Question 1

Which of the following is not true regarding electronic communications networks (ECNs)?

Accepted Answer

A)  They have a visible trading floor. 
B)  Trades are executed by a computer network. 
C)  They have been created in many countries to match orders between buyers and sellers. 
D)  They allow investors to place orders on their computers. 
E)  All of the above are true. 
A)  They have a visible trading floor. 
B)  Trades are executed by a computer network. 
C)  They have been created in many countries to match orders between buyers and sellers. 
D)  They allow investors to place orders on their computers. 
E)  All of the above are true.

Question 2

Eurobonds:

Accepted Answer

A)  can be issued only by European firms. 
B)  can be sold only to European investors. 
C)  A and B 
D)  none of the above 
A)  can be issued only by European firms. 
B)  can be sold only to European investors. 
C)  A and B 
D)  none of the above

Question 3

A put option is the amount or percentage by which the existing spot rate exceeds the forward rate.

Accepted Answer

A) True 
 B)False

Question 4

An obligation to purchase a specific amount of currency at a future point in time is called a:

Accepted Answer

A)  call option 
B)  spot contract 
C)  put option 
D)  forward contract 
E)  both B and D 
A)  call option 
B)  spot contract 
C)  put option 
D)  forward contract 
E)  both B and D

Question 5

Certificates representing bundles of stock of non-U.S. firms are called:

Accepted Answer

A)  Eurobonds 
B)  ADRs 
C)  FRNs 
D)  Eurobor 
A)  Eurobonds 
B)  ADRs 
C)  FRNs 
D)  Eurobor

Question 6

The degree of financial information that must be provided by public companies is the same among countries.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following is not a possible bid/ask quotation for the Barbados dollar?

Accepted Answer

A)  $.50/$.51 
B)  $.49/$.50 
C)  $.52/$.51 
D)  $.51/$.52 
E)  All of the above are possible bid/ask quotations. 
A)  $.50/$.51 
B)  $.49/$.50 
C)  $.52/$.51 
D)  $.51/$.52 
E)  All of the above are possible bid/ask quotations.

Question 8

The interest rate commonly charged for loans between banks is called the cross rate.

Accepted Answer

A) True 
 B)False

Question 9

The international money market is frequently accessed by MNCs for short-term investment and financing decisions, while longer term financing decisions are made in the international credit market or the international bond market and in international stock markets.

Accepted Answer

A) True 
 B)False

Question 10

The interest rate in developing countries is usually very low.

Accepted Answer

A) True 
 B)False

Question 11

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 12

An MNC with receivables in Japanese Yen purchases yen forward to hedge its exposure to exchange rate fluctuations.

Accepted Answer

A) True 
 B)False

Question 13

If there is a large supply of savings relative to the demand for short-term funds, the interest rate for that country will be relatively low.

Accepted Answer

A) True 
 B)False

Question 14

An investor engaging in a transaction whereby he or she contracts to purchase British pounds one year from now is an example of a spot market transaction.

Accepted Answer

A) True 
 B)False

Question 15

Assume that $1 is equal to .85 Euros and 98 yen. The value of yen in euros is

Accepted Answer

A)  .01 
B)  118 
C)  1.18 
D)  .0087 
A)  .01 
B)  118 
C)  1.18 
D)  .0087

Question 16

A quotation representing the value of a foreign currency in dollars is referred to as a(n) ____ quotation; a quotation representing the number of units of a foreign currency per dollar is referred to as a(n) ____ quotation.

Accepted Answer

A)  direct; indirect 
B)  indirect; direct 
C)  direct; direct 
D)  indirect; indirect 
E)  cannot be answered without more information 
A)  direct; indirect 
B)  indirect; direct 
C)  direct; direct 
D)  indirect; indirect 
E)  cannot be answered without more information

Question 17

Shareholders can have influence on a wider variety of management issues in some countries.

Accepted Answer

A) True 
 B)False

Question 18

The existence of imperfect markets has prevented the internationalization of financial markets.

Accepted Answer

A) True 
 B)False

Question 19

The Basel II accord is focused on eliminating inconsistencies in ____ across countries.

Accepted Answer

A)  capital requirements 
B)  deposit rates 
C)  deposit insurance 
D)  bank failure policies 
A)  capital requirements 
B)  deposit rates 
C)  deposit insurance 
D)  bank failure policies

Question 20

A share of the ADR of a Dutch firm represents one share of that firm's stock that is traded on a Dutch stock exchange. The share price of the firm was 15 euros when the Dutch market closed. As the U.S. market opens, the euro is worth $1.10. Thus, the price of the ADR should be ____.

Accepted Answer

A)  $13.64 
B)  $15.00 
C)  $16.50 
D)  16.50 euros 
E)  none of the above 
A)  $13.64 
B)  $15.00 
C)  $16.50 
D)  16.50 euros 
E)  none of the above

Exam 3: International Financial Markets

Which of the following is not true regarding electronic communications networks (ECNs)?

Eurobonds:

A put option is the amount or percentage by which the existing spot rate exceeds the forward rate.

An obligation to purchase a specific amount of currency at a future point in time is called a:

Certificates representing bundles of stock of non-U.S. firms are called:

The degree of financial information that must be provided by public companies is the same among countries.

Which of the following is not a possible bid/ask quotation for the Barbados dollar?

The interest rate commonly charged for loans between banks is called the cross rate.

The international money market is frequently accessed by MNCs for short-term investment and financing decisions, while longer term financing decisions are made in the international credit market or the international bond market and in international stock markets.

The interest rate in developing countries is usually very low.

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.

An MNC with receivables in Japanese Yen purchases yen forward to hedge its exposure to exchange rate fluctuations.

If there is a large supply of savings relative to the demand for short-term funds, the interest rate for that country will be relatively low.

An investor engaging in a transaction whereby he or she contracts to purchase British pounds one year from now is an example of a spot market transaction.

Assume that $1 is equal to .85 Euros and 98 yen. The value of yen in euros is

A quotation representing the value of a foreign currency in dollars is referred to as a(n) ____ quotation; a quotation representing the number of units of a foreign currency per dollar is referred to as a(n) ____ quotation.

Shareholders can have influence on a wider variety of management issues in some countries.

The existence of imperfect markets has prevented the internationalization of financial markets.

The Basel II accord is focused on eliminating inconsistencies in ____ across countries.

A share of the ADR of a Dutch firm represents one share of that firm's stock that is traded on a Dutch stock exchange. The share price of the firm was 15 euros when the Dutch market closed. As the U.S. market opens, the euro is worth $1.10. Thus, the price of the ADR should be ____.

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

A quotation representing the value of a foreign currency in dollars is referred to as a(n) quotation; a quotation representing the number of units of a foreign currency per dollar is referred to as a(n) quotation.