Question 1

A "self-sustaining foreign operation" refers to:

Accepted Answer

A) A foreign operation which is financially or operationally independent of the Canadian parent company such that the exposure to exchange rate changes is limited to the Canadian company's net investment in the foreign operation 
B) A foreign operation which is financially or operationally independent of the Canadian parent company such that the exposure to exchange rate changes is similar to the exposure that would exist had the transactions of the foreign operation been undertaken directly by the Canadian parent 
C) A foreign operation which is financially or operationally interdependent with the Canadian parent company such that the exposure to exchange rate changes is limited to the Canadian company's net investment in the foreign operation 
D) A foreign operation which is financially or operationally interdependent with the Canadian parent company such that the exposure to exchange rate changes is similar to the exposure that would exist had the transactions of the foreign operation been undertaken directly by the Canadian parent 
A) A foreign operation which is financially or operationally independent of the Canadian parent company such that the exposure to exchange rate changes is limited to the Canadian company's net investment in the foreign operation 
B) A foreign operation which is financially or operationally independent of the Canadian parent company such that the exposure to exchange rate changes is similar to the exposure that would exist had the transactions of the foreign operation been undertaken directly by the Canadian parent 
C) A foreign operation which is financially or operationally interdependent with the Canadian parent company such that the exposure to exchange rate changes is limited to the Canadian company's net investment in the foreign operation 
D) A foreign operation which is financially or operationally interdependent with the Canadian parent company such that the exposure to exchange rate changes is similar to the exposure that would exist had the transactions of the foreign operation been undertaken directly by the Canadian parent A

Question 2

Which of the following statements hold true in general:

Accepted Answer

A) Eliminating transaction exposure will also eliminate translation exposure 
B) Eliminating transaction exposure will increase translation exposure 
C) Eliminating transaction exposure will reduce translation exposure 
D) None of these 
A) Eliminating transaction exposure will also eliminate translation exposure 
B) Eliminating transaction exposure will increase translation exposure 
C) Eliminating transaction exposure will reduce translation exposure 
D) None of these D

Question 3

Consider an MNC based in Canada with manufacturing activities in Japan.The result of a change in the ¥/$ exchange rate on the assets and liabilities of the consolidated balance sheet is:   Ignoring transaction exposure in the yen,the translation exposure will indicate a possible need for a "balance sheet hedge" of:

Accepted Answer

A) ¥200,000,000 more liabilities denominated in yen 
B) ¥200,000,000 less assets denominated in yen 
C) a or b 
D) none of these 
A) ¥200,000,000 more liabilities denominated in yen 
B) ¥200,000,000 less assets denominated in yen 
C) a or b 
D) none of these C

Question 4

A foreign operation which is financially or operationally interdependent with the Canadian parent company such that the exposure to exchange rate changes is similar to the exposure that would exist had the transactions of the foreign operation been undertaken directly by the Canadian parent is called a

Accepted Answer

A) Interdependent foreign operation 
B) Integrated foreign operation 
C) Self-sustaining foreign operation 
D) Has no special name 
A) Interdependent foreign operation 
B) Integrated foreign operation 
C) Self-sustaining foreign operation 
D) Has no special name

Question 5

Assume that translation or transaction exposure cannot be hedged at the same time and you have to decide on the firm's hedging policy.What should you do?

Accepted Answer

Transaction gains or losses always have

Question 6

Which of the following is a translation method where the gain or loss due to translation adjustment does not affect reported cash flows?

Accepted Answer

A) current/non-current method 
B) current rate method 
C) current/future method 
D) short/long term method 
A) current/non-current method 
B) current rate method 
C) current/future method 
D) short/long term method

Question 7

The Canadian methods for consolidating the financial reports of an MNC are:

Accepted Answer

A) short/long term method and current/future method 
B) current/non-current method and short/long term method 
C) temporal method and current rate method 
D) temporal method and economic/non-economic method 
A) short/long term method and current/future method 
B) current/non-current method and short/long term method 
C) temporal method and current rate method 
D) temporal method and economic/non-economic method

Question 8

A Canadian firm has an integrated foreign operation in the United States.Which of the following statements is false?

