Exam 14: Global Financial Management

Scenario - The Gayla Corporation The Gayla Corporation is a multinational business that conducts operations in twelve foreign markets.This multi-million dollar organization is very familiar with currency exchanges and has considerable understanding when it comes to the risks associated with operating in the global market arena.The Gayla Corporation claims it would not be as successful without the expertise of the financial wizards that work for it.The company has not lost money so far and plans to stay that way. -The financial experts of the Gayla Corporation are very much aware of the organization's cost of debt.Which of the following best identifies what cost of debt means to the corporation?

Of the following,which is NOT true about the IMF and World Bank?

A derivatives market run by large banks is called a(n)_____.

Selling a currency in a currency futures contract and profiting on a decrease in the value of the currency over time is called _____.

The sensitivity of a stock to market risk affected by currency movements is called the weighted average cost of capital.

Investors who attempt to earn profits from trading in currencies or currency derivatives are referred to as _______.

______ is the sensitivity of a stock to market risk affected by currency movements.

Forward contracts

The weighted average of different interest rates paid on long-term borrowings is called the _____.

When a bank sells a LC into the financial marketplace as a money market instrument,it is called a(n)_____.

Scenario - Aero,Inc. Aero,Inc.started from the idea of Brad Aerostle of Madison,South Dakota in 1992.Brad earned a financial degree from Harvard and had watched the financial markets for years.Armed with college credentials and knowledge,he believed he could offer needed services to individuals and companies desiring to conduct business around the globe.From the minute Brad put his idea into motion,his brainchild - Aero,Inc.- proved quite profitable. Aero,Inc.currently has over five thousand clients ranging from slightly wealthy individuals to very rich and thriving corporations around the world.Brad's skill at what he does has made his company a sought out firm by those who want to prosper in the foreign marketplace. -One of the prominent concerns the clients of Aero,Inc.express is that of currency fluctuations.The clients know fluctuations in currency can wind up costing them money.Aero,Inc.alleviates its clients concern by suggesting the client enter into a situation where currencies can be exchanged at a previously agreed exchange rate as a way to hedge exchange rate movements.Which one of the following best identifies what Aero,Inc.is likely suggesting?

A small commitment fee needed to purchase a futures contract is called a _____.

Prolonged periods of relatively high dollar values in world currency markets would be a disadvantage to U.S.exporters and an advantage to their foreign competitors.

Scenario - Aero,Inc. Aero,Inc.started from the idea of Brad Aerostle of Madison,South Dakota in 1992.Brad earned a financial degree from Harvard and had watched the financial markets for years.Armed with college credentials and knowledge,he believed he could offer needed services to individuals and companies desiring to conduct business around the globe.From the minute Brad put his idea into motion,his brainchild - Aero,Inc.- proved quite profitable. Aero,Inc.currently has over five thousand clients ranging from slightly wealthy individuals to very rich and thriving corporations around the world.Brad's skill at what he does has made his company a sought out firm by those who want to prosper in the foreign marketplace. -When Aero,Inc.recommends purchasing futures contracts to its clients,it always informs the clients of the rather small commitment fee that is needed to purchase a futures contract.Which one of the following best identifies what this fee is called?

Buying a currency in a currency futures contract and profiting on an increase in the value of the currency over time is called _____.

______ is a coefficient obtained by regressing a stock's return on a currency's return over time.

How short-term changes in exchange rates can affect operating costs and revenues of firms engaged in international business activities is referred to as ________ risks.

Clearing House Interbank Payment System (CHIPS)is an organization that provides secure communication for contracts,invoices,and other trade documents that normally accompany cash payments.

Large global banks are called _______ center banks.

_____ risk is associated with the short-term effects of currency movements on the consolidated accounting statements of a firm.