Question 1

The British pound to Swiss franc exchange rate is

Accepted Answer

A) 1.4719 British pounds to the Swiss franc. 
B) 14.719 British pounds to the Swiss franc. 
C) .6794 British pounds to the Swiss franc. 
D) 1.0917 British pounds to the Swiss franc. 
A) 1.4719 British pounds to the Swiss franc. 
B) 14.719 British pounds to the Swiss franc. 
C) .6794 British pounds to the Swiss franc. 
D) 1.0917 British pounds to the Swiss franc.

Question 2

Arbitrage eliminates forward discounts and premiums across the markets of a single currency.

Accepted Answer

A) True 
 B)False

Question 3

Forward rates are quoted

Accepted Answer

A) in direct form. 
B) in indirect form. 
C) at a premium or discount. 
D) all of the above. 
A) in direct form. 
B) in indirect form. 
C) at a premium or discount. 
D) all of the above.

Question 4

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 5

The current spot exchange rate between the Japanese yen and the U.S.dollar is 84.61 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) 91.51 Y/US$ 
B) 87.99 Y/US$ 
C) 81.36 Y/US$ 
D) 103.08 Y/US$ 
A) 91.51 Y/US$ 
B) 87.99 Y/US$ 
C) 81.36 Y/US$ 
D) 103.08 Y/US$

Question 6

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 7

After the U.S.dollar,the most widely traded currency is

Accepted Answer

A) the Saudi riyal. 
B) the euro. 
C) the Swiss franc. 
D) the Canadian dollar. 
A) the Saudi riyal. 
B) the euro. 
C) the Swiss franc. 
D) the Canadian dollar.

Question 8

Jean-Marc lives in Besançon,a French city near the Swiss border.The exchange rate is 1.20 Swiss francs to the euro.If Jean-Marc's shopping cart of groceries typically costs him 80 euros,what should it cost him if he drives across the border to Switzerland? Do you think that purchase price parity would apply in this situation?

Accepted Answer

If purchase price parity applies,Jean-Ma

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

One reason for international investment is that

Accepted Answer

A) the economies of many countries are growing faster than that of 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 that of 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 11

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.

Question 12

Which of the following international business activities constitutes a foreign direct investment? All firms mentioned are U.S.based.

Accepted Answer

A) Yanqui Spirits imports a 1000 cases of rum from the Dominican Republic. 
B) WMT Inc.opens a big-box retail facility in Nicaragua. 
C) Condor University runs training sessions for Indonesian civil servants on its California Campus. 
D) Merkizer Pharmaceuticals licenses an Indian company to manufacture a drug under its patents. 
A) Yanqui Spirits imports a 1000 cases of rum from the Dominican Republic. 
B) WMT Inc.opens a big-box retail facility in Nicaragua. 
C) Condor University runs training sessions for Indonesian civil servants on its California Campus. 
D) Merkizer Pharmaceuticals licenses an Indian company to manufacture a drug under its patents.

Question 13

Exchange rate risk

Accepted Answer

A) arises from the fact that the spot exchange rate on a future date is a random variable. 
B) applies only to certain types of international businesses. 
C) has been phased out due to recent international legislation. 
D) is not a significant factor in foreign investment decisions. 
A) arises from the fact that the spot exchange rate on a future date is a random variable. 
B) applies only to certain types of international businesses. 
C) has been phased out due to recent international legislation. 
D) is not a significant factor in foreign investment decisions.

Question 14

What is the role of arbitrage in the foreign exchange markets?

Accepted Answer

Foreign exchange quotes should be consis

Question 15

Buying and selling in more than one market to make a riskless profit is called

Accepted Answer

A) profit maximization. 
B) arbitrage. 
C) international trading. 
D) cannot be determined from the above information. 
A) profit maximization. 
B) arbitrage. 
C) international trading. 
D) cannot be determined from the above information.

Question 16

If the net present value of a direct foreign investment is negative,the multinational firm should

Accepted Answer

A) reject any proposals. 
B) consider establishing a sales office. 
C) consider licensing. 
D) both A and C. 
A) reject any proposals. 
B) consider establishing a sales office. 
C) consider licensing. 
D) both A and C.

Question 17

The Swiss franc to British pound exchange rate is

Accepted Answer

A) 1.4719 Swiss francs to the pound. 
B) 14.7185 Swiss francs to the pound. 
C) .6198 Swiss francs to the pound. 
D) 1.0917 Swiss francs to the pound. 
A) 1.4719 Swiss francs to the pound. 
B) 14.7185 Swiss francs to the pound. 
C) .6198 Swiss francs to the pound. 
D) 1.0917 Swiss francs to the pound.

Question 18

The foreign exchange market provides a physical entity that transfers the purchasing power from one currency to another.

Accepted Answer

A) True 
 B)False

Question 19

An important motive for direct foreign investment is to

Accepted Answer

A) gain entry to markets with economies growing faster than the U.S. 
B) insulate the firm from fluctuations in the value of the dollar. 
C) diversify political risks. 
D) increase a project's NPV by using lower foreign discount rates. 
A) gain entry to markets with economies growing faster than the U.S. 
B) insulate the firm from fluctuations in the value of the dollar. 
C) diversify political risks. 
D) increase a project's NPV by using lower foreign discount rates.

Question 20

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

Accepted Answer

A) True 
 B)False

The British pound to Swiss franc exchange rate is

Arbitrage eliminates forward discounts and premiums across the markets of a single currency.

Forward rates are quoted

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.

The current spot exchange rate between the Japanese yen and the U.S.dollar is 84.61 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?

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.

After the U.S.dollar,the most widely traded currency is

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

One reason for international investment is that

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 international business activities constitutes a foreign direct investment? All firms mentioned are U.S.based.

Exchange rate risk

What is the role of arbitrage in the foreign exchange markets?

Buying and selling in more than one market to make a riskless profit is called

If the net present value of a direct foreign investment is negative,the multinational firm should

The Swiss franc to British pound exchange rate is

The foreign exchange market provides a physical entity that transfers the purchasing power from one currency to another.

An important motive for direct foreign investment is to

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

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

The British pound to Swiss franc exchange rate is

Arbitrage eliminates forward discounts and premiums across the markets of a single currency.

Forward rates are quoted

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.

The current spot exchange rate between the Japanese yen and the U.S.dollar is 84.61 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?

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.

After the U.S.dollar,the most widely traded currency is

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

One reason for international investment is that

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 international business activities constitutes a foreign direct investment? All firms mentioned are U.S.based.

Exchange rate risk

What is the role of arbitrage in the foreign exchange markets?

Buying and selling in more than one market to make a riskless profit is called

If the net present value of a direct foreign investment is negative,the multinational firm should

The Swiss franc to British pound exchange rate is

The foreign exchange market provides a physical entity that transfers the purchasing power from one currency to another.

An important motive for direct foreign investment is to

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

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