Question 1

Which one of the following management techniques is likely to best offset the risk of long-run exposure to receivables denominated in a particular foreign currency?

Accepted Answer

A) borrow money in the foreign currency in question 
B) lend money in the foreign currency in question 
C) increase sales to that country 
D) increase sales in this country 
A) borrow money in the foreign currency in question 
B) lend money in the foreign currency in question 
C) increase sales to that country 
D) increase sales in this country A

Question 2

A British firm and a U.S.Corporation each wish to enter into a currency swap hedging agreement.The British firm is receiving U.S.dollars from sales in the U.S.but wants pounds.The U.S.firm is receiving pounds from sales in Britain but wants dollars.Which of the following choices would best satisfy the desires of the firms?

Accepted Answer

A) The British firm pays dollars to a swap dealer and receives pounds from the dealer. The U.S. firm pays pounds to the swap dealer and receives dollars. 
B) The U.S. firm pays dollars to a swap dealer and receives pounds from the dealer. The British firm pays pounds to the swap dealer and receives dollars. 
C) The British firm pays pounds to a swap dealer and receives pounds from the dealer. The U.S. firm pays dollars to the swap dealer and receives dollars. 
D) The British firm pays dollars to a swap dealer and receives dollars from the dealer. The U.S. firm pays pounds to the swap dealer and receives pounds. 
A) The British firm pays dollars to a swap dealer and receives pounds from the dealer. The U.S. firm pays pounds to the swap dealer and receives dollars. 
B) The U.S. firm pays dollars to a swap dealer and receives pounds from the dealer. The British firm pays pounds to the swap dealer and receives dollars. 
C) The British firm pays pounds to a swap dealer and receives pounds from the dealer. The U.S. firm pays dollars to the swap dealer and receives dollars. 
D) The British firm pays dollars to a swap dealer and receives dollars from the dealer. The U.S. firm pays pounds to the swap dealer and receives pounds. A

Question 3

Simpson Sign Company based in Frostbite Falls,Minnesota has a 6-month C$100,000 contract to complete sign work in Winnipeg,Manitoba,Canada. The current spot rate is $1.02/C$ and the forward rate is $1.01/C$.Under conditions of equilibrium,management would use today ________ when preparing operating budgets.

Accepted Answer

A) $102,000 
B) $101,000 
C) $100,000 
D) None of the above 
A) $102,000 
B) $101,000 
C) $100,000 
D) None of the above B

Question 4

Another name for operating exposure is ________ exposure.

Accepted Answer

A) economic 
B) competitive 
C) strategic 
D) all of the above 
A) economic 
B) competitive 
C) strategic 
D) all of the above

Question 5

Which one of the following management techniques is likely to best offset the risk of long-run exposure to payables denominated in a particular foreign currency?

Accepted Answer

A) borrow money in the foreign currency in question 
B) lend money in the foreign currency in question 
C) rely on the Federal Reserve Board to enact monetary policy favorable to your exposure risk 
D) none of the above 
A) borrow money in the foreign currency in question 
B) lend money in the foreign currency in question 
C) rely on the Federal Reserve Board to enact monetary policy favorable to your exposure risk 
D) none of the above

Question 6

The particular strategy of trying to offset inflows of cash from one country with outflows of cash in the same currency is known as ________.

Accepted Answer

A) hedging 
B) diversification 
C) matching 
D) balancing 
A) hedging 
B) diversification 
C) matching 
D) balancing

Question 7

Diversifying sources of financing,regardless of the currency of denomination,can lower a firm's cost of capital and increase its availability of capital.

Accepted Answer

A) True 
 B)False

Question 8

Diversification is possibly the best technique for reducing the problems associated with international transactions.Provide one example each of international financial diversification and international operational diversification and explain how the action reduces risk.

Accepted Answer

An MNE well known in the financial marke

Question 9

A U.S.timber products firm has a long-term contract to import unprocessed logs from Canada.To avoid occasional and unpredictable changes in the exchange rate between the U.S.dollar and the Canadian dollar,the firms agree to split between the two firms the impact of any exchange rate movement.This type of agreement is referred to as ________.

Accepted Answer

A) risk-sharing 
B) currency-switching 
C) matching 
D) a natural hedge 
A) risk-sharing 
B) currency-switching 
C) matching 
D) a natural hedge

Question 10

A ________ is the term used to describe a foreign currency agreement between two parties to exchange a given amount of one currency for another,and after a period of time,to give back the original amounts.

Accepted Answer

A) matched flow 
B) currency swap 
C) back-to-back loan 
D) none of the above 
A) matched flow 
B) currency swap 
C) back-to-back loan 
D) none of the above

Question 11

Which of the following is NOT an acceptable hedging technique to reduce risk caused by a relatively predictable long-term foreign currency inflow of Japanese yen?

