Question 1

One reason for international investment is that

Accepted Answer

A)  the economies of many countries are growing faster than the U.S. 
B)  price-earnings (P/
E)  ratios are higher in foreign countries. 
C)  doing business in foreign countries is simpler than in the U. S. 
D)  raw materials are typically cheaper in other countries than in the U. S. 
A)  the economies of many countries are growing faster than the U.S. 
B)  price-earnings (P/
E)  ratios are higher in foreign countries. 
C)  doing business in foreign countries is simpler than in the U. S. 
D)  raw materials are typically cheaper in other countries than in the U. S.

Question 2

You are on your way to a beautiful Mexican resort. The current exchange rate is 21 pesos to the dollar. When you arrive, you convert $1,000 for how many pesos?

Accepted Answer

A)  21,000 pesos 
B)  2,100 pesos 
C)  476 pesos 
D)  4,760 pesos 
A)  21,000 pesos 
B)  2,100 pesos 
C)  476 pesos 
D)  4,760 pesos

Question 3

Spot transactions are made immediately in the market place at the market price.

Accepted Answer

A) True 
 B)False

Question 4

10,000 bushels of corn currently sells in the U. S. for $57,300. The current exchange rate is 68.13 rupees to the dollar. If purchasing power parity prevails, what is the price of 10,000 bushels of corn in rupees?

Accepted Answer

A)  3,903,849 rupees 
B)  8,410,392 rupees 
C)  68,130 rupees 
D)  1,467,782 rupees 
A)  3,903,849 rupees 
B)  8,410,392 rupees 
C)  68,130 rupees 
D)  1,467,782 rupees

Question 5

You are leaving Mexico and have 3,200 pesos to change into dollars. The exchange rate is 12.5 pesos to the dollar. How many dollars will you receive?

Accepted Answer

A)  $256 
B)  You will receive $400. 
C)  $2,560 
D)  $40.00 
A)  $256 
B)  You will receive $400. 
C)  $2,560 
D)  $40.00

Question 6

The 6 month interest rate in Australia is 0.6%. The spot exchange rate for Australian dollars is 1.4063 to the U.S.dollar. The 6 months forward rate is 1.4259 to the U.S. dollar. These prices indicate that the 6 month risk-free rate in the U.S. is

Accepted Answer

A)  6.00%. 
B)  3.02%. 
C)  3.42%. 
D)  2.00%. 
A)  6.00%. 
B)  3.02%. 
C)  3.42%. 
D)  2.00%.

Question 7

Which of the following international business activities constitutes a foreign direct investment? All firms mentioned are U.S. based.

Accepted Answer

A)  Yanqui Spirits imports a 1000 cases of rum from the Dominican Republic. 
B)  WMT Inc. opens a big-box retail facility in Nicaragua. 
C)  Condor University runs training sessions for Indonesian civil servants on its California Campus. 
D)  Merkizer Pharmaceuticals licenses an Indian company to manufacture a drug under its patents. 
A)  Yanqui Spirits imports a 1000 cases of rum from the Dominican Republic. 
B)  WMT Inc. opens a big-box retail facility in Nicaragua. 
C)  Condor University runs training sessions for Indonesian civil servants on its California Campus. 
D)  Merkizer Pharmaceuticals licenses an Indian company to manufacture a drug under its patents.

Question 8

An attempt to profit by converting dollars to yen, yen to euros, and euros back to dollars would be an example of

Accepted Answer

A)  arbitrage. 
B)  speculation. 
C)  hedging. 
D)  intervention. 
A)  arbitrage. 
B)  speculation. 
C)  hedging. 
D)  intervention.

Question 9

A barrel of oil currently costs $60 in U.S. dollars. The current exchange rate is $1.1256 U. S. to the euro. If purchasing power parity prevails what is the price of a barrel of oil in euros?

