If a U.S. firm desires to avoid the risk from exchange rate
1. Assme Assme that a !ank"s !ank"s !id rate rate on S#iss S#iss francs francs is $.%& and its its ask rate is $.%'. $.%'. Its !id(ask !id(ask percentage spread is) a a!ot %.%%*. . ! a!ot %.+,*. . c a!ot %.-3*. . d a!ot %.1'*. .
AS) AS) / /id(ask percentage spread 4$.%' − $.%&56$.%' %.+,*
72S) 1 +. Assme Assme that a !ank"s !ank"s !id rate rate on 8apanese 8apanese 9en 9en is $.--%1 and and its ask rate rate is $.--%3. $.--%3. Its !id( !id( ask percentage spread is) a a!ot %.::*. . ! a!ot %.;;*. . c a!ot %.,&*. . d a!ot %.%3*. .
AS) AS) C /id(ask percentage spread 4$.--%3 − $.--%156$.--%3 %.,&*
72S) 1 3. 2he !id6ask !id6ask spread spread for small retail retail transact transactions ions is commonl9 commonl9 in the range range of <<<< percent. percent. a 3 to ' . ! .-1 to .-3
. c 1- to 1& . d .& to 1 .
AS) A
72S) 1
%. <<<< is is not a factor factor that affects affects the the !id6ask !id6ask spread. spread. a 0rder costs . ! Inventor9 costs . c =olme . d All of the a!ove factors affect the !id6ask spread .
AS) >
72S) 1
'. According According to to the text? text? the the for#ard for#ard rate rate is commonl9 commonl9 sed sed for) for) a hedging. . ! immediate transactions. . c previos transactions. . d !ond transactions. .
AS) A
72S) 1
;. If a U.S. firm desires desires to avoid avoid the risk from from exchange exchange rate flcta flctations? tions? and and it is receiving receiving 1--?--- in :- da9s? it cold) a o!tain a :-(da9 for#ard prchase contract on eros. . ! o!tain a :-(da9 for#ard sale contract on eros. . c prchase eros :- da9s from no# at the spot rate. . d sell eros :- da9s from no# at the spot rate. .
AS) /
72S) 1
:. If a U.S. firm desires to avoid the risk from exchange rate flctations? and it #ill need C$+--?--- in :- da9s to make pa9ment on imports from Canada? it cold) a o!tain a :-(da9 for#ard prchase contract on Canadian dollars. . ! o!tain a :-(da9 for#ard sale contract on Canadian dollars. . c prchase Canadian dollars :- da9s from no# at the spot rate. . d sell Canadian dollars :- da9s from no# at the spot rate. .
AS) A
72S) 1
1-. Assme the Canadian dollar is e@al to $.;; and the 7ervian Sol is e@al to $.3&. 2he vale of the 7ervian Sol in Canadian dollars is) a a!ot .3,+1 Canadian dollars. . ! a!ot .3:'' Canadian dollars. . c a!ot +.3, Canadian dollars. . d a!ot +.&1 Canadian dollars. .
AS) / $.3&6$.;; .3:''
72S) 1 11. hich of the follo#ing is not tre #ith respect to spot market li@idit9B a 2he more #illing !9ers and sellers there are? the more li@id a market is. . ! 2he spot markets for heavil9 traded crrencies sch as the 8apanese 9en are . ver9 li@id. c A crrenc9"s li@idit9 affects the ease #ith #hich an MC can o!tain or . sell that crrenc9. d If a crrenc9 is illi@id? an MC is t9picall9 a!le to @ickl9 prchase that
.
crrenc9 at a reasona!le exchange rate.
AS) >
72S) 1
1+. For#ard markets for crrencies of developing contries are) a prohi!ited. . ! less li@id than markets for developed contries. . c more li@id than markets for developed contries. . d onl9 availa!le for se !9 government agencies. .
AS) /
72S) 1
13. A for#ard contract can !e sed to lock in the <<<< of a specified crrenc9 for a ftre point in time. a prchase price . ! sale price . c A or / . d none of the a!ove .