Accepted Answer

A) Import raw materials from Japan denominated in yen to substitute for domestic suppliers. 
B) Pay suppliers from other countries in yen. 
C) Import raw materials from Japan denominated in dollars. 
D) Acquire debt denominated in yen. 
A) Import raw materials from Japan denominated in yen to substitute for domestic suppliers. 
B) Pay suppliers from other countries in yen. 
C) Import raw materials from Japan denominated in dollars. 
D) Acquire debt denominated in yen.

Question 12

An MNE has a contract for a relatively predictable long-term inflow of Japanese yen that the firm chooses to hedge by seeking out potential suppliers in Japan.This hedging strategy is referred to as ________.

Accepted Answer

A) a natural hedge 
B) currency-switching 
C) matching 
D) diversification 
A) a natural hedge 
B) currency-switching 
C) matching 
D) diversification

Question 13

The three main types of foreign exchange risk are

Accepted Answer

A) operating, transaction, and translation. 
B) translation, accounting, and operating. 
C) transaction, accounting, and translation. 
D) operating, currency, and market. 
A) operating, transaction, and translation. 
B) translation, accounting, and operating. 
C) transaction, accounting, and translation. 
D) operating, currency, and market.

Question 14

A Canadian firm with a U.S.subsidiary and a U.S.firm with a Canadian subsidiary agree to a parallel loan agreement.In such an agreement,the Canadian firm is making a/an ________ loan to the ________ subsidiary while effectively financing the ________ subsidiary.

Accepted Answer

A) indirect; U.S.; Canadian 
B) indirect; Canadian; U.S. 
C) direct; U.S.; Canadian 
D) direct; Canadian; U.S. 
A) indirect; U.S.; Canadian 
B) indirect; Canadian; U.S. 
C) direct; U.S.; Canadian 
D) direct; Canadian; U.S.

Question 15

When disequilibria in international markets occur,management can take advantage by

Accepted Answer

A) doing nothing if they are already diversified and able to realize beneficial portfolio effects. 
B) recognizing disequilibria faster than purely domestic competitors. 
C) shifting operational of financing activities to take advantage of the disequilibria. 
D) all of the above. 
A) doing nothing if they are already diversified and able to realize beneficial portfolio effects. 
B) recognizing disequilibria faster than purely domestic competitors. 
C) shifting operational of financing activities to take advantage of the disequilibria. 
D) all of the above.

Question 16

The goal of operating exposure analysis is to identify strategic operating techniques the firm might adopt to enhance value in the face of unanticipated exchange rate changes.

Accepted Answer

A) True 
 B)False

Question 17

An MNE has a contract for a relatively predictable long-term inflow of Japanese yen that the firm chooses to hedge by paying for imports from Canada in Japanese yen.This hedging strategy is known as ________.

Accepted Answer

A) a natural hedge 
B) currency-switching 
C) matching 
D) diversification 
A) a natural hedge 
B) currency-switching 
C) matching 
D) diversification

Question 18

Which of the following is NOT an example of an operating cash flow?

Accepted Answer

A) management fees and distributed overhead 
B) royalties and license fees 
C) rent and lease payments 
D) dividend paid to parent company 
A) management fees and distributed overhead 
B) royalties and license fees 
C) rent and lease payments 
D) dividend paid to parent company

Question 19

Operating exposure referred to as MEDIUM RUN:EQUILIBRIUM has which of the following set of characteristics?

Accepted Answer

A) It lasts two to five years, has complete pass-through of exchange rate changes, and existing competitors begin partial responses. 
B) It lasts for less than one year, has partial pass-through of exchange rate changes, and existing competitors begin partial responses. 
C) It lasts for more than five years, has partial pass-through of exchange rate changes, and existing competitors begin partial responses. 
D) It lasts two to five years, has partial pass-through of exchange rate changes, and existing competitors begin partial responses. 
A) It lasts two to five years, has complete pass-through of exchange rate changes, and existing competitors begin partial responses. 
B) It lasts for less than one year, has partial pass-through of exchange rate changes, and existing competitors begin partial responses. 
C) It lasts for more than five years, has partial pass-through of exchange rate changes, and existing competitors begin partial responses. 
D) It lasts two to five years, has partial pass-through of exchange rate changes, and existing competitors begin partial responses.

Question 20

Currency swaps are exclusively for periods of time under one year.

Accepted Answer

A) True 
 B)False

Which one of the following management techniques is likely to best offset the risk of long-run exposure to receivables denominated in a particular foreign currency?

Another name for operating exposure is ________ exposure.

Which one of the following management techniques is likely to best offset the risk of long-run exposure to payables denominated in a particular foreign currency?

The particular strategy of trying to offset inflows of cash from one country with outflows of cash in the same currency is known as ________.

Diversifying sources of financing,regardless of the currency of denomination,can lower a firm's cost of capital and increase its availability of capital.

Diversification is possibly the best technique for reducing the problems associated with international transactions.Provide one example each of international financial diversification and international operational diversification and explain how the action reduces risk.

