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1) if cross-border acquisitions generate synergistic gains,
a.then both the acquiring and target shareholders gain wealth at the same time
b.then one can argue that cross-border acquisitions are mutually beneficial and thus
should not be thwarted both from a national and global perspective
c.then the value of the combined firm is greater than the stand-alone valuations of the
individual (acquiring and target) firms
d.all of the above
2) sponsored adrs
a.are created by a bank at the request of the foreign company that issued the underlying
security
b.can trade on the nasdaq
c.can trade on the nyse
d.all of the above
3) empirical tests of the black-scholes option pricing formula
a.have faced difficulties due to nonsynchronous data
b.suggest that when using simultaneous price data and incorporating transaction costs
they conclude that the phlx american currency options are efficiently priced
c.suggest that the european option-pricing model works well for pricing american
currency options that are at- or out-of-the money, but does not do well in pricing
in-the-money calls and puts
d.all of the above
4) in a forfaiting transaction, the forfait is usually
a.the importer
b.the exporter
c.the bank
d.the title to the goods, or the bill of lading
5) one of the objectives of corporate governance is to,
a.introduce expensive and burdensome accountings
b.strengthen the protection of outside investors from expropriation by managers and
controlling insiders
c.provide taxpayer financing for corporate raiders to strengthen the discipline of the
marketplace
d.none of the above
6) the price elasticity of demand for commodity products tends to be
a.highly elastic
b.highly inelastic
c.both a and b
d.none of the above
7) which of the following issues are difficulties for the fundamental approach to
exchange rate forecasting?
a.one has to forecast a set of independent variables to forecast the exchange rates.
forecasting the former will certainly be subject to errors and may not be necessarily
easier than forecasting the latter
b.the parameter values, that is the 's and 's, that are estimated using historical data may
change over time because of changes in government policies and/or the underlying
structure of the economy. either difficulty can diminish the accuracy of forecasts even if
the model is correct
c.the model itself can be wrong
d.all of the above
8) assume that you have invested $100,000 in japanese equities. when purchased the
stock's price and the exchange rate were ¥100 and ¥100/$1.00 respectively. at selling
time, one year after purchase, they were ¥110 and ¥110/$1.00. if the investor had sold
¥10,000,000 forward at the forward exchange rate of ¥105/$1.00 the dollar rate of
return would be:
a.-27.27%
b.4.32%
c.28.00%
d.-9.09%
9) assume that a product has the following three stages of production:
if the value-added tax (vat) rate is 15%, what is the incremental vat at stage 2 of
production?
a.75
b.120
c.210
d.255
10) a ten-year floating-rate note (frn) has coupons referenced to 3-month pound libor,
and pays coupon interest quarterly. assume that the current 3-month libor is 3 percent. if
the risk premium above libor that the issuer must pay is 1/8 percent, the next period's
coupon rate on a £1,000 face value frn will be
a.£31.25
b.£15.625
c.£30.625
d.£7.8125
11) edge act banks
a.are not prohibited from owning equity in business corporations
b.are prohibited from owning equity in business corporations
c.both a and b
d.none of the above
12) studies show that international stock markets tend to move more closely together
when the volatility is higher. this finding suggests that
a.investors should liquidate their portfolio holdings during turbulent periods
b.since investors need risk diversification most precisely when markets are turbulent,
there may be less benefit to international diversification for investors who liquidate
their portfolio holdings during turbulent periods
c.this kind of correlation is why international portfolio diversification is smart for
today's investor
d.none of the above
13) suppose that the exchange rate is 1.25 = £1.00.
options (calls and puts) are available on the philadelphia exchange in units of 10,000
with strike prices of $1.60/1.00.
options (calls and puts) are available on the philadelphia exchange in units of £10,000
with strike prices of $2.00/£1.00.
for a u.s. firm to hedge a 100,000 payable,
a.buy 10 call options on the euro with a strike in dollars
b.buy 8 put options on the pound with a strike in dollars
c.sell 10 call options on the euro with a strike in dollars
d.sell 8 put options on the pound with a strike in dollars
e.both a and b
f.both c and d
14) as a mode of entry into a foreign market, cross-border acquisition
a.involves building new production facilities in a foreign country
b.offer faster speed over greenfield investment
c.can offer access to proprietary assets
d.both b and c
15) put the following in correct date order:
a.jamaica agreement, plaza agreement, louvre accord
b.plaza agreement, jamaica agreement, louvre accord
c.louvre accord, jamaica agreement, plaza agreement
d.jamaica agreement, louvre accord, plaza agreement
16) open interest in currency futures contracts
a.tends to be greatest for the near-term contracts
b.tends to be greatest for the longer-term contracts
c.typically decreases with the term to maturity of most futures contracts
d.both a and c
17) hedge funds
a.do not register as an investment company and are not subject to reporting or
disclosure requirements
b.have experienced phenomenal growth in recent years
c.tend to have relatively low correlations with various stock market benchmarks
d.all of the above
18) suppose that great britain is a major export market for your firm, a u.s.-based mnc.
if the british pound depreciates against the u.s. dollar,
a.your firm will be able to charge more in dollar terms while keeping pound prices
stable
b.your firm may be priced out of the u.k. market, to the extent that your dollar costs stay
constant and your pound prices will rise
c.to protect u.k. market share, your firm may have to cut the dollar price of your goods
to keep the pound price the same
d.both b and c are correct
