1) financial accounting standards board (fasb) statements 8 and 52 relate to the
translation methods. the following outlines the objectives and descriptions of the two
statements.
(i) – measure in dollars an enterprise’s assets, liabilities, revenues, or expenses that are
denominated in a foreign currency according to generally accepted accounting
principles
(ii) – is essentially the temporal method of translation (with some subtle differences)
(iii) – provide information that is generally compatible with the expected economic
effects of a rate change on an enterprise’s cash flows and equity
(iv) – reflect in consolidated statements the financial results and relationships of the
individual consolidated entities as measured in their functional currencies in conformity
with u.s. generally accepted accounting principles
the stated objectives of fasb 52 are
a.to provide information that is generally compatible with the expected economic
effects of a rate change on an enterprise’s cash flows and equity
b.to reflect in consolidated statements the financial results and relationships of the
individual consolidated entities as measured in their functional currencies in conformity
with u.s. generally accepted accounting principles
c.both a and b
d.none of the above
2) the formula for beta is:
a.
b.
c.
d.
3) a stop order is an order to buy or sell a stock once the price of the stock reaches a
specified price, known as the stop price. when the specified price is reached, your stop
order becomes a market order, the advantage of a stop order is that
a.you don’t have to monitor how a stock is performing on a daily basis
b.the stop price can be activated by a short-term fluctuation in a stock’s price
c.once your stop price is reached, your stop order becomes a market order and the price
you receive may be much different from the stop price, especially in a fast-moving
market where stock prices can change rapidly
d.all of the above are advantages
4) the purpose of a withholding tax
a.is to assure the local tax authority that it will receive the tax due on the active income
earned within its tax jurisdiction
b.is to assure the local tax authority that it will receive the tax due on the passive
income earned within its tax jurisdiction
c.is to assure the local tax authority that it will receive the tax due on all income earned
within its tax jurisdiction
d.none of the above
5) suppose a u.s.-based mnc maintains a vacation home for employees in the british
countryside and the local price of this property is always moving together with the
pound price of the u.s. dollar. as a result,
a.whenever the pound depreciates against the dollar, the local currency price of this
property goes up by the same proportion
b.the firm is not exposed to currency risk even if the pound-dollar exchange rate
fluctuates randomly
c.both a and b
d.none of the above
6) the four currencies in which the majority of domestic and international bonds are
denominated are
a.u.s. dollar, the euro, the indian rupee, and the chinese yuan
b.u.s. dollar, the euro, the pound sterling, and the swiss franc
c.u.s. dollar, the euro, the swiss franc, and the yen
d.u.s. dollar, the euro, the pound sterling, and the yen
7) a ‘specialist”
a.makes a market by holding an inventory of a particular security, like ibm or intel
b.is a participant on the floor of the exchange, like the nyse
c.has a designated station on the floor of the exchange
d.all of the above
8) under the terms of islamic finance (shari’ah law)
a.selling debt at a reduced value is strictly forbidden
b.charging interest is ok, but short selling stock is forbidden
c.buying low and selling high is forbidden
d.none of the above
9) transfer pricing can have an effect on how divisions of a mnc are perceived by the
local banks. which transfer price would leave a local affiliate that imports components
from the parent with less impressive financial statements?
a.high transfer price
b.low transfer price
c.none of the above
10) show how your proposed swap would work for firm a. (e.g. if you were acting as an
agent for the swap bank, try to ‘sell” firm a on your swap)
11) the sarbanes-oxley act of 2002 stipulates that
a.a public accounting oversight board be created
b.the company should appoint independent financial experts to its audit committee
c.ceo and cfo sign off the company’s financial statements
d.all of the above
12) the abc company, a u.s.-based mnc, plans to establish a subsidiary in spain to
manufacture and sell water pumps. abc has total assets of $80 million, of which $60
million is equity financed. the remainder is financed with debt. abc considers its current
capital structure optimal. the construction cost of the facility in spain is estimated to be
8,500 million, of which 6,500 million is to be financed at a below-market rate of
interest arranged by the spanish government. the proposed project will increase the
borrowing capacity by
a.1,215 million
b.2,215 million
c.3,215 million
d.4,215 million