AS) C
72S) 1
1%. 2he for#ard market) a for eros is ver9 illi@id. . ! for astern ropean contries is ver9 li@id. . c does not exist for some crrencies. . d none of the a!ove .
AS) C
72S) 1
1&. <<<< is not a !ank characteristic important to cstomers in need of foreign exchange. a Dote competitiveness . ! Speed of exection . c Forecasting advice . d Advice a!ot crrent market conditions . e All of the a!ove are important !ank characteristics to cstomers in need of . foreign exchange.
AS)
72S) 1
1,. 2he /asel II accord is focsed on eliminating inconsistencies in <<<< across contries. a capital re@irements . ! deposit rates . c deposit insrance . d !ank failre policies .
AS) A
72S) 1
1'. 2he international mone9 market primaril9 concentrates on) a short(term lending 4one 9ear or less5. . ! medim(term lending. . c long(term lending. . d placing !onds #ith investors. . e placing ne#l9 issed stock in foreign markets. .
AS) A
72S) 1
1;. 2he international credit market primaril9 concentrates on) a short(term lending 4less than one 9ear5.
. ! . c . d . e .
medim(term lending. long(term lending. providing an exchange of foreign crrencies for firms #ho need them. placing ne#l9 issed stock in foreign markets.
AS) /
72S) 1
1:. 2he main participants in the international mone9 market are) a consmers. . ! small firms. . c large corporations. . d small ropean firms needing ropean crrencies for international trade. .
AS) C
72S) 1
+-. I/0E is) a the interest rate commonl9 charged for loans !et#een !anks. . ! the average inflation rate in ropean contries. . c the maximm loan rate ceiling on loans in the international mone9 market. . d the maximm deposit rate ceiling on deposits in the international mone9 . market. e the maximm interest rate offered on !onds that are issed in ondon. .
AS) A
72S) 1
+1. A s9ndicated loan) a represents a loan !9 a single !ank to a s9ndicate of corporations. . ! represents a loan !9 a single !ank to a s9ndicate of contr9 governments.
. c . d . e .
represents a direct loan !9 a s9ndicate of oil(prodcing exporters to a less developed contr9. represents a loan !9 a grop of !anks to a !orro#er. A and /
AS) >
72S) 1
++. 2he international mone9 market is primaril9 served !9) a the governments of ropean contries? #hich directl9 intervene in foreign . crrenc9 markets. ! government agencies sch as the International Monetar9 Fnd that enhance . development of contries. c several large !anks that accept deposits and provide loans in varios . crrencies. d small !anks that convert foreign crrenc9 for torists and !siness visitors. .
AS) C
72S) 1
+3. International mone9 market transactions normall9 represent) a the e@ivalent of $1 million or more. . ! the e@ivalent of $1?--- to $1-?---. . c the e@ivalent of !et#een $1-?--- and $1--?---. . d the e@ivalent of !et#een $1--?--- and $+--?---. .
AS) A
72S) 1
+&. From 1:%% to 1:'1? the exchange rate !et#een an9 t#o crrencies #as t9picall9) a fixed #ithin narro# !ondaries. . ! floating? !t s!ect to central !ank intervention. . c floating? and not s!ect to central !ank intervention. .
d nonexistentG that is crrencies #ere not exchanged? !t gold #as sed to . pa9 for all foreign transactions.
AS) A
72S) 1
+,. As a reslt of the Smithsonian Agreement? the U.S. dollar #as) a the crrenc9 to !e sed !9 all contries as a medim of exchange for . international trade. ! forced to !e freel9 floating relative to all crrencies #ithot an9 . !ondaries. c devaled relative to maor crrencies. . d revaled 4p#ard5 relative to maor crrencies. .
AS) C
72S) 1
+'. According to the text? the average foreign exchange trading arond the #orld <<<< per da9. a e@als a!ot $+-- !illion . ! e@als a!ot $%-- !illion . c e@als a!ot $'-- !illion . d exceeds $1 trillion .
