Exam 10: Measuring Exposure to Exchange Rate Fluctuations

Assume a regression is run of the firm's stock price percentage change on the percentage change in the foreign currency.The coefficient is negative.This implies that the company's stock price increases if the foreign currency appreciates.

(True/False)

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Question 41

Which of the following operations benefits from appreciation of the firm's local currency

(Multiple Choice)

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Question 42

Which of the following operations benefits from depreciation of the firm's local currency

(Multiple Choice)

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Question 43

Assume that Mill Corporation,a U.S.-based MNC,has applied the following regression model to estimate the sensitivity of its cash flows to exchange rate movements: $P C F_{t}=a_{0}+a_{1} e_{t}+\mu t$ where the term on the left-hand side is the percentage change in inflation-adjusted cash flows measured in the firm's home currency over period t,and $e_{t}$ is the percentage change in the exchange rate of the currency over period t.The regression model estimates a coefficient of $a_{1}$ of 2.This indicates that:

(Multiple Choice)

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Question 44

The maximum one-day loss computed for the value-at-risk (VAR)method,does not depend on:

(Multiple Choice)

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Question 45

A U.S.MNC has the equivalent of $1 million cash outflows in each of two highly negatively correlated currencies. During _ dollar cycles,cash outflows are _.

(Multiple Choice)

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Question 46

______________ is(are)not a determinant of translation exposure.

(Multiple Choice)

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Question 47

One argument why exchange rate risk is irrelevant to corporations is that shareholders can deal with this risk individually.

(True/False)

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Question 48

U.S.exporters may not necessarily benefit from weak-dollar periods if foreign competitors are willing to reduce their profit margin.

(True/False)

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Question 49

The __ the percentage of an MNC's business conducted by its foreign subsidiaries,the _ the percentage of a given financial statement item that is susceptible to translation exposure.

(Multiple Choice)

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Question 50

If the U.S.dollar appreciates:

(Multiple Choice)

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Question 51

A firm produces goods for which substitute goods are produced in all countries. Depreciation of the firm's local currency should:

(Multiple Choice)

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Question 52

In general,a firm that concentrates on local sales,has very little foreign competition,and obtains foreign supplies (denominated in foreign currencies)will likely _ a(n) local currency.

(Multiple Choice)

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Question 53

Generally,MNCs with less foreign costs than foreign revenue will be _ affected by a _ foreign currency.

(Multiple Choice)

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Question 54

Consider an MNC that is exposed to the Taiwan dollar (TWD)and the Egyptian pound (EGP).25% of the MNC's funds are Taiwan dollars and 75% are pounds.The standard deviation of exchange movements is 7% for Taiwan dollars and 5% for pounds.The correlation coefficient between movements in the value of the Taiwan dollar and the pound is.7.Based on this information,the standard deviation of this two-currency portfolio is approximately:

(Multiple Choice)

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Question 55

One argument for exchange rate irrelevance is that:

(Multiple Choice)

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Question 56

The transaction exposure of two inflow currencies is offset when the correlation between the currencies is high.

(True/False)

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Question 57

If the functional currencies for reporting purposes are highly correlated,translation exposure is magnified.

(True/False)

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Question 58

According to the text,currency variability levels _ perfectly stable over time,and currency correlations _ perfectly stable over time.

(Multiple Choice)

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Question 59

Showing 41 - 59 of 59

Assume a regression is run of the firm's stock price percentage change on the percentage change in the foreign currency.The coefficient is negative.This implies that the company's stock price increases if the foreign currency appreciates.

Which of the following operations benefits from appreciation of the firm's local currency

Which of the following operations benefits from depreciation of the firm's local currency

The maximum one-day loss computed for the value-at-risk (VAR)method,does not depend on:

A U.S.MNC has the equivalent of $1 million cash outflows in each of two highly negatively correlated currencies. During _ dollar cycles,cash outflows are _.

______________ is(are)not a determinant of translation exposure.

One argument why exchange rate risk is irrelevant to corporations is that shareholders can deal with this risk individually.

U.S.exporters may not necessarily benefit from weak-dollar periods if foreign competitors are willing to reduce their profit margin.

The __ the percentage of an MNC's business conducted by its foreign subsidiaries,the _ the percentage of a given financial statement item that is susceptible to translation exposure.