Accepted Answer

A)  71.43 euro 
B)  58.36 euro 
C)  73.16 euro 
D)  53.30 euro 
A)  71.43 euro 
B)  58.36 euro 
C)  73.16 euro 
D)  53.30 euro

Question 10

The 6 month interest rate in the U.S. is 2%. The spot exchange rate for Australian dollars is 1.4063 to the U.S.dollar. The 6 months forward rate is 1.4259 to the U.S. dollar. These prices indicate that the 6 month risk-free rate in Australia is

Accepted Answer

A)  6.00%. 
B)  0.34%. 
C)  0.60%. 
D)  3.42%. 
A)  6.00%. 
B)  0.34%. 
C)  0.60%. 
D)  3.42%.

Question 11

When multinational companies evaluate capital investments in foreign countries, they discount

Accepted Answer

A)  pre-tax earnings of the foreign subsidiary. 
B)  foreign earnings at home country discount rates. 
C)  only earnings that are expected to be transferred back to the parent company. 
D)  all cash flows in the foreign currency at the host country discount rates. 
A)  pre-tax earnings of the foreign subsidiary. 
B)  foreign earnings at home country discount rates. 
C)  only earnings that are expected to be transferred back to the parent company. 
D)  all cash flows in the foreign currency at the host country discount rates.

Question 12

The forward rate is the same as the spot rate that will prevail in the future.

Accepted Answer

A) True 
 B)False

Question 13

The interest rate in the U.S. is 4%, in Switzerland it is 3%. The spot rate is 1.0232 USD to the Swiss franc. A U.S. based hotel chain needs to project forward exchange rates for the next five years. Complete the table below.

Accepted Answer

The ratio of the U.S. interest rate to t

Question 14

Capital markets in foreign countries

Accepted Answer

A)  offer lower returns than those obtainable in the domestic capital markets. 
B)  provide international diversification. 
C)  in general are becoming less integrated due to the widespread availability of interest rate and currency swaps. 
D)  increase portfolio betas. 
A)  offer lower returns than those obtainable in the domestic capital markets. 
B)  provide international diversification. 
C)  in general are becoming less integrated due to the widespread availability of interest rate and currency swaps. 
D)  increase portfolio betas.

Question 15

The following are the prices in the foreign exchange market between the U.S. dollar and a foreign currency (fc). Spot 0.6335US$/fc; three-month forward 0.6375US$/fc. What was the discount or premium on three-month forward for the foreign currency?

Accepted Answer

A)  0.63% premium 
B)  0.40% premium 
C)  0.63% discount 
D)  0.40% discount 
A)  0.63% premium 
B)  0.40% premium 
C)  0.63% discount 
D)  0.40% discount

Question 16

What are some of the potential risks, other than exchange rate risk, that need to be considered in foreign direct investment decisions.

Accepted Answer

Business risks involve issues such as pr

Question 17

Spot exchange markets are efficient due to arbitrage forces.

Accepted Answer

A) True 
 B)False

Question 18

The relevant sources of risk for direct foreign investment capital budgeting decisions are the same as those faced when making domestic capital budgeting decisions.

Accepted Answer

A) True 
 B)False

Question 19

The direct 3 month forward rate for the U.K. pound is 1.4496; the pound is expected to

Accepted Answer

A)  stay the same against the dollar. 
B)  weaken against the dollar. 
C)  fluctuate randomly against the dollar. 
D)  strengthen against the dollar. 
A)  stay the same against the dollar. 
B)  weaken against the dollar. 
C)  fluctuate randomly against the dollar. 
D)  strengthen against the dollar.

Question 20

What is the role of arbitrage in the foreign exchange markets?

Accepted Answer

Foreign exchange quotes should be consis

One reason for international investment is that

You are on your way to a beautiful Mexican resort. The current exchange rate is 21 pesos to the dollar. When you arrive, you convert $1,000 for how many pesos?

Spot transactions are made immediately in the market place at the market price.

10,000 bushels of corn currently sells in the U. S. for $57,300. The current exchange rate is 68.13 rupees to the dollar. If purchasing power parity prevails, what is the price of 10,000 bushels of corn in rupees?

You are leaving Mexico and have 3,200 pesos to change into dollars. The exchange rate is 12.5 pesos to the dollar. How many dollars will you receive?

The 6 month interest rate in Australia is 0.6%. The spot exchange rate for Australian dollars is 1.4063 to the U.S.dollar. The 6 months forward rate is 1.4259 to the U.S. dollar. These prices indicate that the 6 month risk-free rate in the U.S. is

Which of the following international business activities constitutes a foreign direct investment? All firms mentioned are U.S. based.