AS) >
72S) 1
+;. Assme a 8apanese firm invoices exports to the U.S. in U.S. dollars. Assme that the for#ard rate and spot rate of the 8apanese 9en are e@al. If the 8apanese firm expects the U.S. dollar to <<<< against the 9en? it #old likel9 #ish to hedge. It cold hedge !9 <<<< dollars for#ard. a depreciateG !9ing . ! depreciateG selling . c appreciateG selling . d appreciateG !9ing .
AS) /
72S) 1
+:. 2he !id(ask spread on an exchange rate can !e sed to directl9 determine) a ho# an exchange rate #ill change. . ! the transaction cost of foreign exchange. . c the for#ard premim. . d the crrenc9 option premim. .
AS) /
72S) 1
3-. Ftres contracts are t9picall9 <<<
AS) C
72S) 1
31. ro!onds) a are sall9 issed in !earer form. . ! t9picall9 carr9 several protective covenants. . c cannot contain call provisions. . d A and / .
AS) A
72S) 1
3+. hich of the follo#ing is treB a on(U.S. firms ma9 desire to isse !onds in the U.S. de to less
. ! . c . d .
reglations in the U.S. U.S. firms ma9 desire to isse !onds in the U.S. de to less reglations in the U.S. U.S. firms ma9 desire to isse !onds in the non(U.S. markets de to less reglations in non(U.S. contries. A and /
AS) C
72S) 1
33. ro!onds) a can !e issed onl9 !9 ropean firms. . ! can !e sold onl9 to ropean investors. . c A and / . d none of the a!ove .
AS) >
72S) 1
3%. hich crrenc9 is sed the most to denominate ro!ondsB a the /ritish pond. . ! the 8apanese 9en. . c the U.S. dollar. . d the S#iss franc. .
AS) C
72S) 1
3&. hen the foreign exchange market opens in the U.S. each morning? the opening exchange rate @otations #ill !e !ased on the) a closing prices in the U.S. dring the previos da9. . ! closing prices in Canada dring the previos da9. . c prevailing prices in locations #here the foreign exchange markets have . !een open.
d officiall9 set !9 central !anks !efore the U.S. market opens. .
AS) C
72S) 1
3,. 2he U.S. dollar is not ever sed as a medim of exchange in) a indstrialiHed contries otside the U.S. . ! in an9 atin American contries. . c in astern ropean contries #here foreign exchange restrictions exist. . d none of the a!ove .
AS) >
72S) 1
3'. hich of the follo#ing is not tre regarding the /retton oods AgreementB a It called for fixed exchange rates !et#een crrencies. . ! overnments intervened to prevent exchange rates from moving more than . 1 percent a!ove or !elo# their initiall9 esta!lished levels. c 2he agreement lasted from 1:%% ntil 1:'1. . d ach contr9 sed gold to !ack its crrenc9. . e All of the a!ove are tre regarding the /retton oods Agreement. .
AS) >
72S) 1
3;. A 8apanese 9en is #orth $.--;-? and a Fiian dollar 4F$5 is #orth $.&:--. hat is the vale of the 9en in Fiian dollars 4i.e.? ho# man9 Fiian dollars do 9o need to !9 a 9en5B a '3.'&. . ! 1+&. . c 1.,:. . d -.-1% .
e .
none of the a!ove
AS) > 4$.--;6$.&:5 F$.-1%6J
72S) 1
&1. A share of the A>E of a >tch firm represents one share of that firm"s stock that is traded on a >tch stock exchange. 2he share price of the firm #as 1& eros #hen the >tch market closed. As the U.S. market opens? the ero is #orth $1.1-. 2hs? the price of the A>E shold !e <<<<. a $13.,% . ! $1&.-. c $1,.&. d 1,.&- eros . e none of the a!ove .
