1. Assume Assume that a bank's bid rate on Swiss francs is $.45 and its ask rate is $.47. Its bid-ask percentage percentage spread is a. about 4.44!. b. about 4."#!. c. about 4.%!. d. about 4.17!. ". Assume Assume that a bank's bid rate on &apanese & apanese en is $.41 and its ask rate is $.4%. Its bid ask percentage spread is a. about 4.((!. b. about 4.))!. c. about 4.#5!. d. about 4.4%!. %. *he bid+ask spread for sma,, s ma,, retai, transactions is common, in the range of percent. a. % to 7 b. .1 to .% c. 1 to 15 d. .5 to 1 4. is not a factor that affects the bid+ask spread. a. rder costs b. In/entor costs costs c. 0o,ume d. A,, of the abo/e factors affect the bid+ask spread 5. *he forward rate is the echange rate used for immediate echange of currencies. a. *rue b. 2a,se #. *he ask 3uote is the price for which a bank offers to se,, a currenc. currenc. a. *rue b. 2a,se 7. According According to the tet the forward rate is common, used for a. hedging. b. immediate transactions. transactions. c. pre/ious transactions.
d. bond transactions. ). If a .S. firm desires to a/oid the risk from echange rate f,uctuations and it is recei/ing 1 in ( das it cou,d a. obtain a (da forward purchase contract on euros. b. obtain a (da forward sa,e contract on euros. c. purchase euros ( das from now at the spot rate. d. se,, euros ( das from now at the spot rate. (. If a .S. firm desires to a/oid the risk from echange rate f,uctuations and it wi,, need 6$" in ( das to make pament on imports from 6anada it cou,d a. obtain a (da forward purchase contract on 6anadian do,,ars. b. obtain a (da forward sa,e contract on 6anadian do,,ars. c. purchase 6anadian do,,ars ( das from now at the spot rate. d. se,, 6anadian do,,ars ( das from now at the spot rate. 1. Assume the 6anadian do,,ar is e3ua, to $.)) and the eru/ian So, is e3ua, to $.%5. *he /a,ue of the eru/ian So, in 6anadian do,,ars is a. about .%#"1 6anadian do,,ars. b. about .%(77 6anadian do,,ars. c. about ".%# 6anadian do,,ars. d. about ".51 6anadian do,,ars. 11. 8hich of the fo,,owing is not true with respect to spot market ,i3uidit9 a. *he more wi,,ing buers and se,,ers there are the more ,i3uid a market is. b. *he spot markets for hea/i, traded currencies such as the &apanese en are /er ,i3uid. c. A currenc's ,i3uidit affects the ease with which an :;6 can obtain or se,, that currenc. d. If a currenc is i,,i3uid an :;6 is tpica,, ab,e to 3uick, purchase that currenc at a reasonab,e echange rate. 1". 2orward markets for currencies of de/e,oping countries are a. prohibited. b. ,ess ,i3uid than markets for de/e,oped countries. c. more ,i3uid than markets for de/e,oped countries. d. on, a/ai,ab,e for use b go/ernment agencies.
