Archives: Quiz

1) during the period between world war i and world war ii, many central banks followed a policy of sterilization of gold a.by restricting the rate of growth in the supply of gold b.by matching inflows and outflows of gold […]

1) tax equity means that a.similarly situated taxpayers should participate in the cost of operating the government according to the same rules b.regardless of the country in which an affiliate of a mnc earns taxable income, the same tax rate […]

1) the euro-pound cross exchange rate can be computed as: a.s(/£) = s($/£) s(/$) b. c. d.all of the above 2) consider a u.s.-based mnc with a wholly-owned french subsidiary. following a depreciation of the dollar against the euro, which […]

1) fdi vertical integration is backward a.when fdi involves an industry abroad that produces inputs for mncs b.when fdi involves an industry abroad that sells the mnc’s outputs c.none of the above 2) in terms of the types of instruments […]

1) many of the small foreign equity markets (e.g. chile, sri lanka) a.have poor liquidity at present b.are very liquid stock markets, since the poor people living there are eager to sell their securities c.have fairly high turnover ratios indicating […]

1) for a recent month, the following payments matrix of interaffiliate cash flows was forecasted: the spot exchange rates are $1.20 = 1.00 and $2.00 = £1.00; affiliates get paid in home currency. use multilateral netting to find the net […]

1) continued u.s. trade deficits coupled with foreigners’ desire to diversify their currency holdings away from u.s. dollars a.could further diminish the position of the dollar as the dominant reserve currency b.could affect the value of u.s. dollar (e.g. through […]

1) financial accounting standards board (fasb) statements 8 and 52 relate to the translation methods. the following outlines the objectives and descriptions of the two statements. (i) – measure in dollars an enterprise’s assets, liabilities, revenues, or expenses that are […]

1) a domestic bank that follows a multinational client abroad to preserve that banking relationship a.is playing the role of the desperate housewife in this relationship b.is pursuing a wholesale defensive strategy c.is pursuing a retail defensive strategy d.none of […]

1) suppose you observe the following exchange rates: 1 = $1.50; ¥120 = $1.00. calculate the euro-pound exchange rate. a.¥133.33 = 1.00 b.1.00 = ¥180 c.¥80 = 1.00 d.1 = £2.50 2) the key factors that are important in a […]

1) consider bank that has entered into a five-year swap on a notational balance of $10,000,000 with a corporate customer who has agreed to pay a fixed payment of 10 percent in exchange for libor. as of the fourth reset […]

1) generating exchange rate forecasts with the fundamental approach involves a.looking at charts of the exchange rate and extrapolating the patterns into the future b.estimation of a structural model c.substituting the estimated values of the independent variables into the estimated […]

1) a foreign branch bank a.is a small service facility staffed by parent bank personnel that is designed to assist mnc clients of the parent bank in dealings with the bank’s correspondents b.operates like a local bank, but legally is […]

1) u.s. banks that establish subsidiary and affiliate banks a.are allowed to underwrite securities b.must provide fdic insurance on their foreign-currency denominated demand deposits c.can underwrite securities, but not accept dollar-denominated deposits d.both a and b 2) consider a u.s.-based […]

1) to pave the way for the european monetary union, the member countries of the european monetary system agreed to achieve a convergence of their economies. which of the following is not a condition of convergence: a.keep the ratio of […]

1) publicly traded yankee bonds must a.meet the same regulations as u.s. domestic bonds b.meet the same regulations as eurobonds if sold to europeans c.meet the same regulations as samurai bonds if sold to japanese d.none of the above 2) […]

1) you are the debt manager for a u.s.-based multinational. you need to borrow 100,000,000 for five years. you can either borrow the 100,000,000 directly in germany or borrow dollars in the u.s. and enter into a combined interest rate […]

1) why would a u.s. bank open a foreign branch bank? a.because this form of bank organization can allow a u.s. bank to provide a fuller range of services for its mnc customers than it can through a representative office […]

1) for the u.s. affiliate shown below, net all its inter-affiliate receipts against all its disbursements. use the following exchange rates. the net inter-affiliate cash flow for the u.s. affiliate is a.$0 b.-$135 c.$135 d.$405 e.$90 2) in reference to […]

1) your firm’s interaffiliate cash receipts and disbursements matrix is shown below ($000): find the net cash flow in (out of) the german affiliate. a.$5,000 in b.$5,000 out c.$30,000 out d.$30,000 in e.none of the above 2) using the table […]

1) value-added tax (vat) is a.a direct national tax levied on the value added in the production of a good (or service) as it moves through various stages of production b.an indirect national tax levied on the value added in […]

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 […]

1) investors in corporate bonds would still be interested in sovereign credit ratings a.because the sovereign credit rating usually represents a ceiling on corporate credit ratings within that country b.because they might play the ted spread c.because they are the […]

1) which will reduce the number of foreign exchange transaction the most for a mnc? a.multilateral netting b.bilateral netting c.fish netting d.none of the above 2) assume the time from acceptance to maturity on a $10,000,000 banker’s acceptance is 90 […]