AS) C 1& × $1.1- $1,.&-
72S) 1 &+. 2he A>E of a /ritish firm is converti!le into 3 shares of stock. 2he share price of the firm #as 3- ponds #hen the /ritish market closed. hen the U.S. market opens? the pond is #orth $1.,3. 2he price of this A>E shold !e $<<<<. a %;.:. ! 1%,.'. c &&.+1 . d none of the a!ove
.
AS) / 3 × 3- × $1.,3 $1%,.'-
72S) 1
,:. In general? stock markets allo# for more price efficienc9 and attract more investors #hen the9 have all of the follo#ing except) a more voting rights for shareholders. . ! more legal protection. . c more enforcement of the la#s. . d less stringent acconting re@irements. .
AS) >
72S) 1
'1. If companies can rel9 on stock markets to o!tain fnds? the9 #ill have to rel9 more heavil9 on the <<<< market to raise long(term fnds. a derivative . ! long(term credit . c mone9 . d foreign exchange .
AS) /
72S) 1
'3. Assme that the !ank"s !id @ote of Mexican peso is $.1+, and ask price is $.1+:. If 9o have Mexican pesos? #hat is the amont of pesos that 9o need to prchase $1--?---B a 1+?,-. ! ''&?1:% .
c ':3?,&1 . d 1+?:-.
AS) C
72S) 1
'&. An o!ligation to prchase a specific amont of crrenc9 at a ftre point in time is called a) a call option . ! spot contract . c pt option . d for#ard contract . e !oth / and > .
AS) >
72S) 1
',. hich of the follo#ing is not a method that can !e sed to invest internationall9B a Investment in MC stocks . ! American depositor9 receipts 4A>Es5 . c orld @it9 !enchmark Shares 4/S5 . d International mtal fnds . e All of the a!ove are methods that can !e sed to invest internationall9. .
AS)
72S) 1
''. 2he interest rate in developing contries is sall9 ver9 lo#. a. 2re !. False AS) F
72S) 1
';. Assme that $1 is e@al to .;& ros and :; 9en. 2he vale of 9en in eros is a .-1 . ! 11; . c 1.1; . d .--;' .
AS) >
72S) 1
':. hen o!taining a loan? the risk premim paid a!ove I/0E depends on the) a risk(free interest rate of the !orro#er. . ! credit risk of the !orro#er. . c !orro#er"s stock price. . d lender"s stock price. .
AS) /
72S) 1
;-. 2he largest glo!al exchange is) a AS>AD . ! 2ok9o Stock xchange . c KS ronext . d ondon Stock xchange .
AS) C
72S) 1
;1. hich of the follo#ing is not tre a!ot s9ndicated loansB a A !orro#er that receives a s9ndicated loan incrs varios fees !esides the . interest rate. ! 2he loans are onl9 denominated in U.S. dollars. .
c 2he loans are provided !9 a grop of !anks to a !orro#er. . d 2he loans are sall9 formed in , #eeks or less. .
AS) /
72S) 1
;+. 2he interest rate on the s9ndicated loan depends on the) a crrenc9 denominating the loan. . ! matrit9 of the loan. . c credit#orthiness of the !orro#er. . d inter!ank lending rate. . e all of the a!ove. .
AS)
72S) 1
;3. Assme a U.S. firm has to pa9 for Lorean imports in ,- da9s. It expects that Lorean #on #ill depreciate? !t it still #ants to hedge its risk. hat t9pe of hedging is more appropriate in this sitation) a /9 dollars for#ard . ! Sell dollars for#ard . c 7rchase call option . d 7rchase pt option .
AS) C
72S) 1
;%. Certificates representing !ndles of stock of non(U.S. firms are called) a ro!onds . ! A>Es . c FEs .
d ro!or .
AS) /
72S) 1
;&. Assme that the spot rate of the Singapore dollar is $.,,%. 2he A>E of a Singapore firm is converti!le into 3 shares of stock. 2he price of an A>E is $+-. hat is the share price of the firm in Singapore dollarsB a 1. ! 13.+; . c 3-.1+ . d 3:.;% .
