Question 1

The strike price is also known as the premium price.

Accepted Answer

A) True 
 B)False

Question 2

The term "eurobor" is widely used to reflect the total amount of euros borrowed by the firms in Europe per month to finance their growth.

Accepted Answer

A) True 
 B)False

Question 3

In general, common law countries such as the U.S., Canada, and the United Kingdom allow for more legal protection than French civil law countries such as France or Italy.

Accepted Answer

A) True 
 B)False

Question 4

If there is a strong demand to borrow a currency, and a low supply of savings in that currency, the interest rate will be relatively low.

Accepted Answer

A) True 
 B)False

Question 5

A futures contract is a contract specifying a standard volume of a particular currency to be exchanged on a specific settlement date.

Accepted Answer

A) True 
 B)False

Question 6

Large commercial banks play a major role in the international money market by accepting short-term deposits in large amounts (such as the equivalent of $1 million or more) and in various currencies, and channeling the money to corporations and government agencies that need to borrow those short-term funds in the desired currencies.

Accepted Answer

A) True 
 B)False

Question 7

A currency put option provides the right, but not the obligation, to buy a specific currency at a specific price within a specific period of time.

Accepted Answer

A) True 
 B)False

Question 8

From 1944 to 1971, the exchange rate between any two currencies was typically:

Accepted Answer

A)  fixed within narrow boundaries. 
B)  floating, but subject to central bank intervention. 
C)  floating, and not subject to central bank intervention. 
D)  nonexistent; that is currencies were not exchanged, but gold was used to pay for all foreign transactions. 
A)  fixed within narrow boundaries. 
B)  floating, but subject to central bank intervention. 
C)  floating, and not subject to central bank intervention. 
D)  nonexistent; that is currencies were not exchanged, but gold was used to pay for all foreign transactions.

Question 9

Which currency is used the most to denominate Eurobonds?

Accepted Answer

A)  the British pound. 
B)  the Japanese yen. 
C)  the U.S. dollar. 
D)  the Swiss franc. 
A)  the British pound. 
B)  the Japanese yen. 
C)  the U.S. dollar. 
D)  the Swiss franc.

Question 10

Which of the following is not a method that can be used to invest internationally?

Accepted Answer

A)  Investment in MNC stocks 
B)  American depository receipts (ADRs) 
C)  World Equity benchmark Shares (WEBS) 
D)  International mutual funds 
E)  All of the above are methods that can be used to invest internationally. 
A)  Investment in MNC stocks 
B)  American depository receipts (ADRs) 
C)  World Equity benchmark Shares (WEBS) 
D)  International mutual funds 
E)  All of the above are methods that can be used to invest internationally.

Question 11

Assume that a bank's bid rate on Japanese yen is $.0041 and its ask rate is $.0043. Its bid-ask percentage spread is:

Accepted Answer

A)  about 4.99%. 
B)  about 4.88%. 
C)  about 4.65%. 
D)  about 4.43%. 
A)  about 4.99%. 
B)  about 4.88%. 
C)  about 4.65%. 
D)  about 4.43%.

Question 12

The term "eurobor" is widely used to reflect the interbank offer rate on euros.

Accepted Answer

A) True 
 B)False

Question 13

The forward rate is the exchange rate used for immediate exchange of currencies.

Accepted Answer

A) True 
 B)False

Question 14

The bid-ask spread on an exchange rate can be used to directly determine:

Accepted Answer

A)  how an exchange rate will change. 
B)  the transaction cost of foreign exchange. 
C)  the forward premium. 
D)  the currency option premium. 
A)  how an exchange rate will change. 
B)  the transaction cost of foreign exchange. 
C)  the forward premium. 
D)  the currency option premium.

Question 15

Which of the following is not true regarding the Bretton Woods Agreement?

Accepted Answer

A)  It called for fixed exchange rates between currencies. 
B)  Governments intervened to prevent exchange rates from moving more than 1 percent above or below their initially established levels. 
C)  The agreement lasted from 1944 until 1971. 
D)  Each country used gold to back its currency. 
E)  All of the above are true regarding the Bretton Woods Agreement. 
A)  It called for fixed exchange rates between currencies. 
B)  Governments intervened to prevent exchange rates from moving more than 1 percent above or below their initially established levels. 
C)  The agreement lasted from 1944 until 1971. 
D)  Each country used gold to back its currency. 
E)  All of the above are true regarding the Bretton Woods Agreement.

Question 16

Banks charge larger bid/ask spreads than they would on less liquid, less traded currencies.

Accepted Answer

A) True 
 B)False

Question 17

When receiving quotations on a currency's exchange rate, the bank's bid quote is the rate at which the bank is willing to sell currency.

