The following information is to be used in answering questions 16?17. In 1995, Ajax Manufacturing's German subsidiary has the following balance sheet: \[\begin{array}{l} \begin{array} { l l l l } \text { Cash, rrarketable } & \text { DM 250,000 } & \text { Current liabilities } & \text { DM 750,000 } \\ \text { securities } & 1,000,000 & \text { Long-tern debt } & 3,400,000 \\ \text { Accourits receivable } & 2,700,000 & \text { Equity } & 4,900,000 \\ \text { Irventory fat rrarket. } & 5,100,000 & & \\ \text { Fixed Assets } & -----7 &\text{total liabilities} & -----\\ & \text { DM } 9,050,000 & \text { plus equity } & \text { DM } 9,050,000 \end{array}\\ \text { Total assets } \end{array}\] Suppose the DM appreciates from $0.70 to $0.76 during the period. -Under the current rate method, what is Ajax's translation gain (loss).?

A) a gain of $294,000 B) a gain of $192,000 C) a loss of $174,000 D) a loss of $12,000 A) a gain of $294,000 B) a gain of $192,000 C) a loss of $174,000 D) a loss of $12,000

The following information is to be used in answering questions 16?17. In 1995, Ajax Manufacturing's German subsidiary has the following balance sheet: \[\begin{array}{l} \begin{array} { l l l l } \text { Cash, rrarketable } & \text { DM 250,000 } & \text { Current liabilities } & \text { DM 750,000 } \\ \text { securities } & 1,000,000 & \text { Long-tern debt } & 3,400,000 \\ \text { Accourits receivable } & 2,700,000 & \text { Equity } & 4,900,000 \\ \text { Irventory fat rrarket. } & 5,100,000 & & \\ \text { Fixed Assets } & -----7 &\text{total liabilities} & -----\\ & \text { DM } 9,050,000 & \text { plus equity } & \text { DM } 9,050,000 \end{array}\\ \text { Total assets } \end{array}\] Suppose the DM appreciates from $0.70 to $0.76 during the period. -Under the current/noncurrent method, what is Ajax's translation gain (loss).?

A) a gain of $294,000 B) a gain of $192,000 C) a loss of $174,000 D) a loss of $12,000 A) a gain of $294,000 B) a gain of $192,000 C) a loss of $174,000 D) a loss of $12,000

Exam 10: Measuring and Managing Translation and Transaction Exposure

The following information is to be used in answering questions 36?38. U.S. borrowing rate for 1 year = 9.5% U.S. deposit rate for 1 year = 8.7% French borrowing rate for 1 year = 11.3% French deposit rate for 1 year = 10.2% French franc spot quote = $0.1763?78 French franc 1?year forward quote = $0.1729?47 -value can Alcoa lock in for its FF 3 million receivable if it executes a forward contract today?

(Multiple Choice)

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Question 21

________ involves simultaneously borrowing and lending activities in two different currencies to lock in the currency's value of a future foreign currency cash flow.

(Multiple Choice)

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Question 22

Suppose the German subsidiary of a U.S. firm had current assets of €3 million, fixed assets of €6 million and current liabilities of €3 million both at the start and at the end of the year. There are no long-term liabilities. If the euro depreciated during that year from $.48 to $.38, the FASB-52 translation gain (loss. to be included in the parent company's equity account is

(Multiple Choice)

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Question 23

Suppose that the spot rate and the 90?day forward rate on the pound sterling are $and $respectively. Your company, wishing to avoid foreign exchange risk, sells £500,000 forward 90 days. Assuming that the spot rate remains the same 90 days hence, your company would

(Multiple Choice)

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Question 24

American Airlines hedges a £million receivable by selling pounds forward. If the spot rate is £1 = $and the 90?day forward rate is $what is American's cost of hedging?

(Multiple Choice)

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Question 25

is possible for transaction exposure to be positive and translation exposure in the same currency to be

(Multiple Choice)

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Question 26

Suppose markets are efficient, there are no taxes, and relative prices remain constant. In such a world,

(Multiple Choice)

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Question 27

The following information is to be used in answering questions 16?17. In 1995, Ajax Manufacturing's German subsidiary has the following balance sheet: Cash, rrarketable DM 250,000 Current liabilities DM 750,000 securities 1,000,000 Long-tern debt 3,400,000 Accourits receivable 2,700,000 Equity 4,900,000 Irventory fat rrarket. 5,100,000 Fixed Assets -----7 total liabilities ----- DM 9,050,000 plus equity DM 9,050,000 Total assets Suppose the DM appreciates from $0.70 to $0.76 during the period. -Under the current rate method, what is Ajax's translation gain (loss).?