AS) A
72S) 1
;,. hich of the follo#ing is not tre regarding A>EsB a A>Es are denominated in the crrenc9 of the stock"s home contr9. . ! A>Es ena!le U.S. investors to avoid cross(!order transactions . c A>Es allo# non(U.S. firms to tap into U.S. market for fnds. . d A>Es sometimes allo# for ar!itrage opportnities. .
AS) A
72S) 1
:%. hich of the follo#ing is not a possi!le !id6ask @otation for the /ar!ados dollarB a $.&-6$.&1 . ! $.%:6$.&. c $.&+6$.&1 . d $.&16$.&+ . e All of the a!ove are possi!le !id6ask @otations.
.
AS) C
72S) 1
:&. Kor compan9 expects to receive &?---?--- 8apanese 9en ,- da9s from no#. Ko decide to hedge 9or position !9 selling 8apanese 9en for#ard. 2he crrent spot rate of the 9en is $.--;:? #hile the for#ard rate is $.--:&. Ko expect the spot rate in ,- da9s to !e $.--:-. o# man9 dollars #ill 9o receive for the &?---?--- 9en ,- da9s from no# if 9o sell 9en for#ardB a $%%?&-. ! $%&?--. c $&+, million . d $%'?&-. e $&&, million .
AS) >
72S) 1
:,. hich of the follo#ing is pro!a!l9 not an example of the se of for#ard contracts !9 an MCB a edging pond pa9a!les !9 selling ponds for#ard . ! edging peso receiva!les !9 selling pesos for#ard . c edging 9en pa9a!les !9 prchasing 9en for#ard . d edging peso pa9a!les !9 prchasing pesos for#ard . e All of the a!ove are examples of sing for#ard contracts. .
AS) A
72S) 1
:'. A @otation representing the vale of a foreign crrenc9 in dollars is referred to as a4n5 <<<< @otationG a @otation representing the nm!er of nits of a foreign crrenc9 per dollar is referred to as a4n5 <<<< @otation. a directG indirect .
! . c . d . e .
indirectG direct directG direct indirectG indirect cannot !e ans#ered #ithot more information
AS) A
72S) 1
:;. Ko o!serve a @otation of the 8apanese 9en 4J5 of $-.--'. Ko are? ho#ever? interested in the nm!er of 9en per dollar. 2hs? 9o calclate the <<<< @otation of <<<< J6$. a directG 1%+.;, . ! indirectG 1%+.;, . c indirectG 1&. d directG 1&. e indirectG .
AS) /
72S) 1
::. hich of the follo#ing is not tre regarding electronic commnications net#orks 4Cs5B a 2he9 have a visi!le trading floor. . ! 2rades are exected !9 a compter net#ork. . c 2he9 have !een created in man9 contries to match orders !et#een !9ers . and sellers. d 2he9 allo# investors to place orders on their compters. . e All of the a!ove are tre. .
AS) A
72S) 1
1--. hich of the follo#ing is pro!a!l9 not appropriate for an MC #ishing to redce its
exposre to /ritish pond pa9a!lesB a 7rchase ponds for#ard . ! /9 a pond ftres contract . c /9 a pond pt option . d /9 a pond call option .
AS) C
72S) 1
1-1. Ftres contracts are sold on exchanges and are conse@entl9 <<<< than for#ard contracts? #hich can !e <<<< to satisf9 an MC"s needs. a more standardiHedG standardiHed . ! more standardiHedG cstom(tailored . c more cstom(tailoredG standardiHed . d more cstom(tailoredG cstom(tailored . e less standardiHedG cstom(tailored .
AS) /
72S) 1
1-+. An MC"s short(term financing decisions are satisfied in the <<<< market? #hile its medim de!t financing decisions are satisfied in the <<<< market. a international mone9G international credit . ! international mone9G international !ond . c international creditG international mone9 . d international !ondG international credit . e international mone9G international stock .
AS) A
72S) 1