1%. A forward contract can be used to ,ock in the of a specified currenc for a future point in time. a. purchase price b. sa,e price c. A or < d. none of the abo/e 14. *he forward market a. for euros is /er i,,i3uid. b. for =astern =uropean countries is /er ,i3uid. c. does not eist for some currencies. d. none of the abo/e 15. is not a bank characteristic important to customers in need of foreign echange. a. >uote competiti/eness b. Speed of eecution c. 2orecasting ad/ice d. Ad/ice about current market conditions e. A,, of the abo/e are important bank characteristics to customers in need of foreign echange. 1#. *he
1). *he internationa, credit market primari, concentrates on a. shortterm ,ending ?,ess than one ear@. b. mediumterm ,ending. c. ,ongterm ,ending. d. pro/iding an echange of foreign currencies for firms who need them. e. p,acing new, issued stock in foreign markets. 1(. *he main participants in the internationa, mone market are a. consumers. b. sma,, firms. c. ,arge corporations. d. sma,, =uropean firms needing =uropean currencies for internationa, trade. ". I<B is a. the interest rate common, charged for ,oans between banks. b. the a/erage inf,ation rate in =uropean countries. c. the maimum ,oan rate cei,ing on ,oans in the internationa, mone market. d. the maimum deposit rate cei,ing on deposits in the internationa, mone market. e. the maimum interest rate offered on bonds that are issued in ondon. "1. A sndicated ,oan a. represents a ,oan b a sing,e bank to a sndicate of corporations. b. represents a ,oan b a sing,e bank to a sndicate of countr go/ernments. c. represents a direct ,oan b a sndicate of oi,producing eporters to a ,ess de/e,oped countr. d. represents a ,oan b a group of banks to a borrower. e. A and < "". *he internationa, mone market is primari, ser/ed b a. the go/ernments of =uropean countries which direct, inter/ene in foreign currenc markets. b. go/ernment agencies such as the Internationa, :onetar 2und that enhance de/e,opment of countries. c. se/era, ,arge banks that accept deposits and pro/ide ,oans in /arious currencies. d. sma,, banks that con/ert foreign currenc for tourists and business /isitors.
"%. Internationa, mone market transactions norma,, represent a. the e3ui/a,ent of $1 mi,,ion or more. b. the e3ui/a,ent of $1 to $1. c. the e3ui/a,ent of between $1 and $1. d. the e3ui/a,ent of between $1 and $". "4. A put option is the amount or percentage b which the eisting spot rate eceeds the forward rate. a. *rue b. 2a,se "5. 2rom 1(44 to 1(71 the echange rate between an two currencies was tpica,, a. fied within narrow boundaries. b. f,oating but subCect to centra, bank inter/ention. c. f,oating and not subCect to centra, bank inter/ention. d. noneistentD that is currencies were not echanged but go,d was used to pa for a,, foreign transactions. "#. As a resu,t of the Smithsonian Agreement the .S. do,,ar was a. the currenc to be used b a,, countries as a medium of echange for internationa, trade. b. forced to be free, f,oating re,ati/e to a,, currencies without an boundaries. c. de/a,ued re,ati/e to maCor currencies. d. re/a,ued ?upward@ re,ati/e to maCor currencies. "7. According to the tet the a/erage foreign echange trading around the wor,d per da. a. e3ua,s about $" bi,,ion b. e3ua,s about $4 bi,,ion c. e3ua,s about $7 bi,,ion d. eceeds $1 tri,,ion "). Assume a &apanese firm in/oices eports to the .S. in .S. do,,ars. Assume that the forward rate and spot rate of the &apanese en are e3ua,. If the &apanese firm epects the .S. do,,ar to against the en it wou,d ,ike, wish to hedge. It cou,d hedge b do,,ars forward. a. depreciateD buing b. depreciateD se,,ing