An attempt to profit by converting dollars to yen, yen to euros, and euros back to dollars would be an example of

A barrel of oil currently costs $60 in U.S. dollars. The current exchange rate is $1.1256 U. S. to the euro. If purchasing power parity prevails what is the price of a barrel of oil in euros?

The 6 month interest rate in the U.S. is 2%. The spot exchange rate for Australian dollars is 1.4063 to the U.S.dollar. The 6 months forward rate is 1.4259 to the U.S. dollar. These prices indicate that the 6 month risk-free rate in Australia is

When multinational companies evaluate capital investments in foreign countries, they discount

The forward rate is the same as the spot rate that will prevail in the future.

The interest rate in the U.S. is 4%, in Switzerland it is 3%. The spot rate is 1.0232 USD to the Swiss franc. A U.S. based hotel chain needs to project forward exchange rates for the next five years. Complete the table below.

Capital markets in foreign countries

The following are the prices in the foreign exchange market between the U.S. dollar and a foreign currency (fc). Spot 0.6335US$/fc; three-month forward 0.6375US$/fc. What was the discount or premium on three-month forward for the foreign currency?

What are some of the potential risks, other than exchange rate risk, that need to be considered in foreign direct investment decisions.

Spot exchange markets are efficient due to arbitrage forces.

The relevant sources of risk for direct foreign investment capital budgeting decisions are the same as those faced when making domestic capital budgeting decisions.

The direct 3 month forward rate for the U.K. pound is 1.4496; the pound is expected to

What is the role of arbitrage in the foreign exchange markets?

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

One reason for international investment is that

You are on your way to a beautiful Mexican resort. The current exchange rate is 21 pesos to the dollar. When you arrive, you convert $1,000 for how many pesos?

Spot transactions are made immediately in the market place at the market price.

10,000 bushels of corn currently sells in the U. S. for $57,300. The current exchange rate is 68.13 rupees to the dollar. If purchasing power parity prevails, what is the price of 10,000 bushels of corn in rupees?

You are leaving Mexico and have 3,200 pesos to change into dollars. The exchange rate is 12.5 pesos to the dollar. How many dollars will you receive?

The 6 month interest rate in Australia is 0.6%. The spot exchange rate for Australian dollars is 1.4063 to the U.S.dollar. The 6 months forward rate is 1.4259 to the U.S. dollar. These prices indicate that the 6 month risk-free rate in the U.S. is

Which of the following international business activities constitutes a foreign direct investment? All firms mentioned are U.S. based.

An attempt to profit by converting dollars to yen, yen to euros, and euros back to dollars would be an example of

A barrel of oil currently costs $60 in U.S. dollars. The current exchange rate is $1.1256 U. S. to the euro. If purchasing power parity prevails what is the price of a barrel of oil in euros?

The 6 month interest rate in the U.S. is 2%. The spot exchange rate for Australian dollars is 1.4063 to the U.S.dollar. The 6 months forward rate is 1.4259 to the U.S. dollar. These prices indicate that the 6 month risk-free rate in Australia is

When multinational companies evaluate capital investments in foreign countries, they discount

The forward rate is the same as the spot rate that will prevail in the future.

The interest rate in the U.S. is 4%, in Switzerland it is 3%. The spot rate is 1.0232 USD to the Swiss franc. A U.S. based hotel chain needs to project forward exchange rates for the next five years. Complete the table below.

Capital markets in foreign countries

The following are the prices in the foreign exchange market between the U.S. dollar and a foreign currency (fc). Spot 0.6335US$/fc; three-month forward 0.6375US$/fc. What was the discount or premium on three-month forward for the foreign currency?

What are some of the potential risks, other than exchange rate risk, that need to be considered in foreign direct investment decisions.

Spot exchange markets are efficient due to arbitrage forces.

The relevant sources of risk for direct foreign investment capital budgeting decisions are the same as those faced when making domestic capital budgeting decisions.

The direct 3 month forward rate for the U.K. pound is 1.4496; the pound is expected to

What is the role of arbitrage in the foreign exchange markets?

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