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Chapter 21
International Corporate Finance
Multiple Choice Questions
1.
Which one of the following securities is used as a means of investing in a
foreign stock that otherwise could not be traded in the United States?
2.
Assume that $1 is equal to ¥98 and also equal to C$1.21. Based on this, you
could say that C$1 is equal to: C$1(¥98/C$1.21) = ¥80.99. The exchange
rate of C$1 = ¥80.99 is referred to as the:
3.
International bonds issued in multiple countries but denominated solely in
the issuer's currency are called:
4.
U.S. dollars deposited in a bank in Switzerland are called:
5.
International bonds issued in a single country and denominated in that
country's currency are called:
6.
You would like to purchase a security that is issued by the British
government. Which one of the following should you purchase?
7.
On Friday evening, Bank A loans Bank B Eurodollars that must be repaid the
following Monday morning. Which one of the following is most likely the
interest rate that will be charged on this loan?
8.
Party A has agreed to exchange $1 million U.S. dollars for $1.21 million
Canadian dollars. What is this agreement called?
9.
A large U.S. company has £500,000 in excess cash from its foreign
operations. The company would like to exchange these funds for U.S.
dollars. In which of the following markets can this exchange be arranged?
10.
The price of one Euro expressed in U.S. dollars is referred to as a(n):
11.
Trader A has agreed to give 100,000 U.S. dollars to Trader B in exchange for
British pounds based on today's exchange rate of $1 = £0.62. The traders
agree to settle this trade within two business day. What is this exchange
called?
12.
George and Pat just made an agreement to exchange currencies based on
today's exchange rate. Settlement will occur tomorrow. Which one of the
following is the exchange rate that applies to this agreement?
13.
A trader has just agreed to exchange $2 million U.S. dollars for $1.55 million
Euros six months from today. This exchange is an example of a:
14.
Mr. Black has agreed to a currency exchange with Mr. White. The parties
have agreed to exchange C$12,500 for $10,000 with the exchange occurring
4 months from now. This agreed-upon exchange rate is called the:
15.
Assume that an item costs $100 in the U.S. and the exchange rate between
the U.S. and Canada is: $1 = C$1.27. Which one of the following concepts
supports the idea that the item that sells for $100 in the U.S. is currently
selling in Canada for $127?
16.
The condition stating that the interest rate differential between two
countries is equal to the percentage difference between the forward
exchange rate and the spot exchange rate is called:
17.
Which one of the following states that the current forward rate is an
unbiased predictor of the future spot exchange rate?
18.
Which one of the following states that the expected percentage change in
the exchange rate between two countries is equal to the difference in the
countries' interest rates?
19.
Which one of the following supports the idea that real interest rates are
equal across countries?
20.
Which one of the following is the risk that a firm faces when it opens a
facility in a foreign country, given that the exchange rate between the firm's
home country and this foreign country fluctuates over time?