c. appreciateD se,,ing d. appreciateD buing "(. *he bidask spread on an echange rate can be used to direct, determine a. how an echange rate wi,, change. b. the transaction cost of foreign echange. c. the forward premium. d. the currenc option premium. %. 2utures contracts are tpica,, D forward contracts are tpica,, . a. so,d on an echangeD so,d on an echange b. offered b commercia, banksD so,d on an echange c. so,d on an echangeD offered b commercia, banks d. offered b commercia, banksD offered b commercia, banks %1. =urobonds a. are usua,, issued in bearer form. b. tpica,, carr se/era, protecti/e co/enants. c. cannot contain ca,, pro/isions. d. A and < %". 8hich of the fo,,owing is true9 a. ;on.S. firms ma desire to issue bonds in the .S. due to ,ess regu,ations in the .S. b. .S. firms ma desire to issue bonds in the .S. due to ,ess regu,ations in the .S. c. .S. firms ma desire to issue bonds in the non.S. markets due to ,ess regu,ations in non.S. countries. d. A and < %%. =urobonds a. can be issued on, b =uropean firms. b. can be so,d on, to =uropean in/estors. c. A and < d. none of the abo/e
%4. 8hich currenc is used the most to denominate =urobonds9 a. the
%(. *he eistence of imperfect markets has pre/ented the internationa,iEation of financia, markets. a. *rue b. 2a,se 4. nder the go,d standard each currenc was con/ertib,e into go,d at a specified rateand the echange rate between two currencies was determined b their re,ati/e con/ertibi,it ratesper ounce of go,d. a. *rue b. 2a,se 41. An in/estor engaging in a transaction whereb he or she contracts to purchase
47. *he
5%. If there is a ,arge supp, of sa/ings re,ati/e to the demand for shortterm funds the interest rate for that countr wi,, be re,ati/e, ,ow. a. *rue b. 2a,se 54. If there is a strong demand to borrow a currenc and a ,ow supp, of sa/ings in that currenc the interest rate wi,, be re,ati/e, ,ow. a. *rue b. 2a,se 55. *he preferences of corporations and go/ernments to borrow in foreign currencies and of in/estors to make shortterm in/estments in foreign currencies resu,ted in the creation of the internationa, bond market. a. *rue b. 2a,se 5#. arge commercia, banks p,a a maCor ro,e in the internationa, mone market b accepting shortterm deposits in ,arge amounts ?such as the e3ui/a,ent of $1 mi,,ion or more@ and in /arious currencies and channe,ing the mone to corporations and go/ernment agencies that need to borrow those shortterm funds in the desired currencies. a. *rue b. 2a,se 57. *he term HeuroborH is wide, used to ref,ect the interbank offer rate on euros. a. *rue b. 2a,se 5). *he term HeuroborH is wide, used to ref,ect the tota, amount of euros borrowed b the firms in =urope per month to finance their growth. a. *rue b. 2a,se 5(. Institutiona, in/estors such as commercia, banks mutua, funds insurance companiesand pension funds from man countries are maCor participants in the internationa, bond market. a. *rue b. 2a,se
#. In response to the Sarbanes,e Act the reporting costs were reduced and man non.S. firms that issued new shares of stock decided to p,ace their stock in the nited States. a. *rue b. 2a,se #1. F,oba, regu,ations re3uire that shareho,ders in a,, countries ha/e the same rights where/er there are stock markets. a. *rue b. 2a,se #". Shareho,ders ha/e more /oting power in some countries than others. a. *rue b. 2a,se #%. Shareho,ders can ha/e inf,uence on a wider /ariet of management issues in some countries. a. *rue b. 2a,se #4. *he ,ega, protection of shareho,ders is the same among countries. a. *rue b. 2a,se #5. Shareho,ders in some countries ma ha/e more power to effecti/e, sue pub,ic,-traded firms if their eecuti/es or directors commit financia, fraud. a. *rue b. 2a,se ##. In genera, common ,aw countries such as the .S. 6anada and the nited ingdom a,,ow for more ,ega, protection than 2rench ci/i, ,aw countries such as 2rance or Ita,. a. *rue b. 2a,se #7. *he go/ernment enforcement of securities ,aws /aries among countries. a. *rue b. 2a,se
