1) the size of the swap market is
a.measured by notational principal
b.over 7 trillion dollars
c.both a and b
d.none of the above
2) the first two columns give the maximum daily amounts of beer and whiskey that
southern ireland and northern ireland can produce when they completely specialize in
one or other product. the last two columns give each country’s consumption without
trade.
what is the price of beer without trade in southern ireland?
a.2 bottles of whiskey = 3 kegs of beer
b.5 bottles of whiskey = 12 kegs of beer
c.1 bottle of whiskey = 1 kegs of beer
3) consider a u.s. importer desiring to purchase merchandise from a dutch exporter
invoiced in euros, at a cost of 512,100. the u.s. importer will contact his u.s. bank
(where of course he has an account denominated in u.s. dollars) and inquire about the
exchange rate, which the bank quotes as 1.0242/$1.00. the importer accepts this price,
so his bank will ____________ the importer’s account in the amount of ____________.
a.debit; $500,000
b.credit; 512,100
c.credit; $500,000
d.debit; 512,100
4) in an agency market, the broker takes the client’s order through the agent, who
matches it with another public order. names for the agent are
a.official broker
b.central broker
c.a broker’s broker
d.all of the above
5) suppose that country a and country b are both on a bimetallic standard. in country a
the ratio is 15 to one (i.e. an ounce of gold is worth 15 times as much as an ounce of
silver in that currency), while in country b the ratio is ten to one. if the free flow of
capital is allowed between countries a and b is this a sustainable framework?
a.yes
b.no
c.there is not enough information to make an informed determination
6) translation exposure, also frequently called accounting exposure, refers to the effect
that an unanticipated change in exchange rates will have on the
a.choice of accounting methodology
b.consolidated financial reports of a mnc
c.firms competitive position
d.cash flows realized from foreign operations
7) a major risk faced by a swap dealer is sovereign risk. this is
a.the probability that a sovereign counterparty will default
b.the probability that a country will impose exchange restrictions on a currency
involved in an existing swap
c.the probability governments will intervene to support an exchange rate
d.none of the above
8) the vast majority of new international bond offerings
a.make annual coupon payments
b.have fixed coupon payments
c.have a fixed maturity
d.all of the above
9) through its medium and long-term guaranteeprogram, eximbank helps u.s. exporters
develop and expand their overseas sales by
a.protecting them against loss should a foreign buyer default
b.guaranteeing the loans made by private financial institutions to foreign importers
c.providing liquidity via the purchase of notes issued by eximbank to finance the loans
d.none of the above
10) which of the following options strategies are internally consistent?
a.sell puts and buy calls
b.buy puts and sell calls
c.buy puts and buy calls
d.both a and b
11) transfer pricing can have an effect on share value
a.to the extent that financial markets are inefficient
b.to the extent that security analysts do not understand the transfer pricing strategy
being used
c.to the extent that third parties benefit from the transfer price
d.both a and b
12) the hedge ratio
a.is the size of the long (short) position the investor must have in the underlying asset
per option the investor must write (buy) to have a risk-free offsetting investment that
will result in the investor perfectly hedging the option
b.
c.is related to the number of options that an investor can write without unlimited loss
while holding a certain amount of the underlying asset
d.all of the above
13) export-import bank (eximbank) is an independent agency of the united states
government that facilitates and finances u.s. export trade. eximbank’s purpose is to
provide financing in situations where private financial institutions are unable or
unwilling to because of which of the following reasons:
(i) – the loan maturity is too long
(ii) – the amount of the loan is too large
(iii) – the loan risk is too great
(iv) – the importing firm has difficulty obtaining hard currency for payment
(v) – there are no futures or forward contracts available for foreign exchange
transactions
a.(i) and (ii)
b.(i), (ii), and (iii)
c.(i), (ii), (iii), and (iv)
d.(i), (ii), (iii), (iv), and (v)
14) cross-correlations among major stock markets and exchange markets are
a.relatively high
b.relatively low
c.essentially perfect
d.practically zero