Question 1

A U.S. firm is expecting cash flows of 20 million Mexican pesos and 35 million Indian rupees. The current spot exchange rates are: $1 = 11.792 pesos and $1 = 49.204 rupees. If these cash flows are not received for one year and the expected spot rates at that time will be $1 = 11.118 pesos and $1 = 41.075 rupees, then what is the difference in dollars received that was caused by the delay?

Accepted Answer

A)  $0.03 million
B)  $0.15 million
C)  $0.24 million
D)  $0.32 million C

Question 2

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 A

Question 3

If the current spot rate between the U.S. dollar and the Swedish krona was $1 = 7.5423 krona, and if the inflation rate in the United States was 5 percent and in Sweden it was 2 percent, then what would be the expected spot rate in one year?

Accepted Answer

A)  $0.1366
B)  $0.1326
C)  $7.7487
D)  $0.1356 A

Question 4

Which of the following is an economic principle that states all identical goods in different markets must have the same price?

Accepted Answer

A)  Purchasing power parity
B)  Interest rate parity
C)  Law of one price
D)  Price swap parity

Question 5

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 6

Convert the following indirect quote to a dollar direct quote: $1 = 15,990 Vietnam dong

Accepted Answer

A)  $0.00006254
B)  $159.90
C)  $6.2539
D)  $1.00625

Question 7

Which of the following is a theory that the difference in interest rates between two countries is equal to the difference between the forward currency exchange rate and the spot exchange rate?

Accepted Answer

A)  Purchasing power parity
B)  Interest rate parity
C)  Law of one price
D)  Currency swap parity

Question 8

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 9

Convert the following direct quote to a dollar indirect quote: 1 Danish krone = $0.1755

Accepted Answer

A)  0.1755 krone
B)  0.8245 krone
C)  1.1755 krone
D)  5.698 krone

Question 10

Given these two exchange rates, $1 = 14.96 Mexican peso and $1 = €0.67, compute the cross-rate between the Mexican peso and the euro. State this exchange rate in pesos.

Accepted Answer

A)  10.02 pesos
B)  15.63 pesos
C)  18.69 pesos
D)  22.32 pesos

Question 11

Convert the following direct quote to a dollar indirect quote: 1 Thai baht = $0.03057

Accepted Answer

A)  0.03057 baht
B)  1.03057 baht
C)  0.96943 baht
D)  32.7118 baht

Question 12

A golf club costs $100 in the United States. The same club costs AU$143 in Australia. Assume that purchasing power parity holds. What is the exchange rate between the U.S. and Australian dollars?

Accepted Answer

A)  AU$1 = $1.43 U.S.
B)  AU$1 = $1.25 U.S.
C)  AU$1 = $0.6993 U.S.
D)  AU$1 = $0.7752U.S.

Question 13

Given these two exchange rates, $1 = 12.5 Mexican peso and $1 = €0.75, compute the cross-rate between the Mexican peso and the euro. State this exchange rate in pesos.

Accepted Answer

A)  19.14 pesos
B)  17.62 pesos
C)  16.67 pesos
D)  18.03 pesos

Question 14

Convert the following direct quote to a dollar indirect quote: 1 Malaysian ringget = $0.2875

Accepted Answer

A)  0.2875 ringget
B)  1.2875 ringget
C)  3.4783 ringget
D)  4.4783 ringget

Question 15

Which of these is defined as an exchange rate regime where the currency is completely determined by the foreign-exchange market through supply and demand?

Accepted Answer

A)  Foreign market regime
B)  Freely floating regime
C)  Currency market regime
D)  Managed-floating regime

Question 16

Convert the following direct quote to dollar indirect quote: 1 Danish krone = $0.1991.

Accepted Answer

A)  5.0226 krone
B)  5.1137 krone
C)  5.2814 krone
D)  5.3097 krone

Question 17

A U.S. firm is expecting cash flows of 15 million Mexican pesos and 20 million Indian rupees. The current spot exchange rates are: $1 = 11.501 pesos and $1 = 45.525 rupees. If these cash flows are not received for one year and the expected spot rates at that time will be $1 = 11.265 pesos and $1 = 45.005 rupees, then what is the difference in dollars received that was caused by the delay?

Accepted Answer

A)  $0.03 million more
B)  $0.03 million less
C)  $16.94 million more
D)  $16.94 million less

Question 18

In the late 1990s, many East Asian currencies suddenly and dramatically devalued. What is the percentage change in value of a $10 million investment in Indonesia when the exchange rate changes from $1 = 3,000 rupiah to $1 = 10,000 rupiah?

Accepted Answer

A)  30 percent
B)  10 percent
C)  70 percent
D)  90 percent

Question 19

Which of these is an international organization that deals with international trade rules and helps settle disputes between its member governments?

Accepted Answer

A)  World Trade Union
B)  World Free Trade Agreement
C)  International Monetary Fund
D)  World Trade Organization

Question 20

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

Accepted Answer

A)  Exchange rate
B)  Spot transaction
C)  Indirect quote
D)  Direct quote

Exam 19: International Corporate Finance