Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

You are on your way to a beautiful Mexican resort.The current exchange rate is 12 pesos to the dollar.When you arrive,you convert 1,000 US$ for how many pesos?

Accepted Answer

A) 12,000 pesos 
B) 1,200 pesos 
C) 8,333 pesos 
D) 83.33 pesos 
A) 12,000 pesos 
B) 1,200 pesos 
C) 8,333 pesos 
D) 83.33 pesos

Question 3

Transactions carried out in the foreign exchange markets can include direct or indirect exchange rate quotes.

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

The purchasing power parity theory is least likely to apply to the price of

Accepted Answer

A) oral surgery. 
B) smart phones. 
C) crude oil. 
D) cane sugar. 
A) oral surgery. 
B) smart phones. 
C) crude oil. 
D) cane sugar.

Question 6

What are some of the potential risks,other than exchange rate risk,that need to be considered in foreign direct investment decisions.

Accepted Answer

Business risks involve issues such as pr

Question 7

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

Accepted Answer

Currency traders make a small

Question 8

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 9

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 10

An investor purchased Canadian dollars at an exchange rate of $0.97 U.S.to 1 Canadian dollar.The Canadian dollars cost her $1,000,000 (U.S.dollars).How many Canadian dollars did she buy?

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 11

Based on the forward rates in table 19.1,the British pound is expected to

Accepted Answer

A) stay the same against the dollar. 
B) weaken against the dollar. 
C) fluctuate randomly against the dollar. 
D) strengthen against the dollar. 
A) stay the same against the dollar. 
B) weaken against the dollar. 
C) fluctuate randomly against the dollar. 
D) strengthen against the dollar.

Question 12

You are leaving Mexico and have 3,200 pesos to change into dollars.The exchange rate is 12.5 pesos to the dollar.How many dollars will you receive?

Accepted Answer

A) $256 
B) $400 
C) $2,560 
D) $40 
A) $256 
B) $400 
C) $2,560 
D) $40

Question 13

Forward contracts are usually quoted for periods greater than one year.

Accepted Answer

A) True 
 B)False

Question 14

Trading in foreign exchange markets is dominated by

Accepted Answer

A) Russian rubles,Indian rupees and Indonesian rupeas. 
B) Spanish pesetas,German marks,French francs. 
C) Chinese renminbis,Saudi ryals,pesos of various Latin American countries. 
D) U.S.dollars,the British pound,the euro and the yen. 
A) Russian rubles,Indian rupees and Indonesian rupeas. 
B) Spanish pesetas,German marks,French francs. 
C) Chinese renminbis,Saudi ryals,pesos of various Latin American countries. 
D) U.S.dollars,the British pound,the euro and the yen.

Question 15

The 1 year interest rate in the U.S.is 1%.The spot exchange rate for Canadian dollars 1.007 to the U.S.dollar.The 6 months forward rate is 1.0068 to the U.S.dollar.These prices indicate that interest rates in Canada,on an annualized basis,are about

Accepted Answer

A) .08% lower. 
B) .08% higher. 
C) .04% higher. 
D) .8% lower. 
A) .08% lower. 
B) .08% higher. 
C) .04% higher. 
D) .8% lower.

Question 16

What is the law of one price? How does it apply to foreign exchange rates?

Accepted Answer

The law of one price states that under c

Question 17

The interplay between interest rate differentials and exchange rates such that both adjust until the foreign exchange market and the money market reach equilibrium is called the

Accepted Answer

A) purchasing power parity theory. 
B) balance of payments quantum theory. 
C) interest rate parity theory. 
D) arbitrage markets theory. 
A) purchasing power parity theory. 
B) balance of payments quantum theory. 
C) interest rate parity theory. 
D) arbitrage markets theory.

Question 18

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 19

The spot exchange rate for the Thai bhat is 33.135 bhat to the dollar.The Host Hotel Company will be able to repatriate profits from its luxury resort hotel in Phuket in 5 years.It has estimated the 5 year forward rate at 38 bhat to the dollar.The risk-free rate in the U.S.is 4% and Host uses an 11 % risk premium for investments of this type.If the expected accumulated profits after 5 years are 100 million bhat,what is their present value in U.S.dollars.

