Question 1

Political risk can affect the cash flows realized by a U.S. firm on an international investment through:

Accepted Answer

A)  expropriation of assets. 
B)  operating or ownership restrictions. 
C)  limitations on the repatriation of capital. 
D)  a and b 
E)  All of the above 
A)  expropriation of assets. 
B)  operating or ownership restrictions. 
C)  limitations on the repatriation of capital. 
D)  a and b 
E)  All of the above E

Question 2

Eurodollar transactions take place only in Europe.

Accepted Answer

A) True 
 B)False  False

Question 3

If the Canadian dollar strengthens against the British pound, which of the following will not happen?

Accepted Answer

A)  Canadian tourism in England will increase. 
B)  British tourism in Canada will decrease. 
C)  Canadian imports of British goods will decrease. 
D)  Britain's Jaguar motorcar will cost Canadians less. 
A)  Canadian tourism in England will increase. 
B)  British tourism in Canada will decrease. 
C)  Canadian imports of British goods will decrease. 
D)  Britain's Jaguar motorcar will cost Canadians less. C

Question 4

Which of the following countries does not fall under the Eurozone?

Accepted Answer

A)  Austria 
B)  Ireland 
C)  Great Britain 
D)  Greece 
E)  Spain 
A)  Austria 
B)  Ireland 
C)  Great Britain 
D)  Greece 
E)  Spain

Question 5

The chance of incurring losses due to the intentional actions of foreign governments or terrorist groups is:

Accepted Answer

A)  international risk. 
B)  business risk. 
C)  political risk. 
D)  war-related risk. 
A)  international risk. 
B)  business risk. 
C)  political risk. 
D)  war-related risk.

Question 6

An exchange rate quoted as $1.47 per British pound is known as a ____ quote.

Accepted Answer

A)  hedge 
B)  direct 
C)  futures 
D)  indirect 
A)  hedge 
B)  direct 
C)  futures 
D)  indirect

Question 7

A recent direct quote for the British pound was $1.6750. How many British pounds can be purchased with $100?

Accepted Answer

A)  165.70 
B)  59.70 
C)  0.5970 
D)  16.57 
A)  165.70 
B)  59.70 
C)  0.5970 
D)  16.57

Question 8

A U.S. firm expecting a future cash inflow denominated in a foreign currency could hedge in the forward exchange market by buying that currency for future delivery.

Accepted Answer

A) True 
 B)False

Question 9

There is no constant relationship between the spot and the forward exchange rate for a currency.

Accepted Answer

A) True 
 B)False

Question 10

Hedging a purchase requiring settlement in a foreign currency:

Accepted Answer

A)  will always result in a lower cost than just waiting to purchase the foreign currency on the settlement date. 
B)  will always result in a higher cost than just waiting to purchase the foreign currency on the settlement date. 
C)  increases the risk associated with international transactions. 
D)  decreases the risk associated with international transactions. 
E)  both a. and d. are correct. 
A)  will always result in a lower cost than just waiting to purchase the foreign currency on the settlement date. 
B)  will always result in a higher cost than just waiting to purchase the foreign currency on the settlement date. 
C)  increases the risk associated with international transactions. 
D)  decreases the risk associated with international transactions. 
E)  both a. and d. are correct.

Question 11

If the exchange rate from U.S. dollars to Canadian dollars is $.80/Canadian dollar, then the exchange rate from Canadian dollars to U.S. dollars is:

Accepted Answer

A)  .80 Canadian $/US dollar. 
B)  $1.25 Canadian $/US dollar. 
C)  $1.20 Canadian $/US dollar. 
D)  $8.00 Canadian $/US dollar. 
A)  .80 Canadian $/US dollar. 
B)  $1.25 Canadian $/US dollar. 
C)  $1.20 Canadian $/US dollar. 
D)  $8.00 Canadian $/US dollar.

Question 12

A Eurobond is denominated in the currency of the country in which the bond is issued.

Accepted Answer

A) True 
 B)False

Question 13

The fixed exchange rate system put in place after World War II was abandoned in favor of the current floating rate system because:

Accepted Answer

A)  the dollar's tie to gold at $35 per ounce became unrealistic. 
B)  it became impossible to keep certain exchange rates constant as the economic status of nations changed subsequent to World War II. 
C)  Neither of the above 
D)  Both of the above 
A)  the dollar's tie to gold at $35 per ounce became unrealistic. 
B)  it became impossible to keep certain exchange rates constant as the economic status of nations changed subsequent to World War II. 
C)  Neither of the above 
D)  Both of the above

Question 14

An agreement between a commercial bank and a corporate customer to exchange an exact amount of one currency for another on a specific future date is called a:

Accepted Answer

A)  spot contract. 
B)  optional contract. 
C)  forward contract. 
D)  deferred contract. 
A)  spot contract. 
B)  optional contract. 
C)  forward contract. 
D)  deferred contract.

Question 15

Most Eurobonds are denominated in:

Accepted Answer

A)  American dollars. 
B)  British pounds. 
C)  European euros. 
D)  Swiss francs. 
A)  American dollars. 
B)  British pounds. 
C)  European euros. 
D)  Swiss francs.

Question 16

The value of a foreign currency, such as the British pound, stated in American dollars is the:

Accepted Answer

A)  indirect rate. 
B)  forward rate. 
C)  direct quote. 
D)  forward spot rate. 
A)  indirect rate. 
B)  forward rate. 
C)  direct quote. 
D)  forward spot rate.

Question 17

Expropriation is the privilege of a political entity that has sovereignty.

