1) suppose that the current exchange rate is 1.00 = $1.60. the indirect quote, from the
u.s. perspective is
a.1.00 = $1.60
b.0.6250 = $1.00
c.1.60 = $1.00
d.none of the above
2) a banker’s acceptance is created when
a.is a document issued by the common carrier specifying that it has received the foods
for shipment; it can serve as title to the goods
b.after taking title to the goods via a bill of lading, the importer’s bank accepts the time
draft
c.a time draft that calls for payment upon physical delivery of goods matures
d.none of the above
3) the toronto stock exchange
a.is a fully automated
b.features electronic matching of public orders
c.has continuous order flow
d.all of the above
4) in a currency swap
a.it may be the case that two counterparties have equivalent credit ratings
b.it may be the case that firms have a comparative advantage in borrowing in their
domestic markets
c.both a and b
d.none of the above
5) your firm is an italian importer of bicycles. you have placed an order with a swiss
firm for sfr. 2,000,000 worth of bicycles. payment (in francs) is due in 12 months. use a
money market hedge to redenominate this one-year franc denominated payable into a
euro-denominated payable with a one-year maturity.
the following were computed without rounding. select the answer closest to yours.
a.1,116,826.92
b.1,250,000
c.1,134,122.29
d.1,156,804.73
6) company x wants to borrow $10,000,000 floating for 5 years; company y wants to
borrow £5,000,000 fixed for 5 years. the exchange rate is $2 = £1 and is not expected to
change over the next 5 years. their external borrowing opportunities are:
a swap bank wants to design a profitable interest-only fixed-for-fixed currency swap. in
order for x and y to be interested, they can face no exchange rate risk
what must the values of a and b in the graph shown above be in order for the swap to be
of interest to firms x and y?
a.a = $10.50%; b = £12%
b.a = $10%; b = £13%
c.a = $12%; b = £13%
d.a = £10.50%; b = $12%
7) the entries in the “current account” and the “capital account”, combined together, can
be outlined (in alphabetic order) as:
(i) – direct investment
(ii) – factor income
(iii) – merchandise
(iv) – official transfer
(v) – other capital
(vi) – portfolio investment
(vii) – private transfer
(viii) – services
capital account includes
a.(i), (ii), and (iii)
b.(ii), (iii), and (vii)
c.(iv), (v), and (vii)
d.(i), (v), and (vi)
8) find the debt-to-equity ratio for a firm with a debt-to-total-value ratio of .
a.1
b.2
c.3
d.4
e.5
9) your firm is a u.k.-based exporter of bicycles. you have sold an order to a french firm
for 1,000,000 worth of bicycles. payment from the french firm (in euro) is due in 12
months. use a money market hedge to redenominate this one-year receivable into a
pound-denominated receivable with a one-year maturity.
the following were computed without rounding. select the answer closest to yours.
a.£803,721.49
b.800,000
c.£780,312.13
d.£72,352.94
10) consider the following spot and forward rate quotations for the swiss franc:
calculate the 3-month forward premium in american terms. assume 30-360 pricing
convention.
a.0.353
b.0.4235
c.0.1364
d.0.1412
11) webs are
a.world equity benchmark shares
b.exchange-traded open-end country funds designed to closely track foreign stock
market indexes
c.both a and b
d.none of the above