1) suppose that the 1-year forward rate of dollar per pound is $1.32, the current spot
rate ($/pound) is $1.20, and the expected future spot rate ($/pound) is $1.40. the
expected premium on the pound is:
a.-6.7%
b.5.7%
c.10%
d.16.7%
2) adr is:
a.a type of eurodollar loans
b.international mutual funds
c.a certificate represents shares of a foreign stock issued by a u.s. bank
d.international reserve created by the imf
3) eurobanks are referred to as offshore banks because:
a.they are subject to foreign countries rules of banking
b.they operate on international waters in order to avoid national regulations
c.they accept deposits and make loans in domestic currency outside the domestic
country
d.they accept deposits and make loans issued in u.s. dollars within europe
4) centralization of cash management allows the parent to offset subsidiary payables
and receivables in a process called:
a.internalizing
b.outsourcing
c.risk shifting
d.netting
5) which of the following reasons explain why interest rate parity may not hold
perfectly?
i.banking practices
ii.government controls
iii.business loan risk
iv.varying expectations
a.i only
b.ii only
c.ii and iv
d.i, iii, and iv
6) the gold standard was an example of:
a.an optimum currency area
b.a commodity money standard
c.a standard currency board
d.all of the above
7) assume that foreign demand for u.s. exports is perfectly inelastic. if the dollar is
devalued then the total export value (in dollars) will:
a.increase
b.decrease
c.stay the same
d.uncertain
8) the u.s. subsidiary of a south korean company pays dividends to its parent company
in south korea causes a:
a.credit in the u.s. investment income
b.debit in the u.s. investment income
c.credit in u.s. services
d.debit in u.s. services
9) deviations from interest rate parity could come from:
a.transaction costs
b.government controls
c.political risk
d.all of the above
10) if the hong kong subsidiary of a u.s. firm has net exposed assets of hk$ 500,000 and
the hk$ changes in value from us$0.50/hk$ tous$0.30/hk$, the u.s. firm will have a
translation ________.
a.loss hk$100,000
b.loss us$100,000
c.gain us$100,000
d.gain us$ 50,000
11) one advantage of the forward exchange market is:
a.that no buying/selling of the currency is needed until a specified date in the future
b.the use of fixed contracts
c.the initial deposit allows for further leveraging
d.that contracts deal only in small amounts
12) after considering the long-term implications of the project such as political risk and
foreign tax regulations, a multinational firm called company x decides to purchase a
foreign company to merge with its foreign subsidiary. this is an example of:
a.cash management
b.projection analysis
c.capital budgeting
d.decentralized management
13) in international finance, libor stands for:
a.london interbank offered rate
b.london international banking offshored rate
c.london international board of retailers
d.london international bill of rights
14) a u.s. resident receives $1,000 in interest from french bonds he owns causes a:
a.credit to service
b.debit to service
c.credit to investment income
d.debit to investment income
15) to reduce transfer pricing distortion, multinational firms are supposed to charge
prices to their foreign subsidiaries that are __________.
a.average variable costs
b.total costs
c.marginal costs
d.arms-length prices
16) which forecasting technique uses the past movements in the exchange rate
movements to predict the future level?
a.structural
b.hedging
c.atheoretical
d.flow
17) initial conditions in the year before the crisis in thailand, indonesia, malaysia, the
philippines, and korea in 1997 indicate that
i.capital inflows/gdp were very low.
ii.nonperforming bank loan ratios were high.
iii.current account deficits were high.
iv.credit growth was fast.
a.i and iv only
b.ii and iii only
c.i, ii, and iii only
d.ii, iii and iv only