Question 1

________ are players in the foreign exchange market.

Accepted Answer

A)  Global investment banks 
B)  Large multinational firms 
C)  Central banks 
D)  All of the above 
A)  Global investment banks 
B)  Large multinational firms 
C)  Central banks 
D)  All of the above

Question 2

A U.S.-based firm is planning to make an investment in Europe. The firm estimates that the project will generate cash flows of 200,000 euros after one year. If the one-year forward exchange rate is $1.40/euro and the dollar cost of capital is 9%, what is the present value (PV) of the project cash flows?

Accepted Answer

A)  $232,981 
B)  $245,198 
C)  $256,881 
D)  $268,880 
A)  $232,981 
B)  $245,198 
C)  $256,881 
D)  $268,880

Question 3

A ________ is written between a firm and a bank and it fixes the currency exchange rate for a transaction that will occur at a future date.

Accepted Answer

A)  currency forward contract 
B)  currency options contract 
C)  currency call option 
D)  currency put option 
A)  currency forward contract 
B)  currency options contract 
C)  currency call option 
D)  currency put option

Question 4

Which of the following statements is FALSE?

Accepted Answer

A)  If the U.S. tax rate exceeds the combined tax rate on all foreign income, it is valid to assume that the firm pays the same tax rate on all income no matter where it is earned. 
B)  Firms can lower their taxes by pooling multiple foreign projects and accelerating the repatriation of earnings. 
C)  Under U.S. tax law, multinational corporations may use any excess tax credits generated in high-tax foreign countries to offset their net U.S. tax liabilities on earnings in low-tax foreign countries. 
D)  If the foreign tax rate exceeds the U.S. tax rate, because the U.S. tax credit exceeds the amount of U.S. taxes owed, no tax is owed in the United States. 
A)  If the U.S. tax rate exceeds the combined tax rate on all foreign income, it is valid to assume that the firm pays the same tax rate on all income no matter where it is earned. 
B)  Firms can lower their taxes by pooling multiple foreign projects and accelerating the repatriation of earnings. 
C)  Under U.S. tax law, multinational corporations may use any excess tax credits generated in high-tax foreign countries to offset their net U.S. tax liabilities on earnings in low-tax foreign countries. 
D)  If the foreign tax rate exceeds the U.S. tax rate, because the U.S. tax credit exceeds the amount of U.S. taxes owed, no tax is owed in the United States.

Question 5

A U.S.-based firm is planning to make an investment in Europe. The firm estimates that the project will generate cash flows of 100,000 euros after one year. If the one-year forward exchange rate is $1.50/euro and the dollar cost of capital is 8%, what is the present value (PV) of the project cash flows?

Accepted Answer

A)  $132,675 
B)  $145,349 
C)  $137,287 
D)  $138,889 
A)  $132,675 
B)  $145,349 
C)  $137,287 
D)  $138,889

Question 6

The implied foreign interest rate computed using spot and forward exchange rates may be lower than the actual foreign interest rate if the foreign country has a high ________.

Accepted Answer

A)  default risk 
B)  inflation risk 
C)  depreciation risk 
D)  none of the above 
A)  default risk 
B)  inflation risk 
C)  depreciation risk 
D)  none of the above

Question 7

A Brazilian firm owes you $2,000,000, payable in three months, however, they insist on paying in Brazilian Reals. The current spot exchange rate is $0.59305/Real. The three-month forward exchange rate is $0.61255/Real. How many Real should you demand in a forward contract to receive $2,000,000 in three months to hedge the exchange rate risk?

Accepted Answer

A)  1,186,100 Real 
B)  3,372,397 Real 
C)  3,265,040 Real 
D)  1,225,100 Real 
A)  1,186,100 Real 
B)  3,372,397 Real 
C)  3,265,040 Real 
D)  1,225,100 Real

Question 8

Which of the following statements regarding international projects is FALSE?

Accepted Answer

A)  Interest rates and costs of capital will likely be different in the foreign country as a result of the macroeconomic environment. 
B)  The project will most likely generate foreign currency cash flows, although the managers and shareholders care about the foreign currency value of the project. 
C)  Under internationally integrated capital markets, the value of an investment does not depend on the currency we use in the analysis. 
D)  The firm will probably face a different tax rate in the foreign country and will be subject to both foreign and domestic tax codes. 
A)  Interest rates and costs of capital will likely be different in the foreign country as a result of the macroeconomic environment. 
B)  The project will most likely generate foreign currency cash flows, although the managers and shareholders care about the foreign currency value of the project. 
C)  Under internationally integrated capital markets, the value of an investment does not depend on the currency we use in the analysis. 
D)  The firm will probably face a different tax rate in the foreign country and will be subject to both foreign and domestic tax codes.

________ are players in the foreign exchange market.

A ________ is written between a firm and a bank and it fixes the currency exchange rate for a transaction that will occur at a future date.

Which of the following statements is FALSE?

The implied foreign interest rate computed using spot and forward exchange rates may be lower than the actual foreign interest rate if the foreign country has a high ________.

Which of the following statements regarding international projects is FALSE?

Corporate Finance and the Financial Manager

Introduction to Financial Statement Analysis

Time Value of Money: an Introduction

Time Value of Money: Valuing Cash Flow Streams

Interest Rates

Bonds

Stock Valuation

Investment Decision Rules

Fundamentals of Capital Budgeting

Stock Valuation: a Second Look

Risk and Return in Capital Markets

Systematic Risk and the Equity Risk Premium

The Cost of Capital

Raising Equity Capital

Debt Financing

Capital Structure

Payout Policy

Financial Modeling and Pro Forma Analysis

Working Capital Management

Short-Term Financial Planning

Option Applications and Corporate Finance

Mergers and Acquisitions

Leasing

Insurance and Risk Management

Corporate Governance

Filters

Exam 23: International Corporate Finance

________ are players in the foreign exchange market.

A ________ is written between a firm and a bank and it fixes the currency exchange rate for a transaction that will occur at a future date.

Which of the following statements is FALSE?

The implied foreign interest rate computed using spot and forward exchange rates may be lower than the actual foreign interest rate if the foreign country has a high ________.

Which of the following statements regarding international projects is FALSE?

Corporate Finance and the Financial Manager

Introduction to Financial Statement Analysis

Time Value of Money: an Introduction

Time Value of Money: Valuing Cash Flow Streams

Interest Rates

Bonds

Stock Valuation

Investment Decision Rules

Fundamentals of Capital Budgeting

Stock Valuation: a Second Look

Risk and Return in Capital Markets

Systematic Risk and the Equity Risk Premium

The Cost of Capital

Raising Equity Capital

Debt Financing

Capital Structure

Payout Policy

Financial Modeling and Pro Forma Analysis

Working Capital Management

Short-Term Financial Planning

Option Applications and Corporate Finance

Mergers and Acquisitions

Leasing

Insurance and Risk Management

Corporate Governance

Filters