Accepted Answer

A) If the US dollar appreciates, the Canadian dollar value reported in the balance sheet of the assets in the United States will be larger. 
B) If the US dollar depreciates, the Canadian dollar value reported in the balance sheet of the assets in the United States will be smaller. 
C) a and b 
D) Need more information 
A) If the US dollar appreciates, the Canadian dollar value reported in the balance sheet of the assets in the United States will be larger. 
B) If the US dollar depreciates, the Canadian dollar value reported in the balance sheet of the assets in the United States will be smaller. 
C) a and b 
D) Need more information

Question 9

The net effect of an increase in the exchange rate on translation exposure depends on

Accepted Answer

A) The translation method used 
B) Whether the value of assets exceeds the value of liabilities 
C) Whether the value of liabilities exceeds the value of assets 
D) All of these 
A) The translation method used 
B) Whether the value of assets exceeds the value of liabilities 
C) Whether the value of liabilities exceeds the value of assets 
D) All of these

Question 10

Which of the above statements pertain to self-sustaining foreign operations?

Accepted Answer

A) (i) 
B) (i) and (ii) 
C) (iii) and (iv) 
D) (i), (ii), and (iii) 
A) (i) 
B) (i) and (ii) 
C) (iii) and (iv) 
D) (i), (ii), and (iii)

Question 11

The "reporting currency" is:

Accepted Answer

A) the currency of the primary economic environment in which the entity operates 
B) the currency in which the MNC prepares its consolidated financial statements 
C) a currency that is not the parent firm's home country currency 
D) a and c 
A) the currency of the primary economic environment in which the entity operates 
B) the currency in which the MNC prepares its consolidated financial statements 
C) a currency that is not the parent firm's home country currency 
D) a and c

Question 12

Translation exposure is defined as:

Accepted Answer

A) the sensitivity of realized domestic currency values of the firm's contractual cash flows denominated in foreign currencies to unexpected exchange rate changes 
B) the extent to which the value of the firm would be affected by unanticipated changes in exchange rate 
C) the potential that the firm's consolidated financial statement can be affected by changes in exchange rates 
D) ex post and ex ante currency exposures 
A) the sensitivity of realized domestic currency values of the firm's contractual cash flows denominated in foreign currencies to unexpected exchange rate changes 
B) the extent to which the value of the firm would be affected by unanticipated changes in exchange rate 
C) the potential that the firm's consolidated financial statement can be affected by changes in exchange rates 
D) ex post and ex ante currency exposures

Question 13

A foreign operation which is financially or operationally independent of the Canadian parent company such that the exposure to exchange rate changes is limited to the Canadian company's net investment in the foreign operation is called

Accepted Answer

A) Interdependent foreign operation 
B) Integrated foreign operation 
C) Independent foreign operation 
D) Self-sustaining foreign operation 
A) Interdependent foreign operation 
B) Integrated foreign operation 
C) Independent foreign operation 
D) Self-sustaining foreign operation

Question 14

The French subsidiary of a Canadian parent has the following balance sheet (in euros):   The euro increases in value from EUR 1.6/C$ to EUR 1.3/C$.Using the current rate method,what happened to the total value of assets?

Accepted Answer

The total value of a

Question 15

The French subsidiary of a Canadian parent has the following balance sheet (in euros):   The euro increases in value from EUR 1.6/C$ to EUR 1.3/C$.Using the temporal method,what happened to the total value of assets?

Accepted Answer

The total value of a

Question 16

XYZ Corporation,a Canadian parent firm,has a wholly owned sales affiliate,ABC Ltd.,in the United Kingdom.The affiliate was established to service to the local market. Assume that:
1)the functional currency of ABC is the pound
2)the reporting currency is the dollar
3)the initial exchange rate $1.00 = £ 0.67
ABC's nonconsolidated balance sheets and the footnotes to the financial statements indicate that ABC owes the parent firm £200,000.Assume that,XYZ had made an investment of $300,000 in the affiliate.Under CICA 1650,the intercompany debt and investment will appear on the consolidated balance sheet as:

Accepted Answer

A) £200,000 
B) $201,493 
C) $298,507 
D) none of these 
A) £200,000 
B) $201,493 
C) $298,507 
D) none of these

Question 17

Under the current rate method

Accepted Answer

A) All balance sheet and all income statement items are translated at the current exchange rate 
B) All balance sheet and some income statement items are translated at the current exchange rate 
C) Some balance sheet and all income statement items are translated at the current exchange rate 
D) Some balance sheet and some income statement items are translated at the current exchange rate 
A) All balance sheet and all income statement items are translated at the current exchange rate 
B) All balance sheet and some income statement items are translated at the current exchange rate 
C) Some balance sheet and all income statement items are translated at the current exchange rate 
D) Some balance sheet and some income statement items are translated at the current exchange rate

Question 18

Which of the above statements pertains to integrated foreign operations?

Accepted Answer

A) (i) 
B) (i) and (ii) 
C) (iii) and (iv) 
D) (i), (ii), and (iii) 
A) (i) 
B) (i) and (ii) 
C) (iii) and (iv) 
D) (i), (ii), and (iii)

Question 19

Explain the differences between an integrated foreign operation and a self-sustaining foreign operation.