1) decompose the return an american would have if he had bought a german stock at 100 per share and sold it one year later at 120. the spot exchange rate one year ago was $1.50 = 1 and the […]

1) in which type of market can liquidity “dry up”? a.a bull market b.a bear market c.a speculative bubble d.a financial panic 2) the role of an underwriter is to a.help negotiate terms with the borrower b.ascertain market conditions c.manage […]

1) according to the research in the accuracy of paid exchange rate forecasters, a.you can make more money selling forecasts than you can following forecasts b.the average forecaster is better than average at forecasting c.the forecasters do a better job […]

1) which banks cannot accept foreign deposits? a.domestic banks located in the u.s b.edge act banks located in the u.s c.subsidiary banks located overseas d.foreign branches located overseas 2) assume the time from acceptance to maturity on a $2,000,000 banker’s […]

1) in contrast to many domestic bonds, which make _________ coupon payments, coupon interest on eurobonds is typically paid _________. a.semiannual; annually b.annual; semiannually c.quarterly; semiannually d.quarterly; annually 2) the current exchange rate is £1.00 = $2.00. compute the correct […]

1) when firms undertake fdi, a.they become mncs b.they reduce their tax rate since they can tell each country that they do business in that they paid their taxes in other countries c.the can exploit workers by paying them below-market […]

1) for a parent that sells goods to a subsidiary, transfer pricing can have an effect on international capital expenditure analysis. a very low markup policy makes the apv of a subsidiary’s capital expenditure appear a.more attractive b.less attractive c.no […]

1) emerald energy is an oil exploration and production company that trades on the london stock market. over the past year, the stock has gone from £50 per share to £55, but over the same period, the dollar has depreciated […]

1) a “greenfield” investment a.involves soybeans in the spring, corn in the summer b.are generally less politically sensitive than the acquisition of an existing foreign firm c.are generally more politically sensitive than the acquisition of an existing foreign firm d.none […]

1) your firm has a british customer that is willing to place a $1 million order (with payment due in 6 months), but insists upon paying in pounds instead of dollars. a.the customer essentially wants you to discount your price […]

1) the asian currency crisis a.happened just prior to the mexican peso crisis b.turned out to be far more serious than the mexican peso crisis in terms of the extent of contagion c.was limited to asian currencies d.was almost over […]

1) with any hedge a.your losses on one side should about equal your gains on the other side b.you should try to make money on both sides of the transaction: that way you make money coming and going c.you should […]

1) 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 […]

1) xyz corporation, located in the united states, has an accounts payable obligation of ¥750 million payable in one year to a bank in tokyo. which of the following is not part of a money market hedge? a.buy the ¥750 […]

1) solve for the weighted average cost of capital: a.8.67% b.8.00% c.7.60% d.7.33% e.7.14% 2) true or false: floating rate notes behave differently in response to interest rate risk than straight fixed-rate bonds. a.true since frns experience only mild price […]

1) the firm’s tax rate is 34%. the firm’s pre-tax cost of debt is 8%; the firm’s debt-to-equity ratio is 3; the risk-free rate is 3%; the beta of the firm’s common stock is 1.5; the market risk premium is […]

1) the sarbanes-oxley act of 2002 a.has had the consequence that many foreign firms have de-listed in the u.s. exchanges and listed their shares on the london stock exchange and other european exchanges b.has increased the pace of foreign firms […]

1) the agency problem tends a.to be more serious in firms with free cash flows b.to be more serious in firms with excessive amounts of excess cash c.to be less serious in firms with few numbers of shareholders d.all of […]

1) covered interest arbitrage (cia) activities will result in a.an unstable international financial markets b.restoring equilibrium prices quickly c.a disintermediation d.no effect on the market 2) the goal of shareholder wealth maximization a.is not appropriate for non-u.s. business firms b.means […]

1) the fisher effect states that a.any forward premium or discount is equal to the expected change in the exchange rate b.any forward premium or discount is equal to the actual change in the exchange rate c.the nominal interest rate […]

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) the term “countertrade” refers to a.many different types of transactions in which the seller provides a buyer with goods or services and promises in return to purchase goods or services from the buyer b.barter, clearing arrangement, and switch trading […]

1) a u.s. firm has sold an italian firm 1,000,000 worth of product. in one year the u.s. firm gets paid. to hedge, the u.s. firm bought put options on the euro with a strike price of $1.65. they paid […]

1) the maastricht treaty a.irrevocably fixed exchange rates among the member currencies b.commits the members of the european union to political union as well as monetary union c.was signed and subsequently ratified by the 12 member states d.all of the […]

1) an income tax is a direct tax. 2) an edge act bank is typically located in a state different from that of its parent in order to get around the prohibition on interstate branch banking. Answer: true 3) a […]

1) a centralized cash pool assists in reducing the problem of mislocated funds and in funds mobilization. 2) many of the skills necessary for effective cash management are the same regardless of whether the firm has only domestic operations or […]