Question 1

Which of the following is not true about syndicated loans?

Accepted Answer

A)  A borrower that receives a syndicated loan incurs various fees besides the interest rate. 
B)  The loans are only denominated in U.S. dollars. 
C)  The loans are provided by a group of banks to a borrower. 
D)  The loans are usually formed in 6 weeks or less. 
A)  A borrower that receives a syndicated loan incurs various fees besides the interest rate. 
B)  The loans are only denominated in U.S. dollars. 
C)  The loans are provided by a group of banks to a borrower. 
D)  The loans are usually formed in 6 weeks or less.

Question 2

If a U.S. firm desires to avoid the risk from exchange rate fluctuations, and it is receiving 100,000 in 90 days, it could:

Accepted Answer

A)  obtain a 90-day forward purchase contract on euros. 
B)  obtain a 90-day forward sale contract on euros. 
C)  purchase euros 90 days from now at the spot rate. 
D)  sell euros 90 days from now at the spot rate. 
A)  obtain a 90-day forward purchase contract on euros. 
B)  obtain a 90-day forward sale contract on euros. 
C)  purchase euros 90 days from now at the spot rate. 
D)  sell euros 90 days from now at the spot rate.

Question 3

The international money market primarily concentrates on:

Accepted Answer

A)  short-term lending (one year or less). 
B)  medium-term lending. 
C)  long-term lending. 
D)  placing bonds with investors. 
E)  placing newly issued stock in foreign markets. 
A)  short-term lending (one year or less). 
B)  medium-term lending. 
C)  long-term lending. 
D)  placing bonds with investors. 
E)  placing newly issued stock in foreign markets.

Question 4

As a result of the Smithsonian Agreement, the U.S. dollar was:

Accepted Answer

A)  the currency to be used by all countries as a medium of exchange for international trade. 
B)  forced to be freely floating relative to all currencies without any boundaries. 
C)  devalued relative to major currencies. 
D)  revalued (upward) relative to major currencies. 
A)  the currency to be used by all countries as a medium of exchange for international trade. 
B)  forced to be freely floating relative to all currencies without any boundaries. 
C)  devalued relative to major currencies. 
D)  revalued (upward) relative to major currencies.

Question 5

Shareholders in some countries may have more power to effectively sue publicly-traded firms if their executives or directors commit financial fraud.

Accepted Answer

A) True 
 B)False

Question 6

In general, stock markets allow for more price efficiency and attract more investors when they have all of the following except:

Accepted Answer

A)  more voting rights for shareholders. 
B)  more legal protection. 
C)  more enforcement of the laws. 
D)  less stringent accounting requirements. 
A)  more voting rights for shareholders. 
B)  more legal protection. 
C)  more enforcement of the laws. 
D)  less stringent accounting requirements.

Question 7

A cross exchange rate expresses the amount of one foreign currency per unit of another foreign currency.

Accepted Answer

A) True 
 B)False

Question 8

The more intense the competition for the traded currency, the larger the bid/ask spread.

Accepted Answer

A) True 
 B)False

Question 9

Forward markets for currencies of developing countries are:

Accepted Answer

A)  prohibited. 
B)  less liquid than markets for developed countries. 
C)  more liquid than markets for developed countries. 
D)  only available for use by government agencies. 
A)  prohibited. 
B)  less liquid than markets for developed countries. 
C)  more liquid than markets for developed countries. 
D)  only available for use by government agencies.

Question 10

The ask quote is the price for which a bank offers to sell a currency.

Accepted Answer

A) True 
 B)False

Question 11

When the foreign exchange market opens in the U.S. each morning, the opening exchange rate quotations will be based on the:

Accepted Answer

A)  closing prices in the U.S. during the previous day. 
B)  closing prices in Canada during the previous day. 
C)  prevailing prices in locations where the foreign exchange markets have been open. 
D)  officially set by central banks before the U.S. market opens. 
A)  closing prices in the U.S. during the previous day. 
B)  closing prices in Canada during the previous day. 
C)  prevailing prices in locations where the foreign exchange markets have been open. 
D)  officially set by central banks before the U.S. market opens.

Question 12

Which of the following is not true with respect to spot market liquidity?

Accepted Answer

A)  The more willing buyers and sellers there are, the more liquid a market is. 
B)  The spot markets for heavily traded currencies such as the Japanese yen are very liquid. 
C)  A currency's liquidity affects the ease with which an MNC can obtain or sell that currency. 
D)  If a currency is illiquid, an MNC is typically able to quickly purchase that currency at a reasonable exchange rate. 
A)  The more willing buyers and sellers there are, the more liquid a market is. 
B)  The spot markets for heavily traded currencies such as the Japanese yen are very liquid. 
C)  A currency's liquidity affects the ease with which an MNC can obtain or sell that currency. 
D)  If a currency is illiquid, an MNC is typically able to quickly purchase that currency at a reasonable exchange rate.