Accepted Answer

A) True 
 B)False

Question 18

If a U.S. firm desires to avoid the risk from exchange rate fluctuations, and it will need C$200,000 in 90 days to make payment on imports from Canada, it could:

Accepted Answer

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

Question 19

LIBOR is:

Accepted Answer

A)  the interest rate commonly charged for loans between banks. 
B)  the average inflation rate in European countries. 
C)  the maximum loan rate ceiling on loans in the international money market. 
D)  the maximum deposit rate ceiling on deposits in the international money market. 
E)  the maximum interest rate offered on bonds that are issued in London. 
A)  the interest rate commonly charged for loans between banks. 
B)  the average inflation rate in European countries. 
C)  the maximum loan rate ceiling on loans in the international money market. 
D)  the maximum deposit rate ceiling on deposits in the international money market. 
E)  the maximum interest rate offered on bonds that are issued in London.

Question 20

A Japanese yen is worth $.0080, and a Fijian dollar (F$) is worth $.5900. What is the value of the yen in Fijian dollars (i.e., how many Fijian dollars do you need to buy a yen)?

Accepted Answer

A)  73.75. 
B)  125. 
C)  1.69. 
D)  0.014. 
E)  none of the above 
A)  73.75. 
B)  125. 
C)  1.69. 
D)  0.014. 
E)  none of the above

The strike price is also known as the premium price.

The term "eurobor" is widely used to reflect the total amount of euros borrowed by the firms in Europe per month to finance their growth.

In general, common law countries such as the U.S., Canada, and the United Kingdom allow for more legal protection than French civil law countries such as France or Italy.

If there is a strong demand to borrow a currency, and a low supply of savings in that currency, the interest rate will be relatively low.

A futures contract is a contract specifying a standard volume of a particular currency to be exchanged on a specific settlement date.

A currency put option provides the right, but not the obligation, to buy a specific currency at a specific price within a specific period of time.

From 1944 to 1971, the exchange rate between any two currencies was typically:

Which currency is used the most to denominate Eurobonds?

Which of the following is not a method that can be used to invest internationally?

Assume that a bank's bid rate on Japanese yen is $.0041 and its ask rate is $.0043. Its bid-ask percentage spread is:

The term "eurobor" is widely used to reflect the interbank offer rate on euros.

The forward rate is the exchange rate used for immediate exchange of currencies.

The bid-ask spread on an exchange rate can be used to directly determine:

Which of the following is not true regarding the Bretton Woods Agreement?

Banks charge larger bid/ask spreads than they would on less liquid, less traded currencies.

When receiving quotations on a currency's exchange rate, the bank's bid quote is the rate at which the bank is willing to sell currency.

If a U.S. firm desires to avoid the risk from exchange rate fluctuations, and it will need C$200,000 in 90 days to make payment on imports from Canada, it could:

LIBOR is:

A Japanese yen is worth $.0080, and a Fijian dollar (F$) is worth $.5900. What is the value of the yen in Fijian dollars (i.e., how many Fijian dollars do you need to buy a yen)?

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

Exam 3: International Financial Markets

The strike price is also known as the premium price.

The term "eurobor" is widely used to reflect the total amount of euros borrowed by the firms in Europe per month to finance their growth.

In general, common law countries such as the U.S., Canada, and the United Kingdom allow for more legal protection than French civil law countries such as France or Italy.

If there is a strong demand to borrow a currency, and a low supply of savings in that currency, the interest rate will be relatively low.

A futures contract is a contract specifying a standard volume of a particular currency to be exchanged on a specific settlement date.

A currency put option provides the right, but not the obligation, to buy a specific currency at a specific price within a specific period of time.

From 1944 to 1971, the exchange rate between any two currencies was typically:

Which currency is used the most to denominate Eurobonds?

Which of the following is not a method that can be used to invest internationally?

Assume that a bank's bid rate on Japanese yen is $.0041 and its ask rate is $.0043. Its bid-ask percentage spread is:

The term "eurobor" is widely used to reflect the interbank offer rate on euros.

The forward rate is the exchange rate used for immediate exchange of currencies.

The bid-ask spread on an exchange rate can be used to directly determine:

Which of the following is not true regarding the Bretton Woods Agreement?

Banks charge larger bid/ask spreads than they would on less liquid, less traded currencies.

When receiving quotations on a currency's exchange rate, the bank's bid quote is the rate at which the bank is willing to sell currency.

If a U.S. firm desires to avoid the risk from exchange rate fluctuations, and it will need C$200,000 in 90 days to make payment on imports from Canada, it could:

LIBOR is:

A Japanese yen is worth $.0080, and a Fijian dollar (F$) is worth $.5900. What is the value of the yen in Fijian dollars (i.e., how many Fijian dollars do you need to buy a yen)?

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