(Multiple Choice)

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Question 28

The following information is to be used in answering questions 36?38. U.S. borrowing rate for 1 year = 9.5% U.S. deposit rate for 1 year = 8.7% French borrowing rate for 1 year = 11.3% French deposit rate for 1 year = 10.2% French franc spot quote = $0.1763?78 French franc 1?year forward quote = $0.1729?47 -1996, DEC hedges a FF million receivable due in 180 days. The current spot rate is FF 1 = $0.18834 and the 180?day forward rate is FF 1 = $0.1862If the spot rate at the end of 180 days is $0.18728, how much has the forward market hedge cost DEC?

(Multiple Choice)

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Question 29

Suppose the English subsidiary of a U.S. firm had current assets of £1 million, fixed assets of £2 million and current liabilities of 1 million pounds both at the start and at the end of the year. There are no long?term liabilities. If the pound depreciated during that year from $to $the translation gain (loss) to be included in the parent company's equity account according to FASB #52 is

(Multiple Choice)

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Question 30

The following information is to be used in answering questions 16?17. In 1995, Ajax Manufacturing's German subsidiary has the following balance sheet: Cash, rrarketable DM 250,000 Current liabilities DM 750,000 securities 1,000,000 Long-tern debt 3,400,000 Accourits receivable 2,700,000 Equity 4,900,000 Irventory fat rrarket. 5,100,000 Fixed Assets -----7 total liabilities ----- DM 9,050,000 plus equity DM 9,050,000 Total assets Suppose the DM appreciates from $0.70 to $0.76 during the period. -Under the current/noncurrent method, what is Ajax's translation gain (loss).?

(Multiple Choice)

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Question 31

__________ involves offsetting exposures in one currency with exposures in the same or another currency, where exchange rates are expected to move in such a way that losses on the first exposed position should be offset by gains on the second currency exposure and vice versa.

(Multiple Choice)

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Question 32

Which of the following is a basic hedging technique during depreciation?

(Multiple Choice)

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Question 33

Transaction gains and losses that result from adjusting assets and liabilities denominated in a currency other than the functional currency must appear on the foreign unit's income statement unless the gains or losses are attributable to

(Multiple Choice)

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Question 34

Suppose it is 1987 and General Motors uses a money market hedge to protect a Lit 200 million payable due in one year. The U.S. interest rate at the time of the hedge was 9% and the lira interest rate was 14%. If the spot rate moved from Lit 1293 at the start of the year to Lit 1349 at the end of the year, what was GM's cost of the money market hedge?

(Multiple Choice)

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Question 35

you fear the dollar will rise against the Spanish peseta, with a resulting adverse change in the dollar value of the equity of your Spanish subsidiary, you can hedge by

(Multiple Choice)

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Question 36

you fear the dollar will rise against the French euro, with a resulting adverse change in the dollar value of the equity of your French subsidiary, you can hedge by

(Multiple Choice)

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Question 37

Pont has entered into a currency risk sharing arrangement with British Gas. Under the contract, Du Pont agrees to pay British Gas a base price of $10 million for gas purchases, but the parties would share the currency risk equally beyond a neutral zone, specified as a band of exchange rates: $Within the neutral zone, Du Pont must pay BG the pound equivalent of $10 million at the base rate of $Suppose the spot rate at the time of payment is £1 = $How much will Du Pont owe British Gas?

(Multiple Choice)

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Question 38

a forward market hedge, a company that is long a foreign currency will _ the foreign currency forward, whereas a company that is short a foreign currency will _ the currency forward.

(Multiple Choice)

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Question 39

Japanese firm sells TV sets to an American importer for one billion yen payable in 90 days. To protect against exchange risk, the importer could

(Multiple Choice)

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Question 40

Showing 21 - 40 of 40

________ involves simultaneously borrowing and lending activities in two different currencies to lock in the currency's value of a future foreign currency cash flow.