Accepted Answer

Present value in bhats is 100,

Question 20

10,000 bushels of corn currently sells in the U.S.for $57,300.The current exchange rate is 55.02 rupees to the dollar.If purchasing power parity prevails,what is the price of 10,000 bushels of corn in rupees?

Accepted Answer

A) 2,152,646 rupees 
B) 10,414.44 rupees 
C) 55,020 rupees 
D) 215,265 rupees 
A) 2,152,646 rupees 
B) 10,414.44 rupees 
C) 55,020 rupees 
D) 215,265 rupees

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

You are on your way to a beautiful Mexican resort.The current exchange rate is 12 pesos to the dollar.When you arrive,you convert 1,000 US$ for how many pesos?

Transactions carried out in the foreign exchange markets can include direct or indirect exchange rate quotes.

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

The purchasing power parity theory is least likely to apply to the price of

What are some of the potential risks,other than exchange rate risk,that need to be considered in foreign direct investment decisions.

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

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

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

An investor purchased Canadian dollars at an exchange rate of $0.97 U.S.to 1 Canadian dollar.The Canadian dollars cost her $1,000,000 (U.S.dollars).How many Canadian dollars did she buy?

Based on the forward rates in table 19.1,the British pound is expected to

You are leaving Mexico and have 3,200 pesos to change into dollars.The exchange rate is 12.5 pesos to the dollar.How many dollars will you receive?

Forward contracts are usually quoted for periods greater than one year.

Trading in foreign exchange markets is dominated by

The 1 year interest rate in the U.S.is 1%.The spot exchange rate for Canadian dollars 1.007 to the U.S.dollar.The 6 months forward rate is 1.0068 to the U.S.dollar.These prices indicate that interest rates in Canada,on an annualized basis,are about

What is the law of one price? How does it apply to foreign exchange rates?

The interplay between interest rate differentials and exchange rates such that both adjust until the foreign exchange market and the money market reach equilibrium is called the

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

10,000 bushels of corn currently sells in the U.S.for $57,300.The current exchange rate is 55.02 rupees to the dollar.If purchasing power parity prevails,what is the price of 10,000 bushels of corn in rupees?

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

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

You are on your way to a beautiful Mexican resort.The current exchange rate is 12 pesos to the dollar.When you arrive,you convert 1,000 US$ for how many pesos?

Transactions carried out in the foreign exchange markets can include direct or indirect exchange rate quotes.

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

The purchasing power parity theory is least likely to apply to the price of

What are some of the potential risks,other than exchange rate risk,that need to be considered in foreign direct investment decisions.

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

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

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

An investor purchased Canadian dollars at an exchange rate of $0.97 U.S.to 1 Canadian dollar.The Canadian dollars cost her $1,000,000 (U.S.dollars).How many Canadian dollars did she buy?

Based on the forward rates in table 19.1,the British pound is expected to

You are leaving Mexico and have 3,200 pesos to change into dollars.The exchange rate is 12.5 pesos to the dollar.How many dollars will you receive?

Forward contracts are usually quoted for periods greater than one year.

Trading in foreign exchange markets is dominated by

The 1 year interest rate in the U.S.is 1%.The spot exchange rate for Canadian dollars 1.007 to the U.S.dollar.The 6 months forward rate is 1.0068 to the U.S.dollar.These prices indicate that interest rates in Canada,on an annualized basis,are about

What is the law of one price? How does it apply to foreign exchange rates?

The interplay between interest rate differentials and exchange rates such that both adjust until the foreign exchange market and the money market reach equilibrium is called the

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

10,000 bushels of corn currently sells in the U.S.for $57,300.The current exchange rate is 55.02 rupees to the dollar.If purchasing power parity prevails,what is the price of 10,000 bushels of corn in rupees?

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