1) the advantages of a market order include the fact that
a.you are pretty much guaranteed that your order will be executed
b.a market order typically has lower commissions than a limit order
c.market orders increase your liquidity
d.both a and b
2) affiliates of foreign mncs are taxed on the income earned in the source country under
a.the territorial method of declaring a national tax jurisdiction
b.the source method of declaring a tax jurisdiction
c.all of the above
d.none of the above
3) a bank agrees to buy from a customer a “three against six” fra at the market rate for
such instruments. how can the bank hedge this obligation?
a.go long a 6-month eurodollar deposit in the amount of the fra at the current 6-month
rate financed by going short a 3-month eurodollar deposit in the amount of the fra at the
current 3-month rate
b.go short a 6-month eurodollar deposit in the amount of the fra at the current 6-month
rate; go long a 3-month eurodollar deposit in the amount of the fra at the current
3-month rate
c.borrow a 3-month eurodollar deposit in the amount of the fra at the current 3-month
rate
d.none of the above
4) for question in this section, the notation is
y = gnp = national income
c = consumption
i = private investment
g = government spending
x = exports
m = imports
which of the following is a true statement?
a.bca x – m
b.bka x – m
c.bka – bca x – m
d.bka m – x
5) prior to honda’s decision to build a plant in ohio,
a.the japanese government had been urging the automobile companies to begin
production in the united states
b.the japanese government had been urging the automobile companies to keep
production in japan
c.the japanese government imposed import quotas on u.s.-made automobiles
d.none of the above
6) what proportion of the firm is financed by debt for a firm that expects a 15% return
on equity, a 12% return on assets, and a 10% return on debt? the tax rate is 25%.
a.20%
b.1/3
c.60%
d.2/3
e.80%
7) a u.s. firm holds an asset in israel and faces the following scenario:
where,
p* = israeli shekel (is) price of the asset held by the u.s. firm
p = dollar price of the same asset
the “exposure” (i.e. the regression coefficient beta) is:
a.-52.6316
b.1,289.80
c.12,898.00
d.none of the above
8) benetton, an italian clothier, is listed on the new york stock exchange.
a.this decision provides their shareholders with a higher degree of protection than is
available in italy
b.this decision can be a signal of the company’s commitment to shareholder rights
c.this may make investors both in italy and abroad more willing to provide capital and
to increase the value of the pre-existing shares
d.all of the above
9) banking tends to be
a.a low marginal cost industry
b.a high marginal cost industry
c.a constant average cost industry
d.none of the above
10) suppose the quote for a five-year swap with semiannual payments is 8.508.60
percent. the means
a.the swap bank will pay semiannual fixed-rate dollar payments of 8.60 percent against
receiving six-month dollar libor
b.the swap bank will receive semiannual fixed-rate dollar payments of 8.50 percent
against paying six-month dollar libor
c.if the swap bank is successful in getting counterparties to both legs of the swap at
these prices, he will have an annual profit of ten basis points
d.none of the above
11) use the european option pricing formula to find the value of a six-month call option
on japanese yen. the strike price is $1 = ¥100. the volatility is 25 percent per annum; r$
= 5.5% and r¥ = 6%.
a.0.005395
b.0.005982
c.$0.006137/¥
d.none of the above
12) consider a bond with an equity warrant. the warrant entitles the bondholder to buy
25 shares of the issuer at 50 per share for the lifetime of the bond. the bond is a 30-year
zero coupon bond with a 1,000 par value that has a yield to maturity of i = 5 percent.
the price of the bond is 500. what is the value of the warrant?
a.231.38
b.268.62
c.500
d.none of the above
13) tiger towers, inc. is considering an expansion of their existing business, student
apartments. the new project will be built on some vacant land that the firm has just
contracted to buy. the land cost $1,000,000 and the payment is due today. construction
of a 20-unit office building will cost $3 million; this expense will be depreciated
straight-line over 30 years to zero salvage value; the pretax value of the land and
building in year 30 will be $18,000,000. the $3,000,000 construction cost is to be paid
today. the project will not change the risk level of the firm. the firm will lease 20 offices
suites at $20,000 per suite per year; payment is due at the start of the year; occupancy
will begin in one year. variable cost is $3,500 per suite. fixed costs, excluding
depreciation, are $75,000 per year. the project will require a $10,000 investment in net
working capital.
what is the unlevered after-tax incremental cash flow for year 30?
a.$12,432,300
b.$12,225,390
c.$12,332,300
d.$12,485,000
e.none of the above
14) an affiliatebank is
a.a locally incorporated bank that is wholly owned by a foreign parent
b.a locally incorporated bank that is majority owned by a foreign parent
c.a locally incorporated bank that is partially owned (but not controlled) by a foreign
parent
d.both a and b
15) on the paris bourse, shares of avionelle trade at 45. the spot exchange rate is $1.40 =
1.00. what is the no-arbitrage u.s. dollar price of an avionelle adr? assume that
transactions costs are negligible.
a.$63
b.$32.14
c.$45
d.$45.50
16) in the united states, managers are bound by the “duty of loyalty” to serve the
shareholders.
a.this is an ethical, not legal, obligation
b.this is a legal obligation
c.this is only a moral obligation; there are no penalties