1) a “tax haven” country is one that has a low, or zero percent, national tax rates. some
of the countries that fall into this category are
a.bahamas, bahrain, bermuda, and the cayman islands
b.denmark, norway, switzerland, and sweden
c.bulgaria, canada, saudi arabia, and south africa
d.congo, egypt, kuwait, and zaire
2) solve for the weighted average cost of capital:
a.7.00%
b.6.89%
c.6.73%
d.6.67%
e.6.57%
3) bank dealers in conversations among themselves use a shorthand notation to quote
bid and ask forward prices in terms of forward points. this is convenient because
a.forward points may change faster than spot and forward quotes
b.forward points may remain constant for long periods of time, even if the spot rates
change frequently
c.traders who are looking for violations of covered interest arbitrage are less interested
in the actual spot and forward exchange rates, but are interested in the premium or
discount differential measured in forward points
d.both c and d are correct
4) when excess tax credits go unused, the foreign tax liability for a branch is greater
than the corresponding u.s. tax liability when the foreign income tax rate is greater than
the u.s. rate. calculate the total tax liability for a wholly-owned subsidiary when excess
tax credits cannot be used in a country given:
u.s. tax rate = 35%
foreign tax rate = 39%
withholding tax rate = 5%
a.44.00%
b.35.00%
c.43.36%
d.42.05%
5) a u.s.-based multinational bank
a.would not have to provide deposit insurance and meet reserve requirements on foreign
currency deposits
b.would have to provide deposit insurance and meet reserve requirements on foreign
currency deposits
c.would not have to provide deposit insurance but would have to meet reserve
requirements on foreign currency deposits
d.would have to provide deposit insurance but not meet reserve requirements on foreign
currency deposits
6) following the introduction of the euro, the national central banks of the euro-12
nations
a.disbanded
b.formed the escb, which is analogous to the federal reserve system in the u.s
c.continue to perform important functions in their jurisdictions
d.b and c are correct
7) comparing agency versus dealer markets, which combination of the following
statements is true:
(i) – in a “dealer market,” the broker takes the client’s order through the agent, who
matches it with another public order.
(ii) – in an “agency market,” the broker takes the trade through the dealer, who
participates in trades as a principal by buying and selling the security for his own
account.
(iii) – in an “agency market,” the broker takes the client’s order through the agent, who
matches it with another public order.
(iv) – in a “dealer market,” the broker takes the trade through the dealer, who participate
in trades as a principal by buying and selling the security for his own account.
(v) – an agent can be viewed as a “broker’s broker.”
(vi) – a dealer can be viewed as a “broker’s broker.”
a.(i), (ii), and (v)
b.(i), (ii), and (vi)
c.(iii), (iv), and (v)
d.(iii), (iv), and (vi)
8) consider a project of the cornell haul moving company, the timing and size of the
incremental after-tax cash flows (for an all-equity firm) are shown below in millions:
the firm’s tax rate is 34%; the firm’s bonds trade with a yield to maturity of 8%; the
current and target debt-equity ratio is 2; if the firm were financed entirely with equity,
the required return would be 10%
using the apv method, what is the value of this project to an all-equity firm?
a.-$46,502,288.10
b.$12,494,643.75
c.$36,580,767.55
d.-$67,163,445.12
e.$59,459,301.03
9) prior to the 1870s, both gold and silver were used as international means of payment
and the exchange rates among currencies were determined by either their gold or silver
contents. suppose that the dollar was pegged to gold at $30 per ounce, the french franc
is pegged to gold at 90 francs per ounce and to silver at 6 francs per ounce of silver, and
the german mark pegged to silver at 1 mark per ounce of silver. what would the
exchange rate between the u.s. dollar and german mark be under this system?
a.1 german mark = $2
b.1 german mark = $0.50
c.1 german mark = $3
d.1 german mark = $1
10) the main approaches to forecasting exchange rates are
a.efficient market, fundamental, and technical approaches
b.efficient market and technical approaches
c.efficient market and fundamental approaches
d.fundamental and technical approaches
11) abc trading company of singapore purchases spices in bulk from around the world,
packages them into consumer size quantities and sells them through sales affiliates in
hong kong and the unites states. for a recent month, the following payments matrix of
interaffiliate cash flows, stated in singapore dollars, was forecasted.
calculate, in singapore dollars, the amount that the interaffiliate foreign exchange
transaction will be reduced by with multilateral netting.
if foreign exchange transactions cost abc 0.45 percent, what savings results from
netting?
a.s$684
b.s$765
c.s$1,449
d.s$1,823
12) the three basic types of taxation are
a.income tax, withholding tax, and value-added tax
b.income tax, withholding tax, and business tax
c.withholding tax, value-added tax, and corporate tax
d.personal tax, corporate tax, and operating tax
13) in a public company with diffused ownership, the board of directors is entrusted
with
a.monitoring the auditors and safeguarding the interests of shareholders
b.monitoring the shareholders and safeguarding the interests of management
c.monitoring the management and safeguarding the interests of shareholders
d.none of the above