Question 1

An investor purchased 1,000,000 Canadian dollars at an exchange rate of 1.0309 Canadian dollars to the U.S.dollar.The Canadian dollars cost her ________.

Accepted Answer

A) $103,090 
B) $970,026 
C) $1,030,927 
D) $97,000 
A) $103,090 
B) $970,026 
C) $1,030,927 
D) $97,000

Question 2

When multinational companies evaluate capital investments in foreign countries,they discount:

Accepted Answer

A) pre-tax earnings of the foreign subsidiary. 
B) foreign earnings at home country discount rates. 
C) only earnings that are expected to be transferred back to the parent company. 
D) all cash flows in the foreign currency at the host country discount rates. 
A) pre-tax earnings of the foreign subsidiary. 
B) foreign earnings at home country discount rates. 
C) only earnings that are expected to be transferred back to the parent company. 
D) all cash flows in the foreign currency at the host country discount rates.

Question 3

The bid rate (also called the offer rate)is the number of units of home currency paid to a customer in exchange for their foreign currency.

Accepted Answer

A) True 
 B)False

Question 4

An attempt to profit by converting dollars to yen,yen to euros,and euros back to dollars would be an example of:

Accepted Answer

A) arbitrage. 
B) speculation. 
C) hedging. 
D) intervention. 
A) arbitrage. 
B) speculation. 
C) hedging. 
D) intervention.

Question 5

What is the difference between and "ask" quote and a "bid" quote.

Accepted Answer

Currency traders make a small

Question 6

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 Swiss franc to British pound exchange rate is:

Accepted Answer

A) 1.64 Swiss francs to the pound. 
B) 1.5663 Swiss francs to the pound. 
C) .6097 Swiss francs to the pound. 
D) .9772 Swiss francs to the pound. 
A) 1.64 Swiss francs to the pound. 
B) 1.5663 Swiss francs to the pound. 
C) .6097 Swiss francs to the pound. 
D) .9772 Swiss francs to the pound.

Question 7

What is meant by interest rate parity?

Accepted Answer

Interest rate parity is the theory that

Question 8

Which of the following statements is true?

Accepted Answer

A) Interest rate parity indicates that the forward premium or discount should be greater than the differences in the national interest rates for securities of the same maturity. 
B) Purchasing power parity indicates that,in the long run,exchange rates adjust to reflect international differences in inflation so that the purchasing power of each currency tends to remain the same. 
C) The International Fisher Effect indicates that the nominal interest rate should be the same all over the world at all times if the market is efficient. 
D) Both B and C. 
A) Interest rate parity indicates that the forward premium or discount should be greater than the differences in the national interest rates for securities of the same maturity. 
B) Purchasing power parity indicates that,in the long run,exchange rates adjust to reflect international differences in inflation so that the purchasing power of each currency tends to remain the same. 
C) The International Fisher Effect indicates that the nominal interest rate should be the same all over the world at all times if the market is efficient. 
D) Both B and C.

Question 9

According to the domestic Fisher effect,if the inflation rate is 5%,and the nominal rate of interest is 7%,the real rate of interest is:

Accepted Answer

A) 2.00%. 
B) 1.904%. 
C) 4.65%. 
D) 0.5252%. 
A) 2.00%. 
B) 1.904%. 
C) 4.65%. 
D) 0.5252%.

Question 10

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)
  
-Assume that your firm must pay $4,000 to a Swiss firm.In Swiss francs Swiss firm will receive:

Accepted Answer

A) 3,908.80 Swiss francs. 
B) 3,913 Swiss francs. 
C) 39,088 Swiss francs. 
D) 4,093.20 Swiss francs. 
A) 3,908.80 Swiss francs. 
B) 3,913 Swiss francs. 
C) 39,088 Swiss francs. 
D) 4,093.20 Swiss francs.

Question 11

Assume that the interest rate in India is 10% while in Europe it is 3% and that the exchange rate is 65.50 rupees to the euro.What would we expect the 6 month exchange rate to be?

Accepted Answer

The higher interest rate in India implie

Question 12

What is the difference between forward rates and spot rates? What is the purpose of forward contracts?

Accepted Answer

The spot rate for a currency is the pric

Question 13

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)
  
-Assume that your firm must pay 10,000,000 rupees to an Indian firm.How much will you have to pay in U.S.dollars.

Accepted Answer

A) $2,199,000 
B) $219,900 
C) $454,752,000 
D) $$454,752 
A) $2,199,000 
B) $219,900 
C) $454,752,000 
D) $$454,752

Question 14

Economic exposure refers to the overall impact of exchange rate changes on the value of the firm.

Accepted Answer

A) True 
 B)False

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

If the quote for a forward exchange contract is greater than the computed price,the forward contract is:

Accepted Answer

A) overvalued. 
B) undervalued. 
C) a good buy. 
D) at equilibrium. 
A) overvalued. 
B) undervalued. 
C) a good buy. 
D) at equilibrium.

Question 17

The current spot exchange rate between the Japanese yen and the U.S.dollar is 92.61 Y/US$.The yen is expected to appreciate by 4% against the dollar over the next year.What do you expect the spot exchange rate between the yen and the dollar to be one year from now?

