1) to maximize the benefits of partial integration of capital markets
a.a country should choose to internationally cross-list those assets that are least
correlated with the domestic market portfolio
b.a country should choose to internationally cross-list those assets that are most highly
correlated with the domestic market portfolio
c.a country should choose to internationally cross-list those assets that are uncorrelated
with the domestic market portfolio
d.none of the above
2) the underlying principle of the current rate method is
a.assets and liabilities should be translated based on their maturity
b.monetary accounts have a similarity because their value represents a sum of money
whose currency equivalent after translation changes each time the exchange rate
changes
c.monetary accounts are translated at the current exchange rate; other accounts are
translated at the current exchange rate if they are carried on the books at current value;
items carried at historical cost are translated at historic exchange rates
d.all balance sheet accounts are translated at the current exchange rate, except for
stockholders’ equity. a “plug” equity account named cumulative translation adjustment
(cta) is used to make the balance sheet balance, since translation gains or losses do not
go through the income statement according to this method
3) a u.s. firm holds an asset in great britain and faces the following scenario:
where,
p* = pound sterling 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.7,500
b.2,5000
c.-2,500
d.none of the above
4) if a country must make a net payment to foreigners because of a
balance-of-payments deficit, the country should
a.either increase its official reserve assets or borrow anew from foreigners
b.either run down its official reserve assets or borrow anew from foreigners
c.either run down its official reserve assets or lend more foreigners
d.none of the above
5) a ‘specialist”
a.makes a market by holding an inventory of a particular security, like ibm or intel
b.is a participant on the floor of the exchange, like the nyse
c.has a designated station on the floor of the exchange
d.all of the above
6) solve for the weighted average cost of capital:
a.8.67%
b.8.00%
c.7.60%
d.7.33%
e.7.14%
7) find the net exposure of the mnc with the following intra affiliate transactions shown.
a.$55
b.$65
c.$800
d.none of the above
8) your firm is a swiss exporter of bicycles. you have sold an order to a french firm for
1,000,000 worth of bicycles. payment from the french firm (in euro) is due in 12
months. use a money market hedge to redenominate this one-year receivable into a
swiss franc-denominated receivable with a one-year maturity.
the following were computed without rounding. select the answer closest to yours.
a.sfr. 1,728,900.26
b.sfr. 1,600,000
c.sfr. 1,544,705.88
d.sfr. 800,000
9) deregulated financial markets and heightened competition in financial services
provided an environment for financial innovations that resulted in the introduction of
various instruments. examples of these innovative instruments include
a.currency futures and options, foreign stock index futures and options
b.multicurrency bonds
c.international mutual funds, country funds, exchange traded funds
d.all of the above
10) “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
11) a “primary” stock market is
a.a big internationally-important market like the nyse
b.a market where corporations issue new shares to initial investors
c.where brokers and market makers trade
d.none of the above
12) the rapid increase in cross-border m&a deals can be attributed to
a.the end of the greenfield erawe are running out of land
b.the lack of domestic investment opportunity
c.the ongoing liberalization of capital markets and the integration of the world economy
d.none of the above
13) the international accounting standards committee
a.is now known as the international accounting standards board
b.is charged with accounting standards at the international house of pancakes
c.includes many convicted felons among its members
d.all of the above
14) a country with a current account surplus
a.acquires ious from foreigners, thereby increasing its net foreign wealth
b.must borrow from foreigners or draw down on its previously accumulated foreign
wealth
c.will experience a reduction in the country’s net foreign wealth
d.both b and c