Question 1

Which one of the following best describes an agreement you make today to exchange U.S. dollars for British pounds three months from now?

Accepted Answer

A)   Forward trade
B)   Spot trade
C)   Arbitrage transaction
D)   Cross-rate exchange
E)   Eurocurrency transactionF) C) and E)
G) A) and D)

Question 2

You can exchange $1 for either 0.7538 euros or 0.6789 British pounds. What is the cross rate between the pound and the euro?

Accepted Answer

A)   £0.7519/€1
B)   £0.8756/€1
C)   £0.9006/€1
D)   £1.0852/€1
E)   £1.1103/€1F) B) and C)
G) A) and E)

Question 3

Which one of the following is an example of long-run exposure to exchange rate risk? Ignore all fees and transaction costs.

Accepted Answer

A)   A U.S. firm owns land in Mexico valued at three million pesos. That value has remained constant in Mexican pesos for the past year. However, the firm's financial statement reflects a three percent decrease in the value of that land for last year.
B)   A U.S. firm sells $250,000 worth of goods to Peru. However, when the payment for those goods arrives and the U.S. firm exchanges the foreign currency, it only receives $248,700.
C)   A U.S. firms purchases $120,000 worth of goods from Canada. However, by the time the goods arrive and the invoice is payable, the cost of those goods has increased to $120,400.
D)   A few years ago, a U.S. firm built a factory in Asia to take advantage of the lower labor costs. Today, the Asian labor costs have increased such that the Asian factory no longer provides a cost advantage over a U.S. factory.
E)   A. U.S. traveler withdrew an extra $2,000 in cash from her savings account to take with her as emergency funds when she traveled to Mexico. Before leaving on her trip, she exchanged this money into Mexican pesos. She never used any of this money during her vacation, so exchanged all of it back into U.S. dollars on her return and received $1,960.F) B) and E)
G) C) and D)

Question 4

A U.S. firm has total assets valued at €687,000 located in Germany. This valuation did not change from last year. Last year, the exchange rate was €0.94 = $1. Today, the exchange rate is €.0.75 = $1. By what amount did these assets change in value on the firm's U.S. financial statements?

Accepted Answer

A)   -$185,148.94
B)   -$162,311.19
C)   $162,311.19
D)   $185,148.94
E)   $0F) C) and E)
G) All of the above

Question 5

According to purchasing power parity, if a Big Mac sells for $3.49 in the United States and 47.25 pesos in Mexico, what is the peso/$ exchange rate?

Accepted Answer

A)   Ps0.0739 = $1
B)   Ps0.0814 = $1
C)   Ps12.29 = $1
D)   Ps13.54 = $1
E)   Ps14.32 = $1F) None of the above
G) A) and B)

Question 6

An American Depositary Receipt is defined as a security:

Accepted Answer

A)   that has been deposited in an interest-bearing account at a U.S. bank.
B)   issued outside of the U.S. that represents shares of a U.S. stock.
C)   issued in the U.S. which represents shares of a foreign stock.
D)   that has a guarantee of payment from a U.S. bank.
E)   issued in multiple countries but denominated in U.S. currency.F) C) and D)
G) A) and B)

Question 7

Rembrandt, Samurai, Yankee, and Bulldog are all names associated with which one of the following?

Accepted Answer

A)   Eurobonds
B)   Currencies
C)   Cross rate
D)   Foreign bonds
E)   Foreign interest ratesF) C) and E)
G) B) and E)

Question 8

Later this week, you are traveling from the U.S. to Canada for a week's vacation. This morning, you exchanged some U.S. dollars for Canadian dollars in preparation for that trip. Which one of the following best describes this exchange?

Accepted Answer

A)   Forward trade
B)   Spot trade
C)   Arbitrage transaction
D)   Cross-rate exchange
E)   Eurocurrency transactionF) A) and E)
G) A) and D)

Question 9

Given the following exchange rates, what is the cross-rate for euros in terms of British pounds?

Accepted Answer

A)   €1.1066 = £1
B)   €1.1079 = £1
C)   €1.1092 = £1
D)   €1.1103 = £1
E)   €1.1116 = £1F) A) and B)
G) D) and E)

Question 10

A trader in Switzerland just agreed to trade Swiss francs for British pounds based on today's exchange rate. The trade is expected to settle tomorrow. What term best describes this exchange?