If the U.S.dollar appreciates:

A firm produces goods for which substitute goods are produced in all countries. Depreciation of the firm's local currency should:

In general,a firm that concentrates on local sales,has very little foreign competition,and obtains foreign supplies (denominated in foreign currencies)will likely _ a(n) local currency.

Generally,MNCs with less foreign costs than foreign revenue will be _ affected by a _ foreign currency.

One argument for exchange rate irrelevance is that:

The transaction exposure of two inflow currencies is offset when the correlation between the currencies is high.

If the functional currencies for reporting purposes are highly correlated,translation exposure is magnified.

According to the text,currency variability levels _ perfectly stable over time,and currency correlations _ perfectly stable over time.

Multinational Financial Management: An Overview

International Flow of Funds

International Financial Markets

Exchange Rate Determination

Currency Derivatives

Government Influence on Exchange Rates

International Arbitrage and Interest Rate Parity

Relationships among Inflation,Interest Rates,and Exchange Rates

Forecasting Exchange Rates

Managing Transaction Exposure

Managing Economic Exposure and Translation Exposure

Direct Foreign Investment

Multinational Capital Budgeting

Multinational Restructuring

Country Risk Analysis

Multinational Cost of Capital and Capital Structure

Long-Term Financing

Financing International Trade

Short-Term Financing

International Cash Management

Filters

Exam 10: Measuring Exposure to Exchange Rate Fluctuations

Assume a regression is run of the firm's stock price percentage change on the percentage change in the foreign currency.The coefficient is negative.This implies that the company's stock price increases if the foreign currency appreciates.

Which of the following operations benefits from appreciation of the firm's local currency

Which of the following operations benefits from depreciation of the firm's local currency

The maximum one-day loss computed for the value-at-risk (VAR)method,does not depend on:

A U.S.MNC has the equivalent of $1 million cash outflows in each of two highly negatively correlated currencies. During _______ dollar cycles,cash outflows are _______.

______________ is(are)not a determinant of translation exposure.

One argument why exchange rate risk is irrelevant to corporations is that shareholders can deal with this risk individually.

U.S.exporters may not necessarily benefit from weak-dollar periods if foreign competitors are willing to reduce their profit margin.

The __________ the percentage of an MNC's business conducted by its foreign subsidiaries,the _________ the percentage of a given financial statement item that is susceptible to translation exposure.

If the U.S.dollar appreciates:

A firm produces goods for which substitute goods are produced in all countries. Depreciation of the firm's local currency should:

In general,a firm that concentrates on local sales,has very little foreign competition,and obtains foreign supplies (denominated in foreign currencies)will likely ___________ a(n)__________ local currency.

Generally,MNCs with less foreign costs than foreign revenue will be _______ affected by a _______ foreign currency.

One argument for exchange rate irrelevance is that:

The transaction exposure of two inflow currencies is offset when the correlation between the currencies is high.

If the functional currencies for reporting purposes are highly correlated,translation exposure is magnified.

According to the text,currency variability levels _______ perfectly stable over time,and currency correlations _______ perfectly stable over time.

Multinational Financial Management: An Overview

International Flow of Funds

International Financial Markets

Exchange Rate Determination

Currency Derivatives

Government Influence on Exchange Rates

International Arbitrage and Interest Rate Parity

Relationships among Inflation,Interest Rates,and Exchange Rates

Forecasting Exchange Rates

Managing Transaction Exposure

Managing Economic Exposure and Translation Exposure

Direct Foreign Investment

Multinational Capital Budgeting

Multinational Restructuring

Country Risk Analysis

Multinational Cost of Capital and Capital Structure

Long-Term Financing

Financing International Trade

Short-Term Financing

International Cash Management

Filters

A U.S.MNC has the equivalent of $1 million cash outflows in each of two highly negatively correlated currencies. During _ dollar cycles,cash outflows are _.

The __ the percentage of an MNC's business conducted by its foreign subsidiaries,the _ the percentage of a given financial statement item that is susceptible to translation exposure.

In general,a firm that concentrates on local sales,has very little foreign competition,and obtains foreign supplies (denominated in foreign currencies)will likely _ a(n) local currency.

Generally,MNCs with less foreign costs than foreign revenue will be _ affected by a _ foreign currency.

According to the text,currency variability levels _ perfectly stable over time,and currency correlations _ perfectly stable over time.