Archives: Quiz

1) find the debt-to-equity ratio for a firm with a debt-to-total-value ratio of 4/5. a.1 b.2 c.3 d.4 e.5 2) an exporter can shift exchange rate risk to their customers by a.invoicing in their home currency b.invoicing in their customer’s […]

1) with regard to the capital account a.the capital account balance measures the difference between u.s. sales of assets to foreigners and u.s. purchases of foreign assets b.u.s. sales (or exports) of assets are recorded as credits, as they result […]

1) more important than he absolute size of a country’s balance-of-payments disequilibrium a.is the nature and cause of the disequilibrium b.is whether it is a trade surplus or deficit c.is whether the local government is mercantilist or not d.nothing is […]

1) xyz corporation enters into a 6-year interest rate swap with a swap bank in which it agrees to pay the swap bank a fixed-rate of 9 percent annually on a notional amount of sfr10,000,000 and receive libor – percent. […]

1) a bank may establish a multinational operation for the reason of prestige. the underlying rationale being that a.local firms may be able to obtain from a foreign subsidiary bank operating in their country more complete trade and financial market […]

1) national neutrality a.is the criterion that an ideal tax should be effective in raising revenue of the government and not have any negative effects on the economic decision-making process of the taxpayer b.requires that taxable income is taxed in […]

1) consider a project of the cornell haul moving company, the timing and size of the incremental after-tax cash flows (for an all-equity firm) are shown below in millions: the firm’s tax rate is 34%; the firm’s bonds trade with […]

1) when a country is more remote, with an uncommon language a.domestic investors tend to invest more in country’s market and less abroad b.foreign investors tend to invest less in country’s market c.domestic investors tend to invest more in country’s […]

1) a u.s. parent firm, as result of its business activities in germany, has a net exposure of 1,000,000. the consolidated reports were prepared at the year-end for the last two successive years. if the exchange rates on these reporting […]

1) with regard to translation exposure versus operating exposure a.upper management should be more concerned with translation exposure b.any discussion really involves speculation about foreign exchange rate changes c.upper management should be more concerned with operating exposure d.none of the […]

1) among the reasons put forth for government assistance in exporting a.success in international trade is fundamentally important for a country b.success in exporting implies that there is demand for a country’s products, that its labor force is employed, and […]

1) the size of the swap market is a.measured by notational principal b.over 7 trillion dollars c.both a and b d.none of the above 2) the first two columns give the maximum daily amounts of beer and whiskey that southern […]

1) the first two columns give the maximum daily amounts of beer and whiskey that southern ireland and northern ireland can produce when they completely specialize in one or other product. the last two columns give each country’s consumption without […]

1) consider a project of the cornell haul moving company, the timing and size of the incremental after-tax cash flows (for an all-equity firm) are shown below in millions: the firm’s tax rate is 34%; the firm’s bonds trade with […]

1) act as a swap bank and quote bid and ask prices to a and b that are attractive to a and b and promise to make at least 20bp for your firm. 2) the economic theory of mercantilism holds […]

1) the table below shows the bushels of wheat and the bottles of beer that north and south dakota can produce per day of labor under two different hypothetical situations (cases i and ii). which state has a comparative advantage […]

1) the asian crisis a.followed a period of economic recession in the region coupled with record private capital outflows b.followed a period of economic expansion in the region financed by record private capital inflows c.began in the fall of 2001 […]

1) consider the following spot and forward rate quotations for the swiss franc: which of the following is true: a.the swiss franc is definitely going to be worth more dollars in six months b.the swiss franc is probably going to […]

1) currency risk a.is the same as currency exposure b.represents random changes in exchange rates c.measure “what the firm has at risk.” d.both a and b 2) your firm is an italian exporter of bicycles. you have sold an order […]

1) the vast majority of new international bond offerings a.are straight fixed-rate notes b.are callable and convertible c.are convertible adjustable rate d.are adjustable rate, with interest rate caps and collars 2) following the adoption of the cadbury code of best […]

1) which term correctly describes the following situation? when a country imposes exchange restrictions on its own currency, limiting conversion to other currencies, a mnc’s frustrated remittance of profits from a subsidiary would be a.blocked funds b.stopped funds c.constipated funds […]

1) a “tax haven” country is one that has a low, or zero percent, national tax rates. some of the countries that fall into this category are a.bahamas, bahrain, bermuda, and the cayman islands b.denmark, norway, switzerland, and sweden c.bulgaria, […]

1) the first two columns give the maximum daily amounts of beer and whiskey that southern ireland and northern ireland can produce when they completely specialize in one or other product. the last two columns give each country’s consumption without […]

1) suppose that the current exchange rate is 1.00 = $1.60. the indirect quote, from the u.s. perspective is a.1.00 = $1.60 b.0.6250 = $1.00 c.1.60 = $1.00 d.none of the above 2) a banker’s acceptance is created when a.is […]

1) efficient cash management techniques can a.reduce the investment in cash balances and foreign exchange transaction expenses b.provide for maximum return from the investment of excess cash c.result in borrowing at lowest rate when a temporary cash shortage exists d.all […]

