1) why would a u.s. bank open a foreign branch bank?
a.because this form of bank organization can allow a u.s. bank to provide a fuller range
of services for its mnc customers than it can through a representative office
b.to avoid u.s. banking regulation on transactions routed through that foreign country
c.because this form of organization allows the bank to service mnc clients at low cost
and without the need of having bank personnel located in the country
d.both a and b
2) proceeding the asian crisis,
a.bankers from industrialized countries actively sought to finance the growth
opportunities in the region
b.the risk exposure of the lending banks in east asia was primarily to local banks and
commercial firms, and not to sovereignties, as in the ldc debt crisis
c.bankers failed to correctly assess the political and economic risks
d.bankers were willing to lend huge amounts to borrowers with a limited potential to
repay
e.all of the above
3) the communist victory in china in 1949 is an example of
a.micro risk
b.macro risk
c.both a and b
d.none of the above
4) when a swap bank serves as a broker:
a.the swap bank stands willing to accept either side of a swap
b.the swap bank matches counterparties but does not assume any risk of the swap
c.the swap bank receives a commission for matching buyers and sellers
d.none of the above
5) changes in exchange rates
a.explain a larger portion of the variability foreign bond indexes than foreign equity
indexes
b.do not affect all foreign equity markets equally
c.do affect dollar-denominated foreign equity returns, but this risk can be hedged
d.all of the above
6) assume that the firm will partially finance the project with a subsidized $3,000,000
interest only 30-year loan at 8.0 percent apr with annual payments. note that eight
percent is less than the 10 percent that they normally borrow at. what is the npv of the
loan?
a.$198,469
b.$53,979.83
c.$102,727.55
d.$1,334,851.09
e.none of the above
7) a typical foreign trade transaction requires three basic documents:
a.letter of credit, time draft, and bill of lading
b.letter of credit, banker’s acceptance, and bill of lading
c.letter of credit, time draft, and a banker’s acceptance
d.none of the above
8) most foreign exchange transactions are for
a.intervention by central banks
b.interbank trades between international banks or nonbank dealers
c.retail trade
d.purchase of hard currencies
9) bank dealers in conversations among themselves use a shorthand notation to quote
bid and ask forward prices in terms of forward points. complete the following table:
a.1.9040-1.9047
b.1.9042-1.9049
c.1.9032-1.9030
d.none of the above
10) when the bond sells at par, the implicit sf/$ exchange rate at maturity of a swiss
franc/u.s. dollar dual currency bonds that pay $581.40 at maturity per sf1,000, is
a.sf0.58/$1.00
b.sf1.58/$1.00
c.sf1.72/$1.00
d.sf1.95/$1.00
11) the entries in the “current account” and the “capital account”, combined together,
can be outlined (in alphabetic order) as:
(i) – direct investment
(ii) – factor income
(iii) – merchandise
(iv) – official transfer
(v) – other capital
(vi) – portfolio investment
(vii) – private transfer
(viii) – services
current account includes
a.(i), (ii), and (iii)
b.(ii), (iii), and (vii)
c.(iv), (v), and (vii)
d.(i), (v), and (vi)
12) the underwriting syndicate of a bond offering is
a.a group of investment banks, merchant banks, and the merchant banking arms of
commercial banks that agree to buy the bond from the issuer and then resell it
b.a group of investment fund managers, brokers, and dealers who specialize in the
secondary bond market
c.a group of investment banks, merchant banks, and the merchant banking arms of
commercial banks that specialize in some phase of a public issuance
d.none of the above
13) a put option to sell $18,000 at a strike price of $1.80 = £1.00 is equivalent to
a.a call option to buy £10,000 at a strike price of $1.80 = £1.00
b.a call option on $18,000 at a strike price of $1.80 = £1.00
c.a put option on £10,000 at a strike price of $1.80 = £1.00
d.none of the above
14) yankee stocks
a.often trade as adrs and have higher risks than trading the actual shares
b.often trade as adrs and have lower risks than trading the actual shares
c.are bank receipts representing a multiple of foreign shares deposited in a u.s. bank
d.both b and c
15) the j-curve effect received wide attention when
a.the british trade balance worsened after a strengthening of the pound in 1967
b.the british trade balance worsened after a devaluation of the pound in 1967
c.the british trade balance improved after a devaluation of the pound in 1967
d.none of the above
16) in the 1850s the french franc was valued by both gold and silver, under the official
french ratio which equated a gold franc to a silver franc 15 times as heavy. at the same
time, the gold from newly discovered mines in california poured into the market,
depressing the value of gold. as a result,
a.the franc effectively became a silver currency
b.the franc effectively became a gold currency
c.silver became overvalued under the french official ratio
d.answers a and c are correct