1) relative to the spot price the forward price will be
a.usually less than the spot price
b.usually more than the spot price
c.usually equal to the spot price
d.usually less than or more than the spot price more often than it is equal to the spot
price
2) if the market rate for 90-day b/as is 6.0 percent, calculate the amount the exporter
will receive if he discounts the b/a with the importer’s bank.
a.$2,945,625
b.$2,990,625
c.$3,000,000
d.$3,009,375
3) who benefits from debt-for-equity swaps?
a.the creditor bank
b.the ldc
c.the market maker
d.all of the above
4) put the following in correct date order:
a.jamaica agreement, plaza agreement, louvre accord
b.plaza agreement, jamaica agreement, louvre accord
c.louvre accord, jamaica agreement, plaza agreement
d.jamaica agreement, louvre accord, plaza agreement
5) solve for the weighted average cost of capital:
a.8.67%
b.8.00%
c.7.60%
d.7.33%
e.7.14%
6) your u.s. firm has a £100,000 payable with a 3-month maturity. which of the
following will hedge your liability?
a.buy the present value of £100,000 today at the spot exchange rate, invest in the u.k. at
i£
b.buy a call option on £100,000 with a strike price in dollars
c.take a long position in a forward contract on £100,000 with a 3-month maturity
d.all of the above
7) suppose that the united states is on a bimetallic standard at $30 to one ounce of gold
and $2 for one ounce of silver. if new silver mines open and flood the market with
silver,
a.only the silver currency will circulate
b.only the gold currency will circulate
c.no change will take place since citizens could exchange their gold currency for silver
currency at any time
d.none of the above
8) at the outbreak of world war i
a.major countries such as great britain, france, germany and russia suspended
redemption of banknotes in gold
b.major countries such as great britain, france, germany and russia imposed embargoes
on the export of gold
c.the classical gold standard was abandoned
d.all of the above
9) if the exchange rate follows a random walk
a.the future exchange rate is unpredictable
b.the future exchange rate is expected to be the same as the current exchange rate, st =
e(st+ 1)
c.the best predictor of future exchange rates is the forward rate ft = e(st+ 1|it)
d.both b and c
10) assume the time from acceptance to maturity on a $10,000,000 banker’s acceptance
is 90 days. further assume that the importing bank’s acceptance commission is 1 percent
and that the market rate for 90-day b/as is 3.0 percent. calculate the amount the exporter
will receive if he holds it to maturity.
a.$9,993,750
b.$9,999,375
c.$9,975,000
d.$9,009,375
11) what is the objective of managing operating exposure?
a.stabilize accounting results in the face of fluctuating exchange rates
b.selecting low cost production sites
c.increase the variability of cash flows in the face of fluctuating exchange rates
d.none of the above
12) the key weakness of the public corporation is
a.too many shareholders, which makes it difficult to make corporate decision
b.relatively high corporate income tax rates
c.conflicts of interest between managers and shareholders
d.conflicts of interests between shareholders and bondholders
13) on average, worldwide daily trading of foreign exchange is closest to
a.impossible to estimate
b.$15 billion
c.$504 billion
d.$3.21 trillion
14) as of 2011 gold accounted for
a.90 percent of the total reserve assets held by imf member countries
b.70 percent of the total reserve assets held by imf member countries
c.approximately 50 percent of the total reserve assets held by imf member countries
d.less than one percent of the total reserve assets held by imf member countries
15) an exporter faced with exposure to an appreciating currency can reduce transaction
exposure with a strategy of
a.paying or collecting early
b.paying or collecting late
c.paying late, collecting early
d.paying early, collecting late
16) a u.s. firm holds an asset in great britain and faces the following scenario:
where,
p* = pound sterling price of the asset held by the u.s. firm
p = dollar price of the same asset
the expected value of the investment in u.s. dollars is:
a.$5,050
b.$4,500
c.$2,112.50
d.none of the above
17) the factors of production are
a.land, labor, capital, and entrepreneurial ability
b.interest, wages and dividends
c.payments and receipts of interest, dividends, and other income on foreign investments
that were previously made
d.none of the above
18) emerald energy is an oil exploration and production company that trades on the
london stock market. assume that when purchased by an international investor the
stock’s price and the exchange rate were £5 and £0.64/$1.00 respectively. at selling
time, one year after the purchase date, they were £6 and £0.60/$1.00. calculate the
investor’s annual percentage rate of return in terms of the u.s. dollars.
a.0.20%
b.20.00%
c.1.28%
d.28.00%
19) suppose the managers of a company have driven the stock price down because they
have spent the investors’ money on lavish perquisites like golf club memberships.
a.this situation may prompt a corporate raider to buy up the shares of the firm in a
hostile takeover
b.if the hostile takeover is successful, the managers will probably lose their jobs in the
ensuing restructuring
c.if the restructuring is successful, the corporate raider can sell his shares at a profit
d.all of the above
20) following honda’s fdi in the u.s.,
a.the u.s. government imposed a voluntary trade agreement under which japanese
automobile manufacturers were not allowed to increase their exports to the u.s. market
b.toyota and nissan made direct investments in america
c.sales of hondas declined
d.none of the above