Question 1

The classic importer has ______.

Accepted Answer

A)  both revenues and expenses that are determined globally 
B)  both revenues and expenses that are determined locally 
C)  revenues that are determined locally and expenses that are determined globally 
D)  revenues that are determined globally and expenses that are determined locally 
E)  None of the above 
A)  both revenues and expenses that are determined globally 
B)  both revenues and expenses that are determined locally 
C)  revenues that are determined locally and expenses that are determined globally 
D)  revenues that are determined globally and expenses that are determined locally 
E)  None of the above

Question 2

Change in the value of noncontractual cash flows due to unexpected changes in currency values is called ______ to currency risk.

Accepted Answer

A)  economic exposure 
B)  operating exposure 
C)  transaction exposure 
D)  translation exposure 
E)  None of the above 
A)  economic exposure 
B)  operating exposure 
C)  transaction exposure 
D)  translation exposure 
E)  None of the above

Question 3

Price elasticity of demand is defined as minus the percentage change in ______.

Accepted Answer

A)  interest rates for a given change in money supply 
B)  money supply for a given change in interest rates 
C)  price for a given percentage change in quantity demanded 
D)  quantity demanded for a given percentage change in price 
E)  None of the above 
A)  interest rates for a given change in money supply 
B)  money supply for a given change in interest rates 
C)  price for a given percentage change in quantity demanded 
D)  quantity demanded for a given percentage change in price 
E)  None of the above

Question 4

Net monetary assets is another term for shareholders' equity.

Accepted Answer

A) True 
 B)False

Question 5

Operating hedges are zero-NPV transactions.

Accepted Answer

A) True 
 B)False

Question 6

Regressions based on historical relationships can be unsatisfactory indicators of expected future exposure to currency risk.

Accepted Answer

A) True 
 B)False

Question 7

The classic exporter has ______.

Accepted Answer

A)  both revenues and expenses that are determined globally 
B)  both revenues and expenses that are determined locally 
C)  revenues that are determined locally and expenses that are determined globally 
D)  revenues that are determined globally and expenses that are determined locally 
E)  None of the above 
A)  both revenues and expenses that are determined globally 
B)  both revenues and expenses that are determined locally 
C)  revenues that are determined locally and expenses that are determined globally 
D)  revenues that are determined globally and expenses that are determined locally 
E)  None of the above

Question 8

If purchasing power parity does not hold, then markets are at least partially segmented.

Accepted Answer

A) True 
 B)False

Question 9

An importer's financial market hedging alternatives include each of a) through d) EXCEPT

Accepted Answer

A)  Buy the foreign currency with long-dated forward contracts. 
B)  Invest in long-dated foreign bonds. 
C)  Use currency swaps to acquire financial assets in the foreign currency. 
D)  Use a rolling hedge to repeatedly sell the foreign currency. 
E)  None of the above 
A)  Buy the foreign currency with long-dated forward contracts. 
B)  Invest in long-dated foreign bonds. 
C)  Use currency swaps to acquire financial assets in the foreign currency. 
D)  Use a rolling hedge to repeatedly sell the foreign currency. 
E)  None of the above

Question 10

MNCs can be exposed to more than one foreign currency.

Accepted Answer

A) True 
 B)False

Question 11

A real appreciation of the domestic currency helps importers and hurts exporters.

Accepted Answer

A) True 
 B)False

Question 12

The classic exporter manufactures goods in the local economy and sells the output in competitive global markets.

Accepted Answer

A) True 
 B)False

Question 13

Translation exposure is defined as change in the value of contractual cash flows due to unexpected changes in currency values.

Accepted Answer

A) True 
 B)False

Question 14

The _______ is negatively exposed to the real value of the domestic currency.

Accepted Answer

A)  classic exporter 
B)  classic importer 
C)  typical domestic firm 
D)  globally competitive firm 
E)  None of the above 
A)  classic exporter 
B)  classic importer 
C)  typical domestic firm 
D)  globally competitive firm 
E)  None of the above

Question 15

Operational hedges can create value by ______.

Accepted Answer

A)  reducing agency costs. 
B)  reducing expected taxes 
C)  reducing costs of financial distress 
D)  More than one of the above 
E)  None of the above 
A)  reducing agency costs. 
B)  reducing expected taxes 
C)  reducing costs of financial distress 
D)  More than one of the above 
E)  None of the above

Question 16

Multinational corporations have an advantage over domestic firms in their ______.

