1) the asian currency crisis
a.happened just prior to the mexican peso crisis
b.turned out to be far more serious than the mexican peso crisis in terms of the extent of
contagion
c.was limited to asian currencies
d.was almost over before anyone outside the pacific rim noticed
2) more than fifty percent of fdi in dollar terms
a.takes the form of cross-border mergers and acquisitions
b.takes the form of greenfield investment
c.is initiated by governments
d.none of the above
3) a currency board arrangement is
a.when the currency of another country circulates as the sole legal tender
b.when the country belongs to a monetary or currency union in which the same legal
tender is shared by the members of the union
c.a monetary regime based on an explicit legislative commitment to exchange domestic
currency for a specified foreign currency at a fixed exchange rate, combined with
restrictions on the issuing authority to ensure the fulfillment of its legal obligation
d.where the country pegs its currency at a fixed rate to a major currency where the
exchange rate fluctuates within a narrow margin of less than one percent
4) multinational banks are often not subject to the same regulations as domestic banks.
a.there may be increased need to publish adequate financial information
b.there may be reduced need to publish adequate financial information
c.there requirements to publish adequate financial information are the same
d.none of the above
5) why would a u.s. bank open a foreign branch bank instead of a foreign chartered
subsidiary?
a.this form of bank organization allows the bank to be able to extend a larger loan to a
customer than a locally chartered subsidiary bank of the parent
b.to slow down check clearing and maximize the bank’s float
c.to avoid u.s. banking regulation
d.both a and c
6) “call market” and “crowd trading” take place on
a.a non-continuous exchange trading system
b.a continuous trading exchange system
c.non-continuous markets and continuous markets, respectively
d.continuous markets and non-continuous markets, respectively
7) a mnc may gain from its global presence by
a.spreading r&d expenditures and advertising costs over their global sales
b.pooling global purchasing power over suppliers
c.utilizing their technological and managerial know-how globally with minimum
additional costs
d.all of the above are potential gains
8) the record of investing in u.s.-based mncs
a.shows that the share prices of u.s.-based mncs behave much like those of domestic
firms, without providing effective international diversification
b.shows that the share prices of u.s.-based mncs behave much differently than those of
domestic firms, providing effective international diversification
c.shows that the share prices of u.s.-based mncs behave much like the currency returns
of their foreign markets
d.none of the above
9) micro spinoffs, inc., issued 20-year debt one year ago today at par value with a
coupon rate of 9 percent, paid annually. today, the debt is selling at $1,050. if the firm’s
tax rate is 34%, what is its after-tax cost of debt?
a.9%
b.8.46%
c.5.94%
d.5.58%
e.none of the above
10) solve for the weighted average cost of capital:
a.8.67%
b.8.00%
c.7.60%
d.7.33%
e.7.14%
11) the doctrine of comparative advantage was first put forth by
a.adam smith
b.adam sandler
c.david ricardo
d.ricky ricardo
e.none of the above
12) under the fixed exchange rate regime
a.the combined balance on the current and capital accounts will be equal in size, but
opposite in sign, to the change in the official reserves
b.the balance on the current and capital accounts will be equal in size, but opposite in
sign
c.a current account surplus or deficit must be matched by an official reserves deficit or
surplus
d.a capital account surplus or deficit must be matched by an official reserves deficit or
surplus
13) your firm’s interaffiliate cash receipts and disbursements matrix is shown below
($000):
find the net cash flow in (out of) the u.s. affiliate.
a.$55,000 in
b.$15,000 out
c.$0 in or out
d.$40,000 out
e.none of the above
14) calculate the euro-based return an italian investor would have realized by investing
10,000 into a $50 american stock. the stock pays a $0.30 quarterly dividend, and after
one year the investment sells for $54 the exchange has changed from .625 per dollar to .
6875 per dollar.
15) calculate the euro-based return an italian investor would have realized by investing
10,000 into a £50 british stock using 50% margin. one year after investment, the stock
pays a £1 dividend, and sells for £54 the exchange rate has changed from 1.25 per
pound to 1.30 per pound. the interest on the margin loan is 1% per year. the margin loan
was denominated in pounds.
16) the time from acceptance to maturity on a $30,000,000 banker’s acceptance is 45
days.
the importing bank’s acceptance commission is 1.5 percent and that the market rate for
45-day b/as is 4 percent.
determine the amount the exporter will receive if he holds the b/a until maturity.
17) the time from acceptance to maturity on a $300,000 banker’s acceptance is 30 days.
the importing bank’s acceptance commission is 3 percent and that the market rate for
30-day b/as is 4 percent.
calculate the amount the banker will receive if the exporter discounts the b/a with the
importer’s bank.
18)
please note that your answers are worth zero points if they do not include currency
symbols ($, )
there is (at least) one profitable arbitrage at these prices. what is it?
