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The cost of capital may be different for a foreign project than for an equivalent domestic project because foreign projects may be more or less risky.

A) True
B) False

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If one British pound can purchase $2.00 U.S.dollars,how many British pounds can one U.S.dollar buy?


A) 0.5050
B) 0.4400
C) 0.3950
D) 0.5000
E) 0.5250

F) A) and E)
G) None of the above

Correct Answer

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Suppose one year ago,Hein Company had inventory in Britain valued at 232,000 pounds.The exchange rate for dollars to pounds was 1£ = 2.00 U.S.dollars.This year the exchange rate is 1£ = 1.82 U.S.dollars.The inventory in Britain is still valued at 232,000 pounds.What is the U.S.dollar gain or loss in inventory value as a result of the change in exchange rates?


A) -$41,760.00
B) -$45,936.00
C) -$42,177.60
D) -$35,496.00
E) -$46,353.60

F) None of the above
G) A) and D)

Correct Answer

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Suppose the exchange rate between U.S.dollars and Swiss francs is SF 1.41 = $1.00,and the exchange rate between the U.S.dollar and the euro is $1.00 = 0.80 euro.What is the cross rate of Swiss francs to euros? (In other words,how many Swiss francs are needed to purchase one euro?) Do not round the intermediate calculations and round the final answer to four decimal places. ​


A) 1.4100
B) 1.8859
C) 1.7625
D) 1.3395
E) 1.7801

F) A) and B)
G) None of the above

Correct Answer

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If a dollar will buy fewer units of a foreign currency in the forward market than in the spot market,then the forward currency is said to be selling at a premium to the spot rate.

A) True
B) False

Correct Answer

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Which of the following are reasons why companies move into international operations?


A) To take advantage of lower production costs in regions where labor costs are relatively low.
B) To develop new markets for the firm's products.
C) To better serve their primary customers.
D) Because important raw materials are located abroad.
E) All of the above.

F) A) and B)
G) D) and E)

Correct Answer

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A currency trader observes the following quotes in the spot market: Given this information,how many Mexican pesos can be purchased for 1 Danish krone? A currency trader observes the following quotes in the spot market: Given this information,how many Mexican pesos can be purchased for 1 Danish krone? A) 1.8251 B) 1.8456 C) 2.4403 D) 2.1532 E) 2.0507


A) 1.8251
B) 1.8456
C) 2.4403
D) 2.1532
E) 2.0507

F) C) and D)
G) A) and B)

Correct Answer

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Multinational financial management requires that


A) the effects of changing currency values be included in financial analyses.
B) legal and economic differences need not be considered in financial decisions because these differences are insignificant.
C) political risk should be excluded from multinational corporate financial analyses.
D) traditional U.S.and European financial models incorporating the existence of a competitive marketplace not be recast when analyzing projects in other parts of the world.
E) cultural differences need not be accounted for when considering firm goals and employee management.

F) B) and D)
G) C) and D)

Correct Answer

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Suppose hockey skates sell in Canada for 114 Canadian dollars,and 1 Canadian dollar equals 0.71 U.S.dollar.If purchasing power parity (PPP) holds,what is the price of hockey skates in the United States?


A) $65.56
B) $87.42
C) $89.03
D) $101.18
E) $80.94

F) A) and C)
G) A) and E)

Correct Answer

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Because political risk is seldom negotiable,it cannot be explicitly addressed in multinational corporate financial analysis.

A) True
B) False

Correct Answer

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If an investor can obtain more of a foreign currency for a dollar in the forward market than in the spot market,then the forward currency is said to be selling at a discount to the spot rate.

A) True
B) False

Correct Answer

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Suppose that currently,1 British pound equals 1.98 U.S.dollars and 1 U.S.dollar equals 1.65 Swiss francs.How many Swiss francs are needed to purchase 1 pound?


