1) a type of noncontinuous exchange trading system is crowd trading.
a.unlike a call market in which there is a common price for all trades, several bilateral
trades may take place at different prices in crowd trading
b.unlike a continuous market in which there is a common price for all trades, several
bilateral trades may take place at different prices
c.unlike a call market in which several bilateral trades may take place at different prices
there is a common price for all trades in a call market
d.none of the above
2) assume that a product has the following three stages of production:
if the value-added tax (vat) rate is 20%, what would be the vat over all stages of
production?
a.64
b.120
c.2,808
d.3,000
3) consider the no-trade input/output situation presented in the following table and
graph for south and north carolina. assume that free trade is legal.
what is the relative price of a gun in terms of butter in north carolina?
a.1 gun costs 3 butters
b.3 guns costs 1 butter
c.1 gun costs 2 butters
d.2 guns costs 1 butter
4) the forward market
a.involves contracting today for the future purchase of sale of foreign exchange at the
spot rate that will prevail at the maturity of the contract
b.involves contracting today for the future purchase of sale of foreign exchange at a
price agreed upon today
c.involves contracting today for the right but not obligation to the future purchase of
sale of foreign exchange at a price agreed upon today
d.none of the above
5) an income tax is defined by your textbook as
a.is a direct tax
b.is an indirect tax
c.is collected with a withholding tax
d.none of the above
6) generally speaking, a firm is subject to high degrees of operating exposure when
a.either its cost or its price is sensitive to exchange rate changes
b.both the cost and the price are sensitive to exchange rate changes
c.both the cost and the price are insensitive to exchange rate changes
d.none of the above
7) tax evasion is more difficult under a vat because
a.at each stage in the production process producers have an incentive to obtain
documentation from the previous stage that the vat was paid in order to get the greatest
tax credit possible
b.customers can’t convince retailers to sell things without a receipt
c.the cost of record keeping under a vat system imposes an economic hardship on small
businesses
d.none of the above
8) edge act banks are so-called because
a.the are federally chartered subsidiaries of u.s. banks that are physically located in the
united states and are allowed to engage in a full range of international banking activities
b.senator walter e. edge of new jersey sponsored the 1919 amendment to section 25 of
the federal reserve act to allow u.s. banks to be competitive with the services foreign
banks could supply their customers
c.they can only be chartered in states that are on the borders of the united stateson the
“edge” of the map
d.none of the above
9) a “global bond” issue
a.is a very large international bond offering by several borrowers pooled together
b.is a very large international bond offering by a single borrower that is simultaneously
sold in several national bond markets
c.has higher yields for the purchasers
d.has a lower liquidity
10) a highly inflationary economy is define in fasb 52 as
a.one that has cumulative inflation of approximately 100 percent or more over a 3-year
period
b.one that has current inflation of approximately 40 percent per year
c.one that has going-forward expected inflation of approximately 40 percent per year
d.none of the above
11) the exposure coefficient in the regression is given by:
a.
b.
c.
12) operating exposure can be defined as
a.the link between the future home currency values of the firm’s assets and liabilities
and exchange rate fluctuations
b.the extent to which the firm’s operating cash flows would be affected by random
changes in exchange rates
c.the sensitivity of realized domestic currency values of the firm’s contractual cash
flows denominated in foreign currencies to unexpected exchange rate changes
d.the potential that the firm’s consolidated financial statement can be affected by
changes in exchange rates
13) the firm’s tax rate is 34%. the firm’s pre-tax cost of debt is 8%; the firm’s
debt-to-equity ratio is 4; the risk-free rate is 3%; the beta of the firm’s common stock is
1.5; the market risk premium is 9%. what is the firm’s cost of equity capital?
a.33.33%
b.10.85%
c.13.12%
d.16.50%
e.none of the above
14) in the united states foreign-source income is taxed at the same rate as u.s.-earned
income and a foreign tax credit is given against taxes paid to a foreign government.
however,
a.the foreign tax credit is limited to the amount of tax that would be due on that income
if it were earned in the united states
b.if the tax rate paid on foreign-source income is greater than the u.s. tax rate, part of
the credit may go unused
c.both of the above are true statements
d.none of the above is true
15) bilateral netting can reduce the number of foreign exchange transactions among a
mnc with n affiliates to
a.
b.
c.
d. none of the above
16) to hedge a foreign currency receivable,
a.buy call options on the foreign currency with a strike in the domestic currency
b.buy put options on the foreign currency with a strike in the domestic currency
c.sell call options on the foreign currency with a strike in the domestic currency
d.sell put options on the foreign currency with a strike in the domestic currency
17) the product life-cycle theory predicts that
a.over time the united states switches from an exporting country of new products to an
importing country
b.over time the united states switches from a comparative advantage in r&d to a service
economy
c.over time the united states education system maintains the country’s dominant
position in the world economy
d.none of the above
18) a bank may establish a multinational operation for the reason of retail defensive
strategy. the underlying rationale being that
a.banks follow their multinational customers abroad to prevent the erosion of their
clientele to foreign banks seeking to service the multinational’s foreign subsidiaries
b.multinational banking operations help a bank prevent the erosion of its traveler’s
check, tourist, and foreign business markets from foreign bank competition
c.by maintaining foreign branches and foreign currency balances, banks may reduce
transaction costs and foreign exchange risk on currency conversion if government
controls can be circumvented
d.multinational banks are often not subject to the same regulations as domestic banks.
there may be reduced need to publish adequate financial information, lack of required
deposit insurance and reserve requirements on foreign currency deposits, and the
absence of territorial restrictions
19) the underlying principle of tax equity is that
a.all similarly situated taxpayers should participate in the cost of operating the
government according to the same rules
b.all similarly situated taxpayers should participate in the cost of operating the
government on an equal basis
c.none of the above
20) suppose that britain pegs the pound to gold at six pounds per ounce, whereas the
exchange rate between pounds and u.s. dollars is $5 = £1. what should an ounce of gold
be worth in u.s. dollars?
a.$29.40
b.$30.00
c.$0.83
d.$1.20