1) for a recent month, the following payments matrix of interaffiliate cash flows was
forecasted:
the spot exchange rates are $1.20 = 1.00 and $2.00 = £1.00; affiliates get paid in home
currency. use multilateral netting to find the net payments to and from all parties.
which of the following is an accurate chart of their current situation?
a.
b.
c.
d.none of the others
2) the more concentrated a national stock market is
a.the greater opportunity a global investor has to include shares from that county in an
internationally diversified portfolio
b.the less opportunity a global investor has to include shares from that county in an
internationally diversified portfolio
c.the broader the investor base across a number of different shares and industries
d.none of the above
3)
the 5-year project requires equipment that costs $100,000. if undertaken, the
shareholders will contribute $25,000 cash and borrow $75,000 with an interest-only
loan with a maturity of 5 years and annual interest payments. the equipment will be
depreciated straight-line to zero over the 5-year life of the project. there will be a
pre-tax salvage value of $5,000. there are no other start-up costs at year 0. during years
1 through 5, the firm will sell 25,000 units of product at $5; variable costs are $3; there
are no fixed costs.
when using the apv methodology, what is the npv of the interest tax shield?
a.$9,666.51
b.$12,019.32
c.$9,377.31
d.$7,000.73
e.none of the above
4) the current exchange rate is 1.00 = $1.50. compute the correct balances in bank a’s
correspondent account(s) with bank b if a currency trader employed at bank a buys
100,000 from a currency trader at bank b for $150,000 using its correspondent
relationship with bank b.
a.bank a’s dollar-denominated account at b will fall by $150,000
b.bank b’s dollar-denominated account at a will fall by $150,000
c.bank a’s pound-denominated account at b will fall by 100,000
d.bank b’s pound-denominated account at a will rise by 100,000
5) many mncs involved in extractive/natural resources industries
a.tend to directly own oil fields, mine deposits, and forests
b.tend to lease their oil fields, mine deposits, and forests
c.tend to partner with local firms, leveraging their intangible assets
d.none of the above
6) today for a mnc to produce merchandise in one country on capital equipment
financed by funds raised in a number of different currencies through issuing securities
to investors in many countries and then selling the finished product to customers in yet
other countries is
a.not uncommon
b.extremely common
c.uncommon
d.the norm
7) the difference between a broker and a dealer is
a.dealers sell drugs; brokers sell houses
b.brokers bring together buyers and sellers, but carry no inventory; dealers stand ready
to buy and sell from their inventory
c.brokers transact in stocks and bonds; currency is bought and sold through dealers
d.none of the above
8) the world’s largest foreign exchange trading center is
a.new york
b.tokyo
c.london
d.hong kong
9) “bulldog” bonds are
a.dollar-denominated foreign bonds originally sold to u.s. investors
b.yen-denominated foreign bonds originally sold in japan
c.pound sterling-denominated foreign bonds originally sold in the u.k
d.none of the above
10) outside the united states and the united kingdom,
a.concentrated ownership of the company is more the exception than the rule
b.diffused ownership of the company is more the exception than the rule
c.partnerships are more important than corporations
d.none of the above
11) compute the payments due in the second year on a three-year amortizing swap from
company b to company a. company a and company b both want to borrow £1,000,000
for three years. a wants to borrow floating and b wants to borrow fixed. a and b agree to
split the qsd.
a.b pays £402,114.80 to a
b.b pays £100,000 to a
c.b pays £69,788.52 to a
d.none of the above
12) a currency futures option amounts to a derivative on a derivative. why would
something like that exist?
a.for some assets, the futures contract can have lower transactions costs and greater
liquidity than the underlying asset
b.tax consequences matter as well, and for some users an option contract on a future is
more tax efficient
c.transactions costs and liquidity
d.all of the above
13) when individual investors become aware of overseas investment opportunities and
are willing to diversify their portfolios internationally,
a.they trade one market imperfection, information asymmetry, for another, exchange
rate risk
b.they benefit from an expanded opportunity set
c.they should not bother to read or to understand the prospectus, since its probably
written in a foreign language
d.they should invest only in dollars or euros