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

Which of the following statements is true?

Accepted Answer

A) The forward rate is the same as the spot rate that will prevail in the future. 
B) Only the forward rate is known. 
C) An indirect quote is the exchange rate that indicates the number of units of the home currency required to buy one unit of foreign currency. 
D) Both B and C. 
A) The forward rate is the same as the spot rate that will prevail in the future. 
B) Only the forward rate is known. 
C) An indirect quote is the exchange rate that indicates the number of units of the home currency required to buy one unit of foreign currency. 
D) Both B and C.

Question 3

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

Accepted Answer

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

Question 4

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%.

Question 5

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

Question 6

Which of the following statements about exchange rates is true?

Accepted Answer

A) Exchange rates are fixed by international agreements. 
B) Exchange fluctuate between currencies but are fixed in terms of gold. 
C) Exchange rates fluctuate constantly. 
D) Are regulated by a special committee of the United Nations. 
A) Exchange rates are fixed by international agreements. 
B) Exchange fluctuate between currencies but are fixed in terms of gold. 
C) Exchange rates fluctuate constantly. 
D) Are regulated by a special committee of the United Nations.

Question 7

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

Accepted Answer

A) True 
 B)False

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

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 10

A dealer in New York offers to buy U.K.pounds for $1.60 and sell them for $1.605.The different prices are due to

Accepted Answer

A) arbitrage. 
B) a tax on currency transactions. 
C) the bid-ask spread. 
D) supply and demand. 
A) arbitrage. 
B) a tax on currency transactions. 
C) the bid-ask spread. 
D) supply and demand.

Question 11

Assume that your firm must pay $4,000 to a Swiss firm.In Swiss francs,the 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 12

Millheim Electronics is an American firm operating in India,whose government refuses to allow Millheim to send its earnings out of the country.This is an example of repatriation of profits.

Accepted Answer

A) True 
 B)False

Question 13

The spot exchange rate for Canadian dollars is .1.007 to the U.S.dollar.The 6 months forward rate is 1.0068 to the U.S.dollar.The interest rate in Canada (annual)is 1.02%.What is the U.S.interest rate?

Accepted Answer

A) 1.00% 
B) 1.04% 
C) 1.08% 
D) .9800% 
A) 1.00% 
B) 1.04% 
C) 1.08% 
D) .9800%

Question 14

The direct 3 month forward rate for UK pounds is

Accepted Answer

A) .16130 
B) 6.2000 
C) 1.6130 
D) .6200 
A) .16130 
B) 6.2000 
C) 1.6130 
D) .6200

Question 15

The nominal rate of interest in Russia is 9.5% and the inflation rate is 8%.The nominal rate of interest in Spain is 3% and the inflation rate is 1%.Which country has the higher real rate of interest?

Accepted Answer

A) Russia 
B) Spain 
C) There is no difference. 
D) There is not enough information. 
A) Russia 
B) Spain 
C) There is no difference. 
D) There is not enough information.

Question 16

Risks of foreign direct investment potentially include

Accepted Answer

A) exchange rate fluctuations. 
B) political instability. 
C) competition from foreign competitors. 
D) all of the above. 
A) exchange rate fluctuations. 
B) political instability. 
C) competition from foreign competitors. 
D) all of the above.

Question 17

A narrow spread indicates efficiency in the spot exchange market.

Accepted Answer

A) True 
 B)False

Question 18

Use the following information to answer the following question(s).
Below is an excerpt from Table 19.1,Foreign Exchange Rates (December 26,2012)that appears in your text.(Sources The Wall Street Journal,Reuters)
Country/Currency In US$ Per US$
India (Rupee).01818 55.0155
Britain (Pound)1.6133 .6198
1-mos forward 1.6133 .6198
3-mos forward 1.6130 .6200
6-mos forward 1.6128 .6200
Canada (Dollar)1.0074 .9927
Switzerland franc 1.0917 .9160
1-mos forward 1.0928 .9151
3-mos forward 1.0939 .9141
6-mos forward 1.0961 .9123
-To buy one Indian Rupee you would need

Accepted Answer

A) 1.818 cents. 
B) 55.0155 cents. 
C) 18.18 cents. 
D) .01818 cents. 
A) 1.818 cents. 
B) 55.0155 cents. 
C) 18.18 cents. 
D) .01818 cents.

Question 19

One U.S.dollar buys 101.31 yen and 12.536 Mexican pesos.What is price of pesos in yen?

Accepted Answer

A) 8.0815 
B) .12374 
C) .08082 
D) 12.3740 
A) 8.0815 
B) .12374 
C) .08082 
D) 12.3740

Question 20

If a country 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

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

Which of the following statements is true?

The exchange rate that represents the number of units of a foreign currency that can be purchased with one unit of a home 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

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.

Which of the following statements about exchange rates is true?

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

Which of the following statements is true?

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.

A dealer in New York offers to buy U.K.pounds for $1.60 and sell them for $1.605.The different prices are due to

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

Millheim Electronics is an American firm operating in India,whose government refuses to allow Millheim to send its earnings out of the country.This is an example of repatriation of profits.

The spot exchange rate for Canadian dollars is .1.007 to the U.S.dollar.The 6 months forward rate is 1.0068 to the U.S.dollar.The interest rate in Canada (annual)is 1.02%.What is the U.S.interest rate?

The direct 3 month forward rate for UK pounds is

The nominal rate of interest in Russia is 9.5% and the inflation rate is 8%.The nominal rate of interest in Spain is 3% and the inflation rate is 1%.Which country has the higher real rate of interest?

Risks of foreign direct investment potentially include

A narrow spread indicates efficiency in the spot exchange market.

One U.S.dollar buys 101.31 yen and 12.536 Mexican pesos.What is price of pesos in yen?

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

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

Which of the following statements is true?

The exchange rate that represents the number of units of a foreign currency that can be purchased with one unit of a home 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

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.

Which of the following statements about exchange rates is true?

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

Which of the following statements is true?

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.

A dealer in New York offers to buy U.K.pounds for $1.60 and sell them for $1.605.The different prices are due to

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

Millheim Electronics is an American firm operating in India,whose government refuses to allow Millheim to send its earnings out of the country.This is an example of repatriation of profits.

The spot exchange rate for Canadian dollars is .1.007 to the U.S.dollar.The 6 months forward rate is 1.0068 to the U.S.dollar.The interest rate in Canada (annual)is 1.02%.What is the U.S.interest rate?

The direct 3 month forward rate for UK pounds is

The nominal rate of interest in Russia is 9.5% and the inflation rate is 8%.The nominal rate of interest in Spain is 3% and the inflation rate is 1%.Which country has the higher real rate of interest?

Risks of foreign direct investment potentially include

A narrow spread indicates efficiency in the spot exchange market.

One U.S.dollar buys 101.31 yen and 12.536 Mexican pesos.What is price of pesos in yen?

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

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