Accepted Answer

A)   Arbitrage transaction
B)   Forward trade
C)   Spot trade
D)   Purchasing power parity
E)   Interest rate parityF) B) and E)
G) None of the above

Question 11

Which one of the following terms is used to describe international bonds issued in a single country and generally denominated in that country's currency?

Accepted Answer

A)   Eurobonds
B)   American Depositary Receipts
C)   Foreign bonds
D)   Swaps
E)   GiltsF) A) and B)
G) B) and D)

Exam 18: International Aspects of Financial Management

You can exchange $1 for either 0.7538 euros or 0.6789 British pounds. What is the cross rate between the pound and the euro?

Correct Answer
verified

Rembrandt, Samurai, Yankee, and Bulldog are all names associated with which one of the following?

Correct Answer
verified

Which one of the following is an example of long-run exposure to exchange rate risk? Ignore all fees and transaction costs.

Correct Answer
verified

According to purchasing power parity, if a Big Mac sells for $3.49 in the United States and 47.25 pesos in Mexico, what is the peso/$ exchange rate?

Correct Answer
verified

A trader in Switzerland just agreed to trade Swiss francs for British pounds based on today's exchange rate. The trade is expected to settle tomorrow. What term best describes this exchange?

Correct Answer
verified

Which one of the following best describes an agreement you make today to exchange U.S. dollars for British pounds three months from now?

Correct Answer
verified

Later this week, you are traveling from the U.S. to Canada for a week's vacation. This morning, you exchanged some U.S. dollars for Canadian dollars in preparation for that trip. Which one of the following best describes this exchange?

Correct Answer
verified

Which one of the following terms is used to describe international bonds issued in a single country and generally denominated in that country's currency?

Correct Answer
verified

Given the following exchange rates, what is the cross-rate for euros in terms of British pounds?

Correct Answer
verified

An American Depositary Receipt is defined as a security:

Correct Answer
verified

A U.S. firm has total assets valued at €687,000 located in Germany. This valuation did not change from last year. Last year, the exchange rate was €0.94 = $1. Today, the exchange rate is €.0.75 = $1. By what amount did these assets change in value on the firm's U.S. financial statements?

Correct Answer
verified

Exam 18: International Aspects of Financial Management

You can exchange $1 for either 0.7538 euros or 0.6789 British pounds. What is the cross rate between the pound and the euro?

Correct AnswerverifiedShow Answer

Rembrandt, Samurai, Yankee, and Bulldog are all names associated with which one of the following?

Correct AnswerverifiedShow Answer

Which one of the following is an example of long-run exposure to exchange rate risk? Ignore all fees and transaction costs.

Correct AnswerverifiedShow Answer

According to purchasing power parity, if a Big Mac sells for $3.49 in the United States and 47.25 pesos in Mexico, what is the peso/$ exchange rate?

Correct AnswerverifiedShow Answer

A trader in Switzerland just agreed to trade Swiss francs for British pounds based on today's exchange rate. The trade is expected to settle tomorrow. What term best describes this exchange?

Correct AnswerverifiedShow Answer

Which one of the following best describes an agreement you make today to exchange U.S. dollars for British pounds three months from now?

Correct AnswerverifiedShow Answer

Later this week, you are traveling from the U.S. to Canada for a week's vacation. This morning, you exchanged some U.S. dollars for Canadian dollars in preparation for that trip. Which one of the following best describes this exchange?

Correct AnswerverifiedShow Answer

Which one of the following terms is used to describe international bonds issued in a single country and generally denominated in that country's currency?

Correct AnswerverifiedShow Answer

Given the following exchange rates, what is the cross-rate for euros in terms of British pounds?

Correct AnswerverifiedShow Answer

An American Depositary Receipt is defined as a security:

Correct AnswerverifiedShow Answer

A U.S. firm has total assets valued at €687,000 located in Germany. This valuation did not change from last year. Last year, the exchange rate was €0.94 = $1. Today, the exchange rate is €.0.75 = $1. By what amount did these assets change in value on the firm's U.S. financial statements?

Correct AnswerverifiedShow Answer

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