1) operating exposure measures a.the extent to which the foreign currency value of the firm’s assets is affected by unanticipated changes in exchange rates b.the extent to which the firm’s operating cash flows will be affected by unexpected changes in […]

1) exercise of a currency futures option results in a.a long futures position for the call buyer or put writer b.a short futures position for the call buyer or put writer c.a long futures position for the put buyer or […]

1) a firm with a highly elastic demand for its products a.will be unable to pass increased costs following unfavorable changes in the exchange rate without significantly lowering the quantity sold b.will be able to raise prices following unfavorable changes […]

1) under fasb 52, when a net translation exposure exists, a.a derivatives hedge is necessary to bring balance to the consolidated balance sheet after an exchange rate change b.a money market hedge is necessary to bring balance to the consolidated […]

1) in many countries hostile takeovers are relatively rare. this is so partly because of a.the language barrier b.concentrated ownership in these countries c.cultural values and political environments disapproving hostile corporate takeovers d.both b and c 2) a foreign branch […]

1) company x wants to borrow $10,000,000 floating for 5 years; company y wants to borrow $10,000,000 fixed for 5 years. their external borrowing opportunities are shown below: a swap bank proposes the following interest only swap: x will pay […]

1) with regard to creating money, a.only central banks such as the federal reserve can create money b.money is created when a bank customer invests in a time deposit c.commercial banks can create money when a bank lends out funds […]

1) the triffin paradox a.was first proposed by professor robert triffin b.warned that the gold-exchange system of the bretton woods agreement was programmed to collapse in the long run c.was indeed responsible for the eventual collapse of the dollar-based gold-exchange […]

1) there is an intimate relationship between a country’s bca and how the country finances its domestic investment and pays for government expenditures. given this, in order for a country to reduce a bca deficit, which of the following must […]

1) the single european currency, the euro, was adopted by 11 member nations on january 1 of what year? a.1984 b.1991 c.1999 d.2001 2) according to a recent survey by ernst and young, the most important tax issue that multinational […]

1) suppose that the one-year interest rate is 5.0 percent in the united states and 3.5 percent in germany, and the one-year forward exchange rate is $1.16/. what must the spot exchange rate be? a.$1.1768/ b.$1.1434/ c.$1.12/ d.none of the […]

1) as a rule, when the interest rate of the foreign currency is greater than the interest rate of the quoting currency, a.the outright forward rate is less than the spot exchange rate b.the outright forward rate is more than […]

1) a type of noncontinuous exchange trading system is crowd trading. a.unlike a call market in which there is a common price for all trades, several bilateral trades may take place at different prices in crowd trading b.unlike a continuous […]

1) a five-year, 4 percent euro denominated bond sells at par. a comparable risk five-year, 5.5 percent euro/dollar dual-currency bond pays $1,500 at maturity per 1,000 of face value. it sells for 1,250. what is the implied $/ exchange rate […]

1) consider a fixed for fixed currency swap. the dow corporation is a u.s.-based multinational. the jones corporation is a u.k.-based multinational. dow wants to finance a £2 million expansion in great britain. jones wants to finance a $4 million […]

1) on the basis of regression equation we can decompose the variability of the dollar value of the asset, var(p), into two separate components var(p) = b2 var(s) + var(e). the first term in the right-hand side of the equation, […]

1) the territorial method of declaring a national tax jurisdiction a.is to tax national residents of the country on their worldwide income no matter in which country it is earned b.is to tax all income earned within the country by […]

1) a time draft can become a negotiable money market instrument called a.eurodollars b.a banker’s acceptance c.a letter of credit d.a bill of lading 2) global registered shares a.are created when a mnc issues shares globally b.purchased on one exchange […]

1) suppose that you are the treasurer of ibm with an extra u.s. $1,000,000 to invest for six months. you are considering the purchase of u.s. t-bills that yield 1.810% (that’s a six month rate, not an annual rate by […]

1) if a foreign entity is only a shell company for carrying accounts that could be carried on the parent’s books, a.the functional currency would generally be the parent’s currency b.the functional currency would generally be the local currency c.there […]

1) suppose you observe the following exchange rates: 1 = $1.50; £1 = $2.00. calculate the euro-pound exchange rate. a.1.3333 = £1.00 b.£1.3333 = 1.00 c.3.00 = £1 d.1.25 = £1.00 2) suppose that the one-year interest rate is 4.0 […]

1) consider a project of the cornell haul moving company, the timing and size of the incremental after-tax cash flows (for an all-equity firm) are shown below in millions: the firm’s tax rate is 34%; the firm’s bonds trade with […]

1) tax neutrality is determined by three criteria: which of the following doesn’t belong? a.capital-export neutrality b.capital-import neutrality c.national neutrality d.income neutrality 2) the underlying principle of the current rate method is a.assets and liabilities should be translated based on […]

1) some of the factors (with selected explanations) used in calculating the basic “net present value” and the “incremental” cash flows of a capital project are: (i) – expected after-tax terminal value, including recapture of working capital (ii) – net […]

1) relative to the spot price the forward price will be a.usually less than the spot price b.usually more than the spot price c.usually equal to the spot price d.usually less than or more than the spot price more often […]