Accepted Answer

A) True 
 B)False

Question 18

If recent direct quotes in U.S. dollars are $1.5547 for the British pound and $.1150 for the Mexican peso, the exchange rate available to a British importer buying pesos with pounds is:

Accepted Answer

A)  13.5191 pounds per peso. 
B)  13.5191 pesos per pound. 
C)  0.0740 pounds per peso. 
D)  0.0740 pesos per pound. 
A)  13.5191 pounds per peso. 
B)  13.5191 pesos per pound. 
C)  0.0740 pounds per peso. 
D)  0.0740 pesos per pound.

Question 19

Five units of Country C's currency (call it "c") can be exchanged for four units of Country D's currency (call it "d"). What is the direct quote in Country C?

Accepted Answer

A)  5 c : 4 d 
B)  1.25 c : 1 d 
C)  1 c : 0.80 d 
D)  1 c : 1.25 d 
A)  5 c : 4 d 
B)  1.25 c : 1 d 
C)  1 c : 0.80 d 
D)  1 c : 1.25 d

Question 20

An exchange rate states:

Accepted Answer

A)  the price of one currency in terms of another. 
B)  what one is willing to pay for money. 
C)  how rapidly goods and services are exchanged between countries. 
D)  the difficulty of doing business abroad. 
A)  the price of one currency in terms of another. 
B)  what one is willing to pay for money. 
C)  how rapidly goods and services are exchanged between countries. 
D)  the difficulty of doing business abroad.

Political risk can affect the cash flows realized by a U.S. firm on an international investment through:

Eurodollar transactions take place only in Europe.

If the Canadian dollar strengthens against the British pound, which of the following will not happen?

Which of the following countries does not fall under the Eurozone?

The chance of incurring losses due to the intentional actions of foreign governments or terrorist groups is:

An exchange rate quoted as $1.47 per British pound is known as a ____ quote.

A recent direct quote for the British pound was $1.6750. How many British pounds can be purchased with $100?

A U.S. firm expecting a future cash inflow denominated in a foreign currency could hedge in the forward exchange market by buying that currency for future delivery.

There is no constant relationship between the spot and the forward exchange rate for a currency.

Hedging a purchase requiring settlement in a foreign currency:

If the exchange rate from U.S. dollars to Canadian dollars is $.80/Canadian dollar, then the exchange rate from Canadian dollars to U.S. dollars is:

A Eurobond is denominated in the currency of the country in which the bond is issued.

The fixed exchange rate system put in place after World War II was abandoned in favor of the current floating rate system because:

An agreement between a commercial bank and a corporate customer to exchange an exact amount of one currency for another on a specific future date is called a:

Most Eurobonds are denominated in:

The value of a foreign currency, such as the British pound, stated in American dollars is the:

Expropriation is the privilege of a political entity that has sovereignty.

If recent direct quotes in U.S. dollars are $1.5547 for the British pound and $.1150 for the Mexican peso, the exchange rate available to a British importer buying pesos with pounds is:

Five units of Country C's currency (call it "c") can be exchanged for four units of Country D's currency (call it "d"). What is the direct quote in Country C?

An exchange rate states:

Foundations

Financial Background: a Review of Accounting, Financial Statements, and Taxes

Cash Flows and Financial Analysis

Financial Planning

The Financial System, Corporate Governance, and Interest

Time Value of Money

The Valuation and Characteristics of Bonds

The Valuation and Characteristics of Stock

Risk and Return

Capital Budgeting

Cash Flow Estimation

Risk Topics and Real Options in Capital Budgeting

Cost of Capital

Capital Structure and Leverage

Dividends

The Management of Working Capital Multiple Choice Questions

The Management of Working Capital

Corporate Restructuring

Filters

Exam 19: International Finance

Political risk can affect the cash flows realized by a U.S. firm on an international investment through:

Eurodollar transactions take place only in Europe.

If the Canadian dollar strengthens against the British pound, which of the following will not happen?

Which of the following countries does not fall under the Eurozone?

The chance of incurring losses due to the intentional actions of foreign governments or terrorist groups is:

An exchange rate quoted as $1.47 per British pound is known as a ____ quote.

A recent direct quote for the British pound was $1.6750. How many British pounds can be purchased with $100?

A U.S. firm expecting a future cash inflow denominated in a foreign currency could hedge in the forward exchange market by buying that currency for future delivery.

There is no constant relationship between the spot and the forward exchange rate for a currency.

Hedging a purchase requiring settlement in a foreign currency:

If the exchange rate from U.S. dollars to Canadian dollars is $.80/Canadian dollar, then the exchange rate from Canadian dollars to U.S. dollars is:

A Eurobond is denominated in the currency of the country in which the bond is issued.

The fixed exchange rate system put in place after World War II was abandoned in favor of the current floating rate system because:

An agreement between a commercial bank and a corporate customer to exchange an exact amount of one currency for another on a specific future date is called a:

Most Eurobonds are denominated in:

The value of a foreign currency, such as the British pound, stated in American dollars is the:

Expropriation is the privilege of a political entity that has sovereignty.

If recent direct quotes in U.S. dollars are $1.5547 for the British pound and $.1150 for the Mexican peso, the exchange rate available to a British importer buying pesos with pounds is:

Five units of Country C's currency (call it "c") can be exchanged for four units of Country D's currency (call it "d"). What is the direct quote in Country C?

An exchange rate states:

Foundations

Financial Background: a Review of Accounting, Financial Statements, and Taxes

Cash Flows and Financial Analysis

Financial Planning

The Financial System, Corporate Governance, and Interest

Time Value of Money

The Valuation and Characteristics of Bonds

The Valuation and Characteristics of Stock

Risk and Return

Capital Budgeting

Cash Flow Estimation

Risk Topics and Real Options in Capital Budgeting

Cost of Capital

Capital Structure and Leverage

Dividends

The Management of Working Capital Multiple Choice Questions

The Management of Working Capital

Corporate Restructuring

Filters