Question 13

Eurobonds:

Accepted Answer

A)  are usually issued in bearer form. 
B)  typically carry several protective covenants. 
C)  cannot contain call provisions. 
D)  A and B 
A)  are usually issued in bearer form. 
B)  typically carry several protective covenants. 
C)  cannot contain call provisions. 
D)  A and B

Question 14

The strike price on a currency option is also known as an exercise price.

Accepted Answer

A) True 
 B)False

Question 15

The Bretton Woods Agreement is an agreement to standardize banks' capital requirements across countries; the resulting capital ratios are computed using risk-weighted assets.

Accepted Answer

A) True 
 B)False

Question 16

The international credit market primarily concentrates on:

Accepted Answer

A)  short-term lending (less than one year). 
B)  medium-term lending. 
C)  long-term lending. 
D)  providing an exchange of foreign currencies for firms who need them. 
E)  placing newly issued stock in foreign markets. 
A)  short-term lending (less than one year). 
B)  medium-term lending. 
C)  long-term lending. 
D)  providing an exchange of foreign currencies for firms who need them. 
E)  placing newly issued stock in foreign markets.

Question 17

You observe a quotation of the Japanese yen (¥) of $0.007. You are, however, interested in the number of yen per dollar. Thus, you calculate the ____ quotation of ____ ¥/$.

Accepted Answer

A)  direct; 142.86 
B)  indirect; 142.86 
C)  indirect; 150 
D)  direct; 150 
E)  indirect; 0 
A)  direct; 142.86 
B)  indirect; 142.86 
C)  indirect; 150 
D)  direct; 150 
E)  indirect; 0

Question 18

An MNC's short-term financing decisions are satisfied in the ____ market, while its medium debt financing decisions are satisfied in the ____ market.

Accepted Answer

A)  international money; international credit 
B)  international money; international bond 
C)  international credit; international money 
D)  international bond; international credit 
E)  international money; international stock 
A)  international money; international credit 
B)  international money; international bond 
C)  international credit; international money 
D)  international bond; international credit 
E)  international money; international stock

Question 19

The Single European Act prevented a trend toward increased globalization in the banking industry.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following is probably not an example of the use of forward contracts by an MNC?

Accepted Answer

A)  Hedging pound payables by selling pounds forward 
B)  Hedging peso receivables by selling pesos forward 
C)  Hedging yen payables by purchasing yen forward 
D)  Hedging peso payables by purchasing pesos forward 
E)  All of the above are examples of using forward contracts. 
A)  Hedging pound payables by selling pounds forward 
B)  Hedging peso receivables by selling pesos forward 
C)  Hedging yen payables by purchasing yen forward 
D)  Hedging peso payables by purchasing pesos forward 
E)  All of the above are examples of using forward contracts.

Exam 3: International Financial Markets

Which of the following is not true about syndicated loans?

If a U.S. firm desires to avoid the risk from exchange rate fluctuations, and it is receiving 100,000 in 90 days, it could:

The international money market primarily concentrates on:

As a result of the Smithsonian Agreement, the U.S. dollar was:

Shareholders in some countries may have more power to effectively sue publicly-traded firms if their executives or directors commit financial fraud.

In general, stock markets allow for more price efficiency and attract more investors when they have all of the following except:

A cross exchange rate expresses the amount of one foreign currency per unit of another foreign currency.

The more intense the competition for the traded currency, the larger the bid/ask spread.

Forward markets for currencies of developing countries are:

The ask quote is the price for which a bank offers to sell a currency.

When the foreign exchange market opens in the U.S. each morning, the opening exchange rate quotations will be based on the:

Which of the following is not true with respect to spot market liquidity?

Eurobonds:

The strike price on a currency option is also known as an exercise price.

The Bretton Woods Agreement is an agreement to standardize banks' capital requirements across countries; the resulting capital ratios are computed using risk-weighted assets.

The international credit market primarily concentrates on:

You observe a quotation of the Japanese yen (¥) of $0.007. You are, however, interested in the number of yen per dollar. Thus, you calculate the ____ quotation of ____ ¥/$.

An MNC's short-term financing decisions are satisfied in the ____ market, while its medium debt financing decisions are satisfied in the ____ market.

The Single European Act prevented a trend toward increased globalization in the banking industry.

Which of the following is probably not an example of the use of forward contracts by an MNC?

Multinational Financial Management: An Overview

International Flow of Funds

Exchange Rate Determination

Currency Derivatives

Government Influence on Exchange Rates

International Arbitrage and Interest Rate Parity

Relationships among Inflation, Interest Rates, and Exchange Rates

Forecasting Exchange Rates

Measuring Exposure to Exchange Rate Fluctuations

Managing Transaction Exposure

Managing Economic Exposure and Translation Exposure

Direct Foreign Investment

Multinational Capital Budgeting

International Corporate Governance and Control

Country Risk Analysis

Multinational Cost of Capital and Capital Structure

Long-Term Debt Financing

Financing International Trade

Short-Term Financing

International Cash Management

Filters

You observe a quotation of the Japanese yen (¥) of $0.007. You are, however, interested in the number of yen per dollar. Thus, you calculate the quotation of ¥/$.

An MNC's short-term financing decisions are satisfied in the market, while its medium debt financing decisions are satisfied in the market.