A) 2.7116
B) 3.5937
C) 4.0184
D) 3.7571
E) 3.2670

F) C) and E)
G) C) and D)

Correct Answer

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Today in the spot market $1 = 1.82 Swiss francs and $1 = 130 Japanese yen.In the 90-day forward market,$1 = 1.84 Swiss francs and $1 = 127 Japanese yen.Assume that interest rate parity holds worldwide.Which of the following statements is most CORRECT?


A) Interest rates on 90-day risk-free U.S.securities are higher than the interest rates on 90-day risk-free Swiss securities.
B) Interest rates on 90-day risk-free U.S.securities are higher than the interest rates on 90-day risk-free Japanese securities.
C) Interest rates on 90-day risk-free U.S.securities equal the interest rates on 90-day risk-free Japanese securities.
D) Since interest rate parity holds interest rates should be the same in all three countries.
E) Interest rates on 90-day risk-free U.S.securities equal the interest rates on 90-day risk-free Swiss securities.

F) B) and D)
G) A) and E)

Correct Answer

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Suppose 6 months ago a Swiss investor bought a 6-month U.S.Treasury bill at a price of $9,708.74,with a maturity value of $10,000.00.The exchange rate at that time was 1.435 Swiss francs per dollar.Today,at maturity,the exchange rate is 1.324 Swiss francs per dollar.What is the annualized rate of return to the Swiss investor? Do not round the intermediate calculations and round the final answer to two decimal places.


A) -11.62%
B) -9.93%
C) -10.03%
D) -9.74%
E) -8.94%

F) A) and B)
G) B) and D)

Correct Answer

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Stover Corporation,a U.S.based importer,makes a purchase of crystal glassware from a firm in Switzerland for 39,960 Swiss francs,or $24,000,at the spot rate of 1.665 Swiss francs per dollar.The terms of the purchase are net 90 days,and the U.S.firm wants to cover this trade payable with a forward market hedge to eliminate its exchange rate risk.Suppose the firm completes a forward hedge at the 90-day forward rate of 1.682 Swiss francs.If the spot rate in 90 days is actually 1.609 Swiss francs,how much in U.S.dollars will the U.S.firm have saved or lost by hedging its exchange rate exposure? Do not round the intermediate calculations and round the final answer to the nearest cent.


A) $905.41
B) $937.75
C) $1077.87
D) $1,120.98
E) $1,261.11

F) B) and D)
G) None of the above

Correct Answer

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The cost of capital may be different for a foreign project than for an equivalent domestic project because foreign projects may be more or less risky.

A) True
B) False

Correct Answer

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Suppose 90-day investments in Britain have a 6.00% annualized return and a 1.50% quarterly (90-day) return.In the U.S. ,90-day investments of similar risk have a 4.00% annualized return and a 1.00% quarterly (90-day) return.In the 90-day forward market,1 British pound equals $1.50.If interest rate parity holds,what is the spot exchange rate ($/£) ? Do not round the intermediate calculations and round the final answer to four decimal places.


A) $1.5074
B) $1.7788
C) $1.4773
D) $1.7637
E) $1.6280

F) C) and E)
G) A) and B)

Correct Answer

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Which of the following statements is NOT CORRECT?


A) Any bond sold outside the country of the borrower is called an international bond.
B) Foreign bonds and Eurobonds are two important types of international bonds.
C) Foreign bonds are bonds sold by a foreign borrower but denominated in the currency of the country in which the issue is sold.
D) The term Eurobond applies only to foreign bonds denominated in U.S.currency.
E) A Eurodollar is a U.S.dollar deposited in a bank outside the U.S.

F) D) and E)
G) A) and C)

Correct Answer

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If the spot rate of the Israeli shekel is 5.51 shekels per dollar and the 180-day forward rate is 5.68 shekels per dollar,then the forward rate for the Israeli shekel is selling at a(n) ______________ to the spot rate.


A) 3.12% premium
B) 2.41% premium
C) 3.21% discount
D) 3.09% discount
E) 3.15% discount

F) C) and E)
G) B) and D)

Correct Answer

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Multinational financial management requires that financial analysts consider the effects of changing currency values.

A) True
B) False

Correct Answer

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Showing 41 - 60 of 100

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