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 currency of the primary economic environment in which the entity operates is
defined in fasb 52 as
a.the “reporting currency”
b.the “functional currency”
c.the “current currency”
d.none of the above
2) there are two types of equity related bonds:
a.convertible bonds and dual currency bonds
b.convertible bonds and kitchen sink bonds
c.convertible bonds and bonds with equity warrants
d.callable bonds and exchangeable bonds
3) in general the united states claims
a.only a limited taxing jurisdiction over nonresident alien individuals and foreign
corporations
b.unlimited taxing jurisdiction over nonresident alien individuals and foreign
corporations
c.unlimited taxing jurisdiction over resident alien individuals and foreign corporations
d.none of the above
4) suppose you start with $100 and buy stock for £50 when the exchange rate is £1 =
$2. one year later, the stock rises to £60. you are happy with your 20 percent return on
the stock, but when you sell the stock and exchange your £60 for dollars, you only get
$45 since the pound has fallen to £1 = $0.75. this loss of value is an example of
a.exchange rate risk
b.political risk
c.market imperfections
d.weakness in the dollar
5) so-called subprime mortgages were typically
a.mortgages granted to borrowers with less-than-perfect credit
b.backed by the full faith and credit of the u.s. government
c.held to maturity by the originating lender, thereby assuring that default risk was priced
into the rate of return
d.none of the above
6) find the debt-to-value ratio for a firm with a debt-to-equity ratio of 5.
a.3/4
b.7/9
c.4/5
d.9/11
e.5/6
7) yesterday, you entered into a futures contract to buy 62,500 at $1.50/. your initial
margin was $3,750 (= 0.04 62,500 $1.50/ = 4 percent of the contract value in dollars).
your maintenance margin is $2,000 (meaning that your broker leaves you alone until
your account balance falls to $2,000). at what settle price (use 4 decimal places) do you
get a margin call?
a.$1.4720/
b.$1.5280/
c.$1.500/
d.none of the above
8) the owners of a business are the
a.taxpayers
b.workers
c.suppliers
d.shareholders
9) consider a u.s.-based mnc with a wholly-owned french subsidiary. following a
depreciation of the dollar against the euro, which of the following best describes the
mechanism of any effect of the depreciation?
a.the change in the cash flow in euro due an alteration in the firm’s competitive position
in the marketplace is in part a function of the elasticity of demand for the firm’s product
b.a given operating cash flow in euro will be translated to a higher u.s. dollar cash flow
regardless of the firm’s hedging program
c.both a and b
d.none of the above
10) yesterday, you entered into a futures contract to buy 62,500 at $1.50 per . your
initial performance bond is $1,500 and your maintenance level is $500. at what settle
price will you get a demand for additional funds to be posted?
a.$1.5160 per
b.$1.208 per
c.$1.1920 per
d.$1.4840 per
11) the u.s. trade deficit
a.is a capital account surplus
b.is a current account deficit
c.is both a capital account surplus and a current account deficit
d.none of the above
12) unless investors can derive significant private benefits of control,
a.they will pay small premiums for voting shares over nonvoting shares
b.they will pay moderate premiums for voting shares over nonvoting shares
c.they will pay substantial premiums for voting shares over nonvoting shares
d.they will not pay substantial premiums for voting shares over nonvoting shares
13) the credit rating of an international borrower
a.depends on the volatility of the exchange rate
b.depends on the volatility, but not absolute level, of the exchange rate
c.is usually never higher than the rating assigned to the sovereign government of the
country in which it resides
d.is unrelated to the rating assigned to the sovereign government of the country in
which it resides
14) adrs
a.frequently represent a multiple of the underlying shares
b.can trade on the nyse
c.can trade on the nasdaq
d.all of the above