Accepted Answer

An integrated foreign operation is finan

Question 20

Which of the following items will be translated at historical exchange rate under temporal method:

Accepted Answer

A) Monetary assets 
B) Nonmonetary assets 
C) Income statement items 
D) Both b and c 
A) Monetary assets 
B) Nonmonetary assets 
C) Income statement items 
D) Both b and c

A "self-sustaining foreign operation" refers to:

Which of the following statements hold true in general:

Assume that translation or transaction exposure cannot be hedged at the same time and you have to decide on the firm's hedging policy.What should you do?

Which of the following is a translation method where the gain or loss due to translation adjustment does not affect reported cash flows?

The Canadian methods for consolidating the financial reports of an MNC are:

A Canadian firm has an integrated foreign operation in the United States.Which of the following statements is false?

The net effect of an increase in the exchange rate on translation exposure depends on

Which of the above statements pertain to self-sustaining foreign operations?

The "reporting currency" is:

Translation exposure is defined as:

A foreign operation which is financially or operationally independent of the Canadian parent company such that the exposure to exchange rate changes is limited to the Canadian company's net investment in the foreign operation is called

The French subsidiary of a Canadian parent has the following balance sheet (in euros): The euro increases in value from EUR 1.6/C$ to EUR 1.3/C$.Using the current rate method,what happened to the total value of assets?

The French subsidiary of a Canadian parent has the following balance sheet (in euros): The euro increases in value from EUR 1.6/C$ to EUR 1.3/C$.Using the temporal method,what happened to the total value of assets?

Under the current rate method

Which of the above statements pertains to integrated foreign operations?

Explain the differences between an integrated foreign operation and a self-sustaining foreign operation.

Which of the following items will be translated at historical exchange rate under temporal method:

Globalization and the Multinational Firm

International Monetary System

Balance of Payments

Corporate Governance Around the World

The Market for Foreign Exchange

International Parity Relationships and Forecasting Foreign Exchange Rates

Futures and Options on Foreign Exchange

Management of Transaction Exposure

Management of Economic Exposure

Management of Translation Exposure

International Banking and Money Market

International Bond Market

International Equity Markets

International Portfolio Investment

Foreign Direct Investment and Cross-Border Acquisitions

International Capital Structure and the Cost of Capital

International Capital Budgeting

Multinational Cash Management

International Trade Finance

International Tax Environment and Transfer Pricing

Filters

Exam 14: Interest Rate and Currency Swaps

A "self-sustaining foreign operation" refers to:

Which of the following statements hold true in general:

Assume that translation or transaction exposure cannot be hedged at the same time and you have to decide on the firm's hedging policy.What should you do?

Which of the following is a translation method where the gain or loss due to translation adjustment does not affect reported cash flows?

The Canadian methods for consolidating the financial reports of an MNC are:

A Canadian firm has an integrated foreign operation in the United States.Which of the following statements is false?

The net effect of an increase in the exchange rate on translation exposure depends on

Which of the above statements pertain to self-sustaining foreign operations?

The "reporting currency" is:

Translation exposure is defined as:

A foreign operation which is financially or operationally independent of the Canadian parent company such that the exposure to exchange rate changes is limited to the Canadian company's net investment in the foreign operation is called

The French subsidiary of a Canadian parent has the following balance sheet (in euros): The euro increases in value from EUR 1.6/C$ to EUR 1.3/C$.Using the current rate method,what happened to the total value of assets?

The French subsidiary of a Canadian parent has the following balance sheet (in euros): The euro increases in value from EUR 1.6/C$ to EUR 1.3/C$.Using the temporal method,what happened to the total value of assets?

Under the current rate method

Which of the above statements pertains to integrated foreign operations?

Explain the differences between an integrated foreign operation and a self-sustaining foreign operation.

Which of the following items will be translated at historical exchange rate under temporal method:

Globalization and the Multinational Firm

International Monetary System

Balance of Payments

Corporate Governance Around the World

The Market for Foreign Exchange

International Parity Relationships and Forecasting Foreign Exchange Rates

Futures and Options on Foreign Exchange

Management of Transaction Exposure

Management of Economic Exposure

Management of Translation Exposure

International Banking and Money Market

International Bond Market

International Equity Markets

International Portfolio Investment

Foreign Direct Investment and Cross-Border Acquisitions

International Capital Structure and the Cost of Capital

International Capital Budgeting

Multinational Cash Management

International Trade Finance

International Tax Environment and Transfer Pricing

Filters