns

Risk and Return-Capital Market Theory

Debt Valuation and Interest Rates

Stock Valuation

Investment Decision Criteria

Analyzing Project Cash Flows

Risk Analysis and Project Evaluation

The Cost of Capital

Capital Structure Policy

Dividend Policy

Financial Forecasting and Planning

Working Capital Management

Corporate Risk Management

Filters