Question 1

Currency Exchange Compute the amount of foreign currency that can be purchased for $750,000: 1 Israeli Shekel = $0.2351

Accepted Answer

A)  926,325 Shekel 
B)  750,000 Shekel 
C)  176,325 Shekel 
D)  3,190,131.859 Shekel

Question 2

Which of these is defined as the amount of foreign currency it takes to buy one unit of domestic currency?

Accepted Answer

A)  exchange rate 
B)  spot transaction 
C)  indirect quote 
D)  direct quote

Question 3

All of the following are ways to conduct international business except ________________.

Accepted Answer

A)  Direct ownership investment 
B)  Import/export operations 
C)  Partnership arrangements 
D)  All of these

Question 4

Currency Exchange Compute the amount of foreign currency that can be purchased for $600,000: 1 Korean Won = $0.001045

Accepted Answer

A)  627,000 Won 
B)  627 Won 
C)  5,741,640 Won 
D)  574,162,679.4 Won

Question 5

A golf club costs $112 in the U.S. The same club costs AU$78 in Australia. Assume that purchasing power parity holds. What is the exchange rate between the U.S. and Australian dollars?

Accepted Answer

A)  $1 U.S. = AU$1.37 
B)  $1 U.S. = AU$1.44 
C)  AU$1 = $1.37 U.S. 
D)  AU$1 = $1.44 U.S.

Question 6

Cross Rate Given these two exchange rates, $1 = 11.25 Mexican peso and $1 = €0.7521, compute the cross rate between the Mexican peso and the euro. State this exchange rate in pesos and in euros.

Accepted Answer

A)  0.0669 euros, 14.9589 pesos 
B)  1.3296 euros, 0.0889 pesos 
C)  14.9589 euros, 0.0669 pesos 
D)  0.0889 euros, 1.3296 pesos

Question 7

If the law of one price does not hold, then _____________________.

Accepted Answer

A)  Investors will not be compensated for their risk 
B)  Inflation rates will be very volatile 
C)  Arbitrageurs can make large profits 
D)  None of these

Question 8

If fewer dollars will buy a unit of foreign currency, then the dollar is ________.

Accepted Answer

A)  Strengthening 
B)  Weakening 
C)  Violating the law of purchasing power parity. 
D)  Not in equilibrium

Question 9

International capital budgeting will require that managers ___________.

Accepted Answer

A)  Recognize all of the risks as well as the rewards 
B)  Increase the discount rate to account for any added risks associated with that country 
C)  All incremental cash flows be converted to the domestic currency or convert the domestic discount rate to an equivalent rate in the foreign country 
D)  All of these

Question 10

If the spot rate between the U.S. dollar and the Brazilian real is $1 = 2.0895 real and the 3-month forward rate is $1 = 2.1725 real, is the forward real selling at a discount or a premium?

Accepted Answer

A)  Discount 
B)  Premium 
C)  Unable to determine with the cross-rates.

Question 11

China's exchange rate is a _________________________.

Accepted Answer

A)  Freely floating regime 
B)  Managed floating regime 
C)  Fixed peg arrangement 
D)  None of these

Question 12

Currency Exchange Compute the amount of foreign currency that can be purchased for $1,300,000: 1 Thai Baht = $0.03057

Accepted Answer

A)  39,741 Baht 
B)  1,339,741 Baht 
C)  1,260,259 Baht 
D)  42,525,351.65 Baht

Question 13

What is meant when it is said that the U.S. dollar is weakening? How would it impact your vacation abroad and foreign visitors to the United States?

Accepted Answer

The answer of What is meant when it is said...

Question 14

Cross Rate Given these two exchange rates, $1 = 1.3254 Australian dollars and $1 = £0.5233, compute the cross rate between the Australian dollars and the pound. State this exchange rate in Australian dollars and in pounds.

Accepted Answer

A)  A$2.5329, 0.3948 pounds 
B)  A$0.3948, 2.5329 pounds 
C)  A$0.3948, 0.6936 pounds 
D)  A$0.6936, 0.3948 pounds

Question 15

Convert the following direct quote to dollar indirect quote: 1 Indian Rupee = $0.2110.

Accepted Answer

A)  5.0226 Rupee 
B)  4.7393 Rupee 
C)  4.8814 Rupee 
D)  4.9097 Rupee

Question 16

Which of these is defined as an exchange rate regime where a currency's price is fixed to the value of another currency or to a basket of other currencies?

Accepted Answer

A)  fixed peg arrangement 
B)  freely floating regime 
C)  currency market regime 
D)  managed-floating regime

Question 17

Suppose exchange rates between the U.S. dollar and the Mexican peso is 12.90 peso = $1 and the exchange rate between the U.S. dollar and the euro is $1 = 0.90 euros. What is the cross-rate of the Mexican peso to the euro?

Accepted Answer

A)  16.03 
B)  17.21 
C)  15.26 
D)  14.33

Question 18

Discount Rates A financial manager has determined that the appropriate discount rate for a foreign project is 16 percent. However, that discount rate applies in the United States using dollars. What discount rate should be used in the foreign country using the foreign currency? The inflation rate in the United States and in the foreign country is expected to be 4 percent and 8 percent, respectively.

Accepted Answer

A)  16% 
B)  20% 
C)  12% 
D)  24%

Question 19

What is meant when it is said that the U.S. dollar is strengthening? How would it impact your vacation abroad and foreign visitors to the U.S.?

Accepted Answer