Question 1

Suppose that currently,1 British pound equals 1.98 U.S.dollars and 1 U.S.dollar equals 1.02 Swiss francs.How many Swiss francs are needed to purchase 1 pound?

Accepted Answer

A)  1.9691
B)  2.0196
C)  2.0701
D)  2.1218
E)  2.1749F) All of the above
G) A) and B)

Question 2

One year ago,a U.S.investor converted dollars to yen and purchased 100 shares of stock in a Japanese company at a price of 3,150 yen per share.The stock's total purchase cost was 315,000 yen.At the time of purchase,in the currency market 1 yen equaled $0.00952.Today,the stock is selling at a price of 3,465 yen per share,and in the currency market $1 equals 130 yen.The stock does not pay a dividend.If the investor were to sell the stock today and convert the proceeds back to dollars,what would be his realized return on his initial dollar investment from holding the stock?

Accepted Answer

A)  −13.51%
B)  −12.87%
C)  −12.26%
D)  −11.67%
E)  −11.12%F) None of the above
G) A) and D)

Question 3

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.

Accepted Answer

A) True 
 B)False

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

Suppose one British pound can purchase 1.82 U.S.dollars today in the foreign exchange market,and currency forecasters predict that the U.S.dollar will depreciate by 12.0% against the pound over the next 30 days.How many dollars will a pound buy in 30 days?

Accepted Answer

A)  $1.4860
B)  $1.6511
C)  $1.8346
D)  $2.0384
E)  $2.2422F) A) and B)
G) D) and E)

Question 6

Multinational financial management requires that

Accepted Answer

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 C)
G) C) and D)

Question 7

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.

Accepted Answer

A) True 
 B)False

Question 8

When considering the risk of a foreign investment,a higher risk might arise from exchange rate risk and political risk while lower risk might result from international diversification.

Accepted Answer

A) True 
 B)False

Question 9

Currently,a U.S.trader notes that in the 6-month forward market,the Japanese yen is selling at a premium (that is,you receive more dollars per yen in the forward market than you do in the spot market) ,while the British pound is selling at a discount.Which of the following statements is CORRECT?

Accepted Answer

A)  If interest rate parity holds, 6-month interest rates should be the same in the U.S., Britain, and Japan.
B)  If interest rate parity holds among the three countries, the United States should have the highest 6-month interest rates and Japan should have the lowest rates.
C)  If interest rate parity holds among the three countries, Britain should have the highest 6-month interest rates and Japan should have the lowest rates.
D)  If interest rate parity holds among the three countries, Japan should have the highest 6-month interest rates and Britain should have the lowest rates.
E)  If interest rate parity holds among the three countries, the United States should have the highest 6-month interest rates and Britain should have the lowest rates.F) C) and E)
G) A) and C)

Question 10

Exchange rate risk is the risk that the cash flows from a foreign project,when converted to the parent company's currency,will be worth less than was originally projected because of exchange rate changes.

Accepted Answer

A) True 
 B)False

Exam 19: Multinational Financial Management

Correct Answer
verified

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.

Correct Answer
verified

Suppose that currently,1 British pound equals 1.98 U.S.dollars and 1 U.S.dollar equals 1.02 Swiss francs.How many Swiss francs are needed to purchase 1 pound?

Correct Answer
verified

Multinational financial management requires that

Correct Answer
verified

When considering the risk of a foreign investment,a higher risk might arise from exchange rate risk and political risk while lower risk might result from international diversification.

Correct Answer
verified

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

Correct Answer
verified

Currently,a U.S.trader notes that in the 6-month forward market,the Japanese yen is selling at a premium (that is,you receive more dollars per yen in the forward market than you do in the spot market) ,while the British pound is selling at a discount.Which of the following statements is CORRECT?

Correct Answer
verified

Exchange rate risk is the risk that the cash flows from a foreign project,when converted to the parent company's currency,will be worth less than was originally projected because of exchange rate changes.

Correct Answer
verified

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.

Correct Answer
verified

Suppose one British pound can purchase 1.82 U.S.dollars today in the foreign exchange market,and currency forecasters predict that the U.S.dollar will depreciate by 12.0% against the pound over the next 30 days.How many dollars will a pound buy in 30 days?

Correct Answer
verified

Exam 19: Multinational Financial Management

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

Suppose that currently,1 British pound equals 1.98 U.S.dollars and 1 U.S.dollar equals 1.02 Swiss francs.How many Swiss francs are needed to purchase 1 pound?

Correct AnswerverifiedShow Answer

Multinational financial management requires that

Correct AnswerverifiedShow Answer

When considering the risk of a foreign investment,a higher risk might arise from exchange rate risk and political risk while lower risk might result from international diversification.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Currently,a U.S.trader notes that in the 6-month forward market,the Japanese yen is selling at a premium (that is,you receive more dollars per yen in the forward market than you do in the spot market) ,while the British pound is selling at a discount.Which of the following statements is CORRECT?

Correct AnswerverifiedShow Answer

Exchange rate risk is the risk that the cash flows from a foreign project,when converted to the parent company's currency,will be worth less than was originally projected because of exchange rate changes.

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

Suppose one British pound can purchase 1.82 U.S.dollars today in the foreign exchange market,and currency forecasters predict that the U.S.dollar will depreciate by 12.0% against the pound over the next 30 days.How many dollars will a pound buy in 30 days?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
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Correct Answer
verified

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verified

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verified

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verified

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verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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