A ________ is the term used to describe a foreign currency agreement between two parties to exchange a given amount of one currency for another,and after a period of time,to give back the original amounts.

Which of the following is NOT an acceptable hedging technique to reduce risk caused by a relatively predictable long-term foreign currency inflow of Japanese yen?

An MNE has a contract for a relatively predictable long-term inflow of Japanese yen that the firm chooses to hedge by seeking out potential suppliers in Japan.This hedging strategy is referred to as ________.

The three main types of foreign exchange risk are

A Canadian firm with a U.S.subsidiary and a U.S.firm with a Canadian subsidiary agree to a parallel loan agreement.In such an agreement,the Canadian firm is making a/an loan to the subsidiary while effectively financing the subsidiary.

When disequilibria in international markets occur,management can take advantage by

The goal of operating exposure analysis is to identify strategic operating techniques the firm might adopt to enhance value in the face of unanticipated exchange rate changes.

An MNE has a contract for a relatively predictable long-term inflow of Japanese yen that the firm chooses to hedge by paying for imports from Canada in Japanese yen.This hedging strategy is known as ________.

Which of the following is NOT an example of an operating cash flow?

Operating exposure referred to as MEDIUM RUN:EQUILIBRIUM has which of the following set of characteristics?

Currency swaps are exclusively for periods of time under one year.

Current Multinational Challenges and the Global Economy

Financial Goals and Corporate Governance

The International Monetary System

The Balance of Payments

Current Multinational Financial Challenges: the Credit Crisis of 2007 - 2009

The Foreign Exchange Market

International Parity Conditions

Foreign Currency Derivatives and Swaps

Foreign Exchange Rate Determination and Forecasting

Transaction and Translation Exposure

The Global Cost and Availability of Capital

Sourcing Equity and Debt Globally

Multinational Tax Management

Foreign Direct Investment and Political Risk

Multinational Capital Budgeting and Cross-Border Acquisitions

International Portfolio Theory and Diversification

Working Capital Management

International Trade Finance

Filters

Exam 11: Operating Exposure

Which one of the following management techniques is likely to best offset the risk of long-run exposure to receivables denominated in a particular foreign currency?

Another name for operating exposure is ________ exposure.

Which one of the following management techniques is likely to best offset the risk of long-run exposure to payables denominated in a particular foreign currency?

The particular strategy of trying to offset inflows of cash from one country with outflows of cash in the same currency is known as ________.

Diversifying sources of financing,regardless of the currency of denomination,can lower a firm's cost of capital and increase its availability of capital.

Diversification is possibly the best technique for reducing the problems associated with international transactions.Provide one example each of international financial diversification and international operational diversification and explain how the action reduces risk.

A ________ is the term used to describe a foreign currency agreement between two parties to exchange a given amount of one currency for another,and after a period of time,to give back the original amounts.

Which of the following is NOT an acceptable hedging technique to reduce risk caused by a relatively predictable long-term foreign currency inflow of Japanese yen?

An MNE has a contract for a relatively predictable long-term inflow of Japanese yen that the firm chooses to hedge by seeking out potential suppliers in Japan.This hedging strategy is referred to as ________.

The three main types of foreign exchange risk are

A Canadian firm with a U.S.subsidiary and a U.S.firm with a Canadian subsidiary agree to a parallel loan agreement.In such an agreement,the Canadian firm is making a/an ________ loan to the ________ subsidiary while effectively financing the ________ subsidiary.

When disequilibria in international markets occur,management can take advantage by

The goal of operating exposure analysis is to identify strategic operating techniques the firm might adopt to enhance value in the face of unanticipated exchange rate changes.

An MNE has a contract for a relatively predictable long-term inflow of Japanese yen that the firm chooses to hedge by paying for imports from Canada in Japanese yen.This hedging strategy is known as ________.

Which of the following is NOT an example of an operating cash flow?

Operating exposure referred to as MEDIUM RUN:EQUILIBRIUM has which of the following set of characteristics?

Currency swaps are exclusively for periods of time under one year.

Current Multinational Challenges and the Global Economy

Financial Goals and Corporate Governance

The International Monetary System

The Balance of Payments

Current Multinational Financial Challenges: the Credit Crisis of 2007 - 2009

The Foreign Exchange Market

International Parity Conditions

Foreign Currency Derivatives and Swaps

Foreign Exchange Rate Determination and Forecasting

Transaction and Translation Exposure

The Global Cost and Availability of Capital

Sourcing Equity and Debt Globally

Multinational Tax Management

Foreign Direct Investment and Political Risk

Multinational Capital Budgeting and Cross-Border Acquisitions

International Portfolio Theory and Diversification

Working Capital Management

International Trade Finance

Filters

A Canadian firm with a U.S.subsidiary and a U.S.firm with a Canadian subsidiary agree to a parallel loan agreement.In such an agreement,the Canadian firm is making a/an loan to the subsidiary while effectively financing the subsidiary.