#). *he degree of financia, information that must be pro/ided b pub,ic companies is the same among countries. a. *rue b. 2a,se #(. In genera, stock markets a,,ow for more price efficienc and attract more in/estors when the ha/e a,, of the fo,,owing ecept a. more /oting rights for shareho,ders. b. more ,ega, protection. c. more enforcement of the ,aws. d. ,ess stringent accounting re3uirements. 7. In genera, companies are attracted to the stock market in which there are /er ,imited /oting rights for shareho,ders. a. *rue b. 2a,se 71. If companies can re, on stock markets to obtain funds the wi,, ha/e to re, more hea/i, on the market to raise ,ongterm funds. a. deri/ati/e b. ,ongterm credit c. mone d. foreign echange 7". *he strike price on a currenc option is a,so known as an eercise price. a. *rue b. 2a,se 7%. Assume that the bank's bid 3uote of :eican peso is $.1"# and ask price is $.1"(. If ou ha/e :eican pesos what is the amount of pesos that ou need to purchase $19 a. 1"# b. 7751(4 c. 7(%#51 d. 1"(
74. 8hen recei/ing 3uotations on a currenc's echange rate the bank's bid 3uote is the rate at which the bank is wi,,ing to se,, currenc. a. *rue b. 2a,se 75. An ob,igation to purchase a specific amount of currenc at a future point in time is ca,,ed a a. ca,, option b. spot contract c. put option d. forward contract e. both < and G 7#. 8hich of the fo,,owing is not a method that can be used to in/est internationa,,9 a. In/estment in :;6 stocks b. American depositor receipts ?AGBs@ c. 8or,d =3uit benchmark Shares ?8=
). *he ,argest g,oba, echange is a. ;ASGA> b. *oko Stock =change c. ;JS= =uronet d. ondon Stock =change )1. 8hich of the fo,,owing is not true about sndicated ,oans9 a. A borrower that recei/es a sndicated ,oan incurs /arious fees besides the interest rate. b. *he ,oans are on, denominated in .S. do,,ars. c. *he ,oans are pro/ided b a group of banks to a borrower. d. *he ,oans are usua,, formed in # weeks or ,ess. )". *he interest rate on the sndicated ,oan depends on the a. currenc denominating the ,oan. b. maturit of the ,oan. c. creditworthiness of the borrower. d. interbank ,ending rate. e. a,, of the abo/e. )%. Assume a .S. firm has to pa for orean imports in # das. It epects that orean won wi,, depreciate but it sti,, wants to hedge its risk. 8hat tpe of hedging is more appropriate in this situation a.
b. 1%.") c. %.1" d. %(.)4 )#. 8hich of the fo,,owing is not true regarding AGBs9 a. AGBs are denominated in the currenc of the stock's home countr. b. AGBs enab,e .S. in/estors to a/oid crossborder transactions c. AGBs a,,ow non.S. firms to tap into .S. market for funds. d. AGBs sometimes a,,ow for arbitrage opportunities. )7. *he more intense the competition for the traded currenc the ,arger the bid+ask spread. a. *rue b. 2a,se )).
(%. *he internationa, mone market is fre3uent, accessed b :;6s for shortterm in/estment and financing decisions whi,e ,onger term financing decisions are made in the internationa, credit market or the internationa, bond market and in internationa, stock markets. a. *rue b. 2a,se (4. 8hich of the fo,,owing is not a possib,e bid+ask 3uotation for the
d. indirectD indirect e. cannot be answered without more information (). Jou obser/e a 3uotation of the &apanese en ?L@ of $.7. Jou are howe/er interested in the number of en per do,,ar. *hus ou ca,cu,ate the 3uotation of L+$. a. directD 14".)# b. indirectD 14".)# c. indirectD 15 d. directD 15 e. indirectD ((. 8hich of the fo,,owing is not true regarding e,ectronic communications networks ?=6;s@9 a. *he ha/e a /isib,e trading f,oor. b. *rades are eecuted b a computer network. c. *he ha/e been created in man countries to match orders between buers and se,,ers. d. *he a,,ow in/estors to p,ace orders on their computers. e. A,, of the abo/e are true. 1. 8hich of the fo,,owing is probab, not appropriate for an :;6 wishing to reduce its eposure to
1". An :;6's shortterm financing decisions are satisfied in the market whi,e its medium debt financing decisions are satisfied in the market. a. internationa, moneD internationa, credit b. internationa, moneD internationa, bond c. internationa, creditD internationa, mone d. internationa, bondD internationa, credit e. internationa, moneD internationa, stock