Question 1

Assume that a bank's bid rate on Swiss francs is $.45 and its ask rate is $.47. Its bid-ask percentage spread is:

Accepted Answer

A)  about 4.44%. 
B)  about 4.26%. 
C)  about 4.03%. 
D)  about 4.17%. 
A)  about 4.44%. 
B)  about 4.26%. 
C)  about 4.03%. 
D)  about 4.17%.

Question 2

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 3

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 4

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 5

Which of the following is true?

Accepted Answer

A)  Non-U.S. firms may desire to issue bonds in the U.S. due to less regulations in the U.S. 
B)  U.S. firms may desire to issue bonds in the U.S. due to less regulations in the U.S. 
C)  U.S. firms may desire to issue bonds in the non-U.S. markets due to less regulations in non-U.S. countries. 
D)  A and B 
A)  Non-U.S. firms may desire to issue bonds in the U.S. due to less regulations in the U.S. 
B)  U.S. firms may desire to issue bonds in the U.S. due to less regulations in the U.S. 
C)  U.S. firms may desire to issue bonds in the non-U.S. markets due to less regulations in non-U.S. countries. 
D)  A and B

Question 6

Your company expects to receive 5,000,000 Japanese yen 60 days from now. You decide to hedge your position by selling Japanese yen forward. The current spot rate of the yen is $.0089, while the forward rate is $.0095. You expect the spot rate in 60 days to be $.0090. How many dollars will you receive for the 5,000,000 yen 60 days from now if you sell yen forward?

Accepted Answer

A)  $44,500 
B)  $45,000 
C)  $526 million 
D)  $47,500 
E)  $556 million 
A)  $44,500 
B)  $45,000 
C)  $526 million 
D)  $47,500 
E)  $556 million

Question 7

Futures contracts are sold on exchanges and are consequently ____ than forward contracts, which can be ____ to satisfy an MNC's needs.

Accepted Answer

A)  more standardized; standardized 
B)  more standardized; custom-tailored 
C)  more custom-tailored; standardized 
D)  more custom-tailored; custom-tailored 
E)  less standardized; custom-tailored 
A)  more standardized; standardized 
B)  more standardized; custom-tailored 
C)  more custom-tailored; standardized 
D)  more custom-tailored; custom-tailored 
E)  less standardized; custom-tailored

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

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 10

The forward market:

Accepted Answer

A)  for euros is very illiquid. 
B)  for Eastern European countries is very liquid. 
C)  does not exist for some currencies. 
D)  none of the above 
A)  for euros is very illiquid. 
B)  for Eastern European countries is very liquid. 
C)  does not exist for some currencies. 
D)  none of the above

Question 11

The government enforcement of securities laws varies among countries.

Accepted Answer

A) True 
 B)False

Question 12

In response to the Sarbanes-Oxley Act, the reporting costs were reduced, and many non-U.S. firms that issued new shares of stock decided to place their stock in the United States.

Accepted Answer

A) True 
 B)False

Question 13

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 14

Assume a U.S. firm has to pay for Korean imports in 60 days. It expects that Korean won will depreciate, but it still wants to hedge its risk. What type of hedging is more appropriate in this situation:

Accepted Answer

A)  Buy dollars forward 
B)  Sell dollars forward 
C)  Purchase call option 
D)  Purchase put option 
A)  Buy dollars forward 
B)  Sell dollars forward 
C)  Purchase call option 
D)  Purchase put option

Question 15

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 16

Assume a Japanese firm invoices exports to the U.S. in U.S. dollars. Assume that the forward rate and spot rate of the Japanese yen are equal. If the Japanese firm expects the U.S. dollar to ____ against the yen, it would likely wish to hedge. It could hedge by ____ dollars forward.

Accepted Answer

A)  depreciate; buying 
B)  depreciate; selling 
C)  appreciate; selling 
D)  appreciate; buying 
A)  depreciate; buying 
B)  depreciate; selling 
C)  appreciate; selling 
D)  appreciate; buying

Question 17

If companies can rely on stock markets to obtain funds, they will have to rely more heavily on the ____ market to raise long-term funds.

Accepted Answer

A)  derivative 
B)  long-term credit 
C)  money 
D)  foreign exchange 
A)  derivative 
B)  long-term credit 
C)  money 
D)  foreign exchange

Question 18

Global regulations require that shareholders in all countries have the same rights wherever there are stock markets.

Accepted Answer

A) True 
 B)False

Question 19

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 20

Shareholders have more voting power in some countries than others.

Accepted Answer

A) True 
 B)False

Assume that a bank's bid rate on Swiss francs is $.45 and its ask rate is $.47. Its bid-ask percentage spread is:

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.

Which currency is used the most to denominate Eurobonds?

Eurobonds:

Which of the following is true?

Futures contracts are sold on exchanges and are consequently than forward contracts, which can be to satisfy an MNC's needs.

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

The international credit market primarily concentrates on:

The forward market:

The government enforcement of securities laws varies among countries.

In response to the Sarbanes-Oxley Act, the reporting costs were reduced, and many non-U.S. firms that issued new shares of stock decided to place their stock in the United States.

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.

Assume a U.S. firm has to pay for Korean imports in 60 days. It expects that Korean won will depreciate, but it still wants to hedge its risk. What type of hedging is more appropriate in this situation:

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

Assume a Japanese firm invoices exports to the U.S. in U.S. dollars. Assume that the forward rate and spot rate of the Japanese yen are equal. If the Japanese firm expects the U.S. dollar to against the yen, it would likely wish to hedge. It could hedge by dollars forward.

If companies can rely on stock markets to obtain funds, they will have to rely more heavily on the ____ market to raise long-term funds.

Global regulations require that shareholders in all countries have the same rights wherever there are stock markets.

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

Shareholders have more voting power in some countries than others.

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

Assume that a bank's bid rate on Swiss francs is $.45 and its ask rate is $.47. Its bid-ask percentage spread is:

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.

Which currency is used the most to denominate Eurobonds?

Eurobonds:

Which of the following is true?

Futures contracts are sold on exchanges and are consequently ____ than forward contracts, which can be ____ to satisfy an MNC's needs.

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

The international credit market primarily concentrates on:

The forward market:

The government enforcement of securities laws varies among countries.

In response to the Sarbanes-Oxley Act, the reporting costs were reduced, and many non-U.S. firms that issued new shares of stock decided to place their stock in the United States.

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.

Assume a U.S. firm has to pay for Korean imports in 60 days. It expects that Korean won will depreciate, but it still wants to hedge its risk. What type of hedging is more appropriate in this situation:

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

Assume a Japanese firm invoices exports to the U.S. in U.S. dollars. Assume that the forward rate and spot rate of the Japanese yen are equal. If the Japanese firm expects the U.S. dollar to ____ against the yen, it would likely wish to hedge. It could hedge by ____ dollars forward.

If companies can rely on stock markets to obtain funds, they will have to rely more heavily on the ____ market to raise long-term funds.

Global regulations require that shareholders in all countries have the same rights wherever there are stock markets.

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

Shareholders have more voting power in some countries than others.

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

Futures contracts are sold on exchanges and are consequently than forward contracts, which can be to satisfy an MNC's needs.

Assume a Japanese firm invoices exports to the U.S. in U.S. dollars. Assume that the forward rate and spot rate of the Japanese yen are equal. If the Japanese firm expects the U.S. dollar to against the yen, it would likely wish to hedge. It could hedge by dollars forward.

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