Accepted Answer

A)  market selection and promotion strategies 
B)  plant location decisions 
C)  product sourcing decisions 
D)  More than one of the above 
E)  None of the above 
A)  market selection and promotion strategies 
B)  plant location decisions 
C)  product sourcing decisions 
D)  More than one of the above 
E)  None of the above

Question 17

The percent of the variation in asset value that is explained by variation in a currency value is called the ______.

Accepted Answer

A)  beta 
B)  price elasticity of demand 
C)  r-square 
D)  slope coefficient 
E)  None of the above 
A)  beta 
B)  price elasticity of demand 
C)  r-square 
D)  slope coefficient 
E)  None of the above

Question 18

The domestic currency value of an expected future operating cash flow denominated in a foreign currency changes _______ with a change in the value of the foreign currency.

Accepted Answer

A)  disproportionately 
B)  the currency of denomination 
C)  not at all 
D)  one for one 
E)  None of the above 
A)  disproportionately 
B)  the currency of denomination 
C)  not at all 
D)  one for one 
E)  None of the above

Question 19

Change in financial accounting statements arising from unexpected changes in currency values is called ______ to currency risk.

Accepted Answer

A)  economic exposure 
B)  operating exposure 
C)  transaction exposure 
D)  translation exposure 
E)  None of the above 
A)  economic exposure 
B)  operating exposure 
C)  transaction exposure 
D)  translation exposure 
E)  None of the above

Question 20

A disadvantage of real asset hedges is that ______.

Accepted Answer

A)  bid-ask spreads can be large 
B)  daily marking to market can cause cash flow mismatches 
C)  option premiums can be large 
D)  they are unlikely to be zero-NPV transactions 
E)  they come in only a limited number of currencies and maturities 
A)  bid-ask spreads can be large 
B)  daily marking to market can cause cash flow mismatches 
C)  option premiums can be large 
D)  they are unlikely to be zero-NPV transactions 
E)  they come in only a limited number of currencies and maturities

Exam 10: Managing Operating Exposure to Currency Risk

The classic importer has ______.

Change in the value of noncontractual cash flows due to unexpected changes in currency values is called ______ to currency risk.

Price elasticity of demand is defined as minus the percentage change in ______.

Net monetary assets is another term for shareholders' equity.

Operating hedges are zero-NPV transactions.

Regressions based on historical relationships can be unsatisfactory indicators of expected future exposure to currency risk.

The classic exporter has ______.

If purchasing power parity does not hold, then markets are at least partially segmented.

An importer's financial market hedging alternatives include each of a) through d) EXCEPT

MNCs can be exposed to more than one foreign currency.

A real appreciation of the domestic currency helps importers and hurts exporters.

The classic exporter manufactures goods in the local economy and sells the output in competitive global markets.

Translation exposure is defined as change in the value of contractual cash flows due to unexpected changes in currency values.

The _______ is negatively exposed to the real value of the domestic currency.

Operational hedges can create value by ______.

Multinational corporations have an advantage over domestic firms in their ______.

The percent of the variation in asset value that is explained by variation in a currency value is called the ______.

The domestic currency value of an expected future operating cash flow denominated in a foreign currency changes _______ with a change in the value of the foreign currency.

Change in financial accounting statements arising from unexpected changes in currency values is called ______ to currency risk.

A disadvantage of real asset hedges is that ______.

An Introduction to Multinational Finance

World Trade and the International Monetary System

Foreign Exchange and Eurocurrency Markets

The International Parity Conditions and Their Consequences

Extension: the International Parity Conditions and Their Consequences

Currency Futures and Futures Markets

Currency Options and Options Markets

Currency Swaps and Swaps Markets

Multinational Treasury Management

Extension: Multinational Treasury Management

Managing Transaction Exposure to Currency Risk

Managing Translation Exposure and Accounting for Financial Transactions

Foreign Market Entry and Country Risk Management

Multinational Capital Budgeting

Multinational Capital Structure and Cost of Capital

Taxes and Multinational Corporate Strategy

Real Options and Cross-Border Investment Strategy

Corporate Governance and the International Market for Corporate Control

International Capital Markets

International Portfolio Diversification

International Asset Pricing

Filters