1) If today’s exchange rate reflects any historical trends in Canadian dollar exchange
rate movements, but not all relevant public information, then the Canadian dollar
market is:
a. weak-form efficient
b. semistrong-form efficient
c. strong-form efficient
d. all of the above
2) If a currency’s spot rate market is ____, its exchange rate is likely to be ____ to a
single large purchase or sale transaction.
a. liquid; highly sensitive
b. illiquid; insensitive
c. illiquid; highly sensitive
d. none of the above.
3) Assuming that a subsidiary is wholly owned, a subsidiary’s perspective is appropriate
in attempting to determine whether a project will enhance the firm’s value.
a. True
b. False
4) Some MNCs are subject to economic exposure without being subject to transaction
exposure.
a. True
b. False
5) If you have bought the right to sell, you are a:
a. call writer
b. put buyer
c. futures buyer
d. put writer
6) Which of the following is not a strategy that could be used by an MNC to reduce its
exposure to a host government takeover?
a. Attempt to recover cash flows from a foreign investment as quickly as possible
b. Rely on unique supplies and/or technology
c. Hire local labor
d. Borrow local funds
e. All of the above are strategies to reduce an MNC’s exposure to a host government
takeover
7) Assume that British corporations begin to purchase more supplies from the U.S. as a
result of several labor strikes by British suppliers. This action reflects:
a. an increased demand for British pounds
b. a decrease in the demand for British pounds
c. an increase in the supply of British pounds for sale
d. a decrease in the supply of British pounds for sale
8) Assume that a U.S. investor invests in a British CD offering a six-month interest rate
of 5%. Over this six-month period, the pound depreciates by 9%. The effective yield on
the British CD for the U.S. investor is:
a. 14.45%
b. -4.45%
c. 14.00%
d. -4.00%