Archives: Quiz

1) countries with strong shareholder protection tend to have more valuable stock markets and more companies listed on stock exchanges per capita than countries with weak protection. 2) public traders do not trade directly with one another in a dealer […]

1) which factors appear to be fueling the sale of yankee stocks? a.the push for privatization by many latin american and eastern european government-owned companies b.the rapid growth in the economies of the developing countries c.the large demand for new […]

1) if japan exports more than it imports, then a.the supply of dollars is likely to exceed the demand in the foreign exchange market, ceteris paribus b.one can infer that the yen would be likely to appreciate against other currencies […]

1) if the exchange rate follows a random walk a.the future exchange rate is unpredictable b.the future exchange rate is expected to be the same as the current exchange rate, st = e(st+ 1) c.the best predictor of future exchange […]

1) suppose you are a citizen of the united states with foreign-source income. in the foreign country the tax rate is 40 percent and your u.s. rate is 30%. for every $10,000 of foreign-source income you will a.receive a tax […]

1) in germany the corporate board is a.legally charged with representing the interests of shareholders exclusively b.legally charged with looking after the interests of stakeholders (e.g., workers, creditors, etc.) in general, not just shareholders c.legally charged as a supervisory board […]

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) an american hedge fund is considering a one-year investment in an italian government bond with a one-year maturity and a euro-denominated rate of return of i = 5%. the bond costs 1,000 today and will return 1,050 at the […]

1) the ford motor company recently acquired mazda, a japanese auto maker, and jaguar, a british auto maker. a.this is an example of cross-border m&a b.this was a greenfield investment c.both a and b d.none of the above 2) assume […]

1) a foreign branch bank operates like a local bank, but legally a.it is a part of the parent bank b.a branch bank is subject to both the banking regulations of its home country and the country in which it […]

1) the formula for beta is: a. b. c. d. 2) suppose the face amount of a promissory note is $1,000,000 and the importer’s bank charges an acceptance commission of 1.5 percent. the note is for 60 days. calculate the […]

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) 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 […]

1) examples of control risk include a.the unexpected imposition of capital controls, inbound or outbound, and withholding taxes on dividend and interest payments b.unexpected changes in environmental policies, sourcing/local content requirements, minimum wage law, and restriction on access to local […]

1) you are a u.s.-based treasurer with $1,000,000 to invest. the dollar-euro exchange rate is quoted as $1.60 = 1.00 and the dollar-pound exchange rate is quoted at $2.00 = £1.00. if a bank quotes you a cross rate of […]

1) the link between the home currency value of a firm’s assets and liabilities and exchange rate fluctuations is a.asset exposure b.operating exposure c.both a and b d.none of the above 2) on september 10, 1990 the published prices (cents […]

1) from the perspective of the writer of a put option written on 62,500. if the strike price is $1.55/, and the option premium is $1,875, at what exchange rate do you start to lose money? a.$1.52/ b.$1.55/ c.$1.58/ d.none […]

1) according to the research in the accuracy of paid exchange rate forecasters, a.as a group, they do not do a better job of forecasting the exchange rate than the forward rate does b.the average forecaster is better than average […]

1) “investment grade” ratings are in the following categories: a.moody’s: aaa to bbb – s&p’s: aaa to baa b.moody’s: aaa to baa – s&p’s: aaa to bbb c.moody’s: aaa to a – s&p’s: aaa to a d.moody’s: aaa to a […]

1) a firm’s operating exposure is a.defined as the extent to which the firm’s operating cash flows would be affected by the random changes in exchange rates b.determined by the structure of the markets in which the firm sources its […]

1) if cross-border acquisitions generate synergistic gains, a.then both the acquiring and target shareholders gain wealth at the same time b.then one can argue that cross-border acquisitions are mutually beneficial and thus should not be thwarted both from a national […]

1) the price of a mcdonald’s big mac sandwich a.is about the same in the 120 countries that mcdonalds does business in b.varies considerably across the world in dollar terms c.supports ppp d.none of the above 2) consider the following […]

1) under a gold standard, if britain exported more to france than france exported to great britain, a.such international imbalances of payment will be corrected automatically b.this type of imbalance will not be able to persist indefinitely c.net export from […]

1) 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 […]

1) for european currency options written on euro with a strike price in dollars, what of the effect of an increase in r$ relative to r? a.decrease the value of calls and puts ceteris paribus b.increase the value of calls […]