Suppose that the spot rate and the 90?day forward rate on the pound sterling are $and $respectively. Your company, wishing to avoid foreign exchange risk, sells £500,000 forward 90 days. Assuming that the spot rate remains the same 90 days hence, your company would

American Airlines hedges a £million receivable by selling pounds forward. If the spot rate is £1 = $and the 90?day forward rate is $what is American's cost of hedging?

is possible for transaction exposure to be positive and translation exposure in the same currency to be

Suppose markets are efficient, there are no taxes, and relative prices remain constant. In such a world,

__________ involves offsetting exposures in one currency with exposures in the same or another currency, where exchange rates are expected to move in such a way that losses on the first exposed position should be offset by gains on the second currency exposure and vice versa.

Which of the following is a basic hedging technique during depreciation?

Transaction gains and losses that result from adjusting assets and liabilities denominated in a currency other than the functional currency must appear on the foreign unit's income statement unless the gains or losses are attributable to

you fear the dollar will rise against the Spanish peseta, with a resulting adverse change in the dollar value of the equity of your Spanish subsidiary, you can hedge by

you fear the dollar will rise against the French euro, with a resulting adverse change in the dollar value of the equity of your French subsidiary, you can hedge by

a forward market hedge, a company that is long a foreign currency will _ the foreign currency forward, whereas a company that is short a foreign currency will _ the currency forward.

Japanese firm sells TV sets to an American importer for one billion yen payable in 90 days. To protect against exchange risk, the importer could

Introduction: Multinational Enterpriseand Multinational Financial Management

The Determination of Exchange Rates

The International Monetary System

Parity Conditions in International Finance and Currency Forecasting

The Balance of Payments and International Economic Linkages

Country Risk Anaylsis

The Foreign Exchange Markets

Currency Futures and Options Markets

Swaps and Interest Rate Derivatives

Measuring and Managing Economic Exposure

International Financing and National Capital Market

The Euromarkets

The Cost of Capital for Foreign Investment

International Portfolio Investment

Corporate Strategy and Foreign Direct Investment

Capital Budgeting for the Multinational Corporation

Financing Foreign Trade

Current Asset Management and Short Team Financing

Managing the Multinational Financial System

Filters

Exam 10: Measuring and Managing Translation and Transaction Exposure

________ involves simultaneously borrowing and lending activities in two different currencies to lock in the currency's value of a future foreign currency cash flow.

Suppose that the spot rate and the 90?day forward rate on the pound sterling are $and $respectively. Your company, wishing to avoid foreign exchange risk, sells £500,000 forward 90 days. Assuming that the spot rate remains the same 90 days hence, your company would

American Airlines hedges a £million receivable by selling pounds forward. If the spot rate is £1 = $and the 90?day forward rate is $what is American's cost of hedging?

is possible for transaction exposure to be positive and translation exposure in the same currency to be

Suppose markets are efficient, there are no taxes, and relative prices remain constant. In such a world,

__________ involves offsetting exposures in one currency with exposures in the same or another currency, where exchange rates are expected to move in such a way that losses on the first exposed position should be offset by gains on the second currency exposure and vice versa.

Which of the following is a basic hedging technique during depreciation?

Transaction gains and losses that result from adjusting assets and liabilities denominated in a currency other than the functional currency must appear on the foreign unit's income statement unless the gains or losses are attributable to

you fear the dollar will rise against the Spanish peseta, with a resulting adverse change in the dollar value of the equity of your Spanish subsidiary, you can hedge by

you fear the dollar will rise against the French euro, with a resulting adverse change in the dollar value of the equity of your French subsidiary, you can hedge by

a forward market hedge, a company that is long a foreign currency will _______ the foreign currency forward, whereas a company that is short a foreign currency will _______ the currency forward.

Japanese firm sells TV sets to an American importer for one billion yen payable in 90 days. To protect against exchange risk, the importer could

Introduction: Multinational Enterpriseand Multinational Financial Management

The Determination of Exchange Rates

The International Monetary System

Parity Conditions in International Finance and Currency Forecasting

The Balance of Payments and International Economic Linkages

Country Risk Anaylsis

The Foreign Exchange Markets

Currency Futures and Options Markets

Swaps and Interest Rate Derivatives

Measuring and Managing Economic Exposure

International Financing and National Capital Market

The Euromarkets

The Cost of Capital for Foreign Investment

International Portfolio Investment

Corporate Strategy and Foreign Direct Investment

Capital Budgeting for the Multinational Corporation

Financing Foreign Trade

Current Asset Management and Short Team Financing

Managing the Multinational Financial System

Filters

a forward market hedge, a company that is long a foreign currency will _ the foreign currency forward, whereas a company that is short a foreign currency will _ the currency forward.