Accepted Answer

A) 92.61 Y/US$ 
B) 98.18 Y/US$ 
C) 89.05 Y/US$ 
D) 103.08 Y/US$ 
A) 92.61 Y/US$ 
B) 98.18 Y/US$ 
C) 89.05 Y/US$ 
D) 103.08 Y/US$

Question 18

You are leaving Mexico and have 3,000 pesos to change into dollars.The exchange rate is 10.2 pesos to the dollar.How many dollars will you receive?

Accepted Answer

A) You will receive 30,600 US$. 
B) You will receive 294.12 US$. 
C) You will lose money converting back into dollars. 
D) This is not enough information to find the number of dollars. 
A) You will receive 30,600 US$. 
B) You will receive 294.12 US$. 
C) You will lose money converting back into dollars. 
D) This is not enough information to find the number of dollars.

Question 19

The exchange rate that represents the number of units of a home currency that is required to purchase one unit of a foreign currency is referred to as a(n)________ quote.

Accepted Answer

A) forward 
B) direct 
C) market 
D) indirect 
E) arbitrage 
A) forward 
B) direct 
C) market 
D) indirect 
E) arbitrage

Question 20

According to the international Fisher effect,if the nominal interest rate in Russia is 9.5% and the inflation rate is 8%,the real rate of interest is approximately:

Accepted Answer

A) 18.26%. 
B) 6.5%. 
C) 1.5%. 
D) -1.5%. 
A) 18.26%. 
B) 6.5%. 
C) 1.5%. 
D) -1.5%.

An investor purchased 1,000,000 Canadian dollars at an exchange rate of 1.0309 Canadian dollars to the U.S.dollar.The Canadian dollars cost her ________.

When multinational companies evaluate capital investments in foreign countries,they discount:

The bid rate (also called the offer rate)is the number of units of home currency paid to a customer in exchange for their foreign currency.

An attempt to profit by converting dollars to yen,yen to euros,and euros back to dollars would be an example of:

What is the difference between and "ask" quote and a "bid" quote.

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 Swiss franc to British pound exchange rate is:

What is meant by interest rate parity?

Which of the following statements is true?

According to the domestic Fisher effect,if the inflation rate is 5%,and the nominal rate of interest is 7%,the real rate of interest is:

Assume that the interest rate in India is 10% while in Europe it is 3% and that the exchange rate is 65.50 rupees to the euro.What would we expect the 6 month exchange rate to be?

What is the difference between forward rates and spot rates? What is the purpose of forward contracts?

Economic exposure refers to the overall impact of exchange rate changes on the value of the firm.

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

If the quote for a forward exchange contract is greater than the computed price,the forward contract is:

The current spot exchange rate between the Japanese yen and the U.S.dollar is 92.61 Y/US$.The yen is expected to appreciate by 4% against the dollar over the next year.What do you expect the spot exchange rate between the yen and the dollar to be one year from now?

You are leaving Mexico and have 3,000 pesos to change into dollars.The exchange rate is 10.2 pesos to the dollar.How many dollars will you receive?

The exchange rate that represents the number of units of a home currency that is required to purchase one unit of a foreign currency is referred to as a(n)________ quote.

According to the international Fisher effect,if the nominal interest rate in Russia is 9.5% and the inflation rate is 8%,the real rate of interest is approximately:

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

An investor purchased 1,000,000 Canadian dollars at an exchange rate of 1.0309 Canadian dollars to the U.S.dollar.The Canadian dollars cost her ________.

When multinational companies evaluate capital investments in foreign countries,they discount:

The bid rate (also called the offer rate)is the number of units of home currency paid to a customer in exchange for their foreign currency.

An attempt to profit by converting dollars to yen,yen to euros,and euros back to dollars would be an example of:

What is the difference between and "ask" quote and a "bid" quote.

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 Swiss franc to British pound exchange rate is:

What is meant by interest rate parity?

Which of the following statements is true?

According to the domestic Fisher effect,if the inflation rate is 5%,and the nominal rate of interest is 7%,the real rate of interest is:

Assume that the interest rate in India is 10% while in Europe it is 3% and that the exchange rate is 65.50 rupees to the euro.What would we expect the 6 month exchange rate to be?

What is the difference between forward rates and spot rates? What is the purpose of forward contracts?

Economic exposure refers to the overall impact of exchange rate changes on the value of the firm.

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

If the quote for a forward exchange contract is greater than the computed price,the forward contract is:

The current spot exchange rate between the Japanese yen and the U.S.dollar is 92.61 Y/US$.The yen is expected to appreciate by 4% against the dollar over the next year.What do you expect the spot exchange rate between the yen and the dollar to be one year from now?

You are leaving Mexico and have 3,000 pesos to change into dollars.The exchange rate is 10.2 pesos to the dollar.How many dollars will you receive?

The exchange rate that represents the number of units of a home currency that is required to purchase one unit of a foreign currency is referred to as a(n)________ quote.

According to the international Fisher effect,if the nominal interest rate in Russia is 9.5% and the inflation rate is 8%,the real rate of interest is approximately:

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