1) with regard to cash management systems in practice, studies suggest that the benefits of a multilateral netting system include a.the decrease in the expense associated with funds transfer, which in some cases can be over $1,000 for a large […]

1) merchant banks are different from traditional commercial banks in what way(s)? a.merchant banks can engage in investment banking activities b.merchant banks can arrange for foreign exchange transactions c.merchant banks can assist their clients in hedging exchange rate risk d.all […]

1) the market capitalization of the developing world a.is about 80 percent of the market capitalization of the entire world b.is about 60 percent of the market capitalization of the entire world c.is about 40 percent of the market capitalization […]

1) capital export neutrality a.is a goal based on worldwide economic efficiency b.is an example of mercantilism c.is based on host country economic efficiency d.is based on mnc home country economic efficiency 2) the european stock exchange, comparable in volume […]

1) international markets for goods and services are often imperfect. which is the most common and most important? a.acts of governments b.natural barriers like distance c.cultural barriers d.lack of knowledge 2) suppose that you are the treasurer of ibm with […]

1) studies examining the influence of industrial structure on foreign equity returns a.conclusively show a connection b.have been inconclusive c.show that industrialized economies outperform lesser developed economies d.none of the above 2) in which type of policy actions by the […]

1) shareholders of u.s. bidders (acquiring firms in m&a) experience significant positive abnormal returns when firms expand into new industries and geographic markets. 2) a dealer in british pounds who thinks that the pound is about to appreciate a.may want […]

1) when a currency trades at a premium in the forward market a.the exchange rate is more than one dollar (e.g. 1.00 = $1.28) b.the exchange rate is less than one dollar c.the forward rate is less than the spot […]

1) eurocurrency a.is the euro, the common currency of europe b.is a time deposit of money in an international bank located in a county different from the country that issued the currency c.is a demand deposit of money in an […]

1) in evaluating political risk, experts focus their attention on a set of key factors such as a.the host country’s political/government system b.historical records of political parties and their relative strengths c.integration of the host country into the world political/economic […]

1) the firm may not be able to pass through changes in the exchange rate a.in markets with low product differentiation b.in markets with high price elasticities c.both a and b d.none of the above 2) the most important international […]

1) suppose mexico is a major export market for your u.s.-based company and the mexican peso appreciates drastically against the u.s. dollar. this means a.your company’s products can be priced out of the mexican market, as the peso price of […]

1) exposure to currency risk can be measured by the sensitivities of a.the future home currency values of the firm’s assets and liabilities b.the firm’s operating cash flows to random changes in exchange rates c.both a and b d.none of […]

1) 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 […]

1) since security returns tend to have low correlations among countries, a.investors can reduce risk more effectively if they diversify their portfolio holdings internationally rather than purely domestically b.investors who have a domestically diversified portfolio, with exposures across industry types […]

1) 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 2) […]

1) the 5-year project requires equipment that costs $100,000. if undertaken, the shareholders will contribute $25,000 cash and borrow $75,000 with an interest-only loan with a maturity of 5 years and annual interest payments. the equipment will be depreciated straight-line […]

1) countries a and b currently consume 400 units of food and 400 units of textiles each and currently do not trade with one another. the citizens of country a have to give up one unit of food to gain […]

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) consider the position of a treasurer of a mnc, who has $20,000,000 that his firm will not need for the next 90 days. a.he could borrow the $20,000,000 in the money market b.he could take a long position in […]

1) your firm’s interaffiliate cash receipts and disbursements matrix is shown below ($000): using your results to the last question, use bilateral netting to simplify. Answer: 2) if you could accurately and consistently forecast exchange rates a.this would be a […]

1) libor a.is the london interbank offered rate b.is the reference rate in london for eurodollar deposits c.one of several reference rates in london: there is a libor for eurodollars, euroyen, eurocanadian dollars, and even euro d.all of the above […]

1) the first full-fledged gold standard a.was not established until 1821 in great britain, when notes from the bank of england were made fully redeemable for gold b.was not established until 1780 in the united states, when notes from the […]

1) a netting center necessarily implies that the mnc has a central cash manager. 2) many of the skills necessary for effective cash management are the same regardless of whether the firm has only domestic operations or if it operates […]

1) a centralized cash management system with a cash pool can reduce the investment the mnc has in precautionary cash balances, saving the firm money. 2) in the early 1980s, honda, the japanese automobile company, built an assembly plant in […]