Question 1

Assume that you had dollar quotes for the Japanese yen and the British pound. If you want to know the yen/pound exchange rate, you would rely on:

Accepted Answer

A)   forward rates.
B)   cross rates.
C)   spot rates.
D)   hedge ratios.E) C) and D)
F) A) and D)

Question 2

The most widely used currency in the Eurobond market is the euro.

Accepted Answer

A) True 
 B)False

Question 3

In a fronting loan arrangement, the intermediary bank extends a risk-free loan to the foreign affiliate.

Accepted Answer

A) True 
 B)False  True

Question 4

A portfolio of international stocks in comparison to purely Canadian stocks generally shows:

Accepted Answer

A)   lower percentage risk for a given number of stocks.
B)   higher percentage risk for a given number of stocks.
C)   the same percentage risk for a given number of stocks.
D)   lower percentage return for a given number of stocks.E) B) and C)
F) All of the above

Question 5

The following are the prices in the foreign exchange market between the Canadian dollar and United States dollar (USD) .  What was the discount or premium on 3-month forward and 6 month for United States dollars?

Accepted Answer

A)   2.59% premium/6.65% premium
B)   2.59% discount/6.65% discount
C)   1.03% premium/0.73% premium
D)   1.03% discount/0.73% discountE) C) and D)
F) A) and D)

Question 6

When Country A's currency strengthens against Country B's, citizens of Country A will:

Accepted Answer

A)   pay less to buy Country B's products.
B)   pay more to buy Country B's products.
C)   pay more to buy domestically produced products.
D)   not be affected by the change in their currency's value.E) A) and B)
F) A) and C)

Question 7

While shopping in the Mexican market, you find that limes cost 12 pesos each. You remember that back home they cost 60 cents each. If the Purchasing Power Parity Theory holds, the rate of exchange is:

Accepted Answer

A)   20 pesos/dollar or 5 cents/peso.
B)   80 pesos/dollar or 1.25 cents/peso.
C)   5 pesos/dollar or 20 cents/peso.
D)   1 peso/dollar or 15 cents/peso.E) None of the above
F) A) and D)

Question 8

Assume the following spot and forward rates for the euro ($/euro).
  A) What is the dollar value of one euro in the spot market?
B) Suppose you issued a 120-day forward contract to exchange 200,000 euros into Canadian dollars. How many dollars are involved?
C) How many euros can you get for one dollar in the spot market?
D) What is the 120-day forward premium?

Accepted Answer

A) $1.6277
B) $1.638...

Question 9

Which of the following statements about foreign affiliates is true?

Accepted Answer

A)   In general, foreign affiliates are less profitable than domestic businesses
B)   Foreign affiliates usually raise the portfolio risk of the parent company
C)   Foreign affiliates may have a significant positive impact on the host company's economic growth, employment, trade, and balance of payments
D)   Foreign affiliates are created only to take advantage of indirect loan arrangementsE) A) and B)
F) B) and D)

Question 10

Transaction exposure results in foreign exchange gains and losses.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is not an advantage of borrowing on the Eurocurrency market?

Accepted Answer

A)   Greater availability of credit
B)   Lower overhead costs for lending banks
C)   Absence of compensating balance requirements
D)   Constant lending rate over timeE) None of the above
F) B) and C)

Question 12

Translation exposure occurs because of changes in foreign exchange rates.

Accepted Answer

A) True 
 B)False  True

Question 13

You are on your way to the beautiful Mexican resort of Zijuatenejo. The current exchange rate is 500 pesos to the dollar. When you arrive, you convert $1,000 for how many pesos?

Accepted Answer

A)   500,000 peso
B)   5,000 peso
C)   0.05 peso
D)   0.005 pesoE) B) and D)
F) All of the above

Question 14

A foreign affiliate lowers the portfolio risk of its parent company because the foreign and domestic economies tend to be fairly similar.

Accepted Answer

A) True 
 B)False

Question 15

If prices double in Vancouver while the prices in San Paulo remain the same, the purchasing power of the dollar relative to the real:

Accepted Answer

A)   should increase by 50%.
B)   should increase by 100%.
C)   should decrease by 50%.
D)   should decrease by 100%.E) None of the above
F) All of the above

Question 16

The following are the prices in the foreign exchange market between the Canadian dollar and another local currency (LC) .  What was the discount or premium on 3-month forward for LC?

Accepted Answer

A)   1.2980% premium
B)   0.0325% premium
C)   0.0325% discount
D)   1.2980% discountE) B) and D)
F) A) and C)

Question 17

The Eurobond market has which of the following characteristics?

Accepted Answer

A)   Eurobond issues are denominated in the currency where the bond is sold.
B)   Disclosure requirements in the Eurobond market are much less stringent than those required by Canadian securities commissions.
C)   Eurobond issues are underwritten by the European Central Bank.
D)   Eurobond issues are denominated in euros.E) None of the above
F) B) and C)

Question 18

The current spot exchange rate between the Japanese yen and the Canadian dollar is *105/$. The yen is expected to appreciate by 5% against the dollar over the next six months. What do you expect the spot exchange rate between the yen and the dollar to be six months from now?

Accepted Answer

A)   *94.50/$
B)   *99.75/$
C)   *110.25/$
D)   *115.50/$E) B) and C)
F) C) and D) B

Question 19

The belief that shifts in exchange rates result from increasing or decreasing demand for a country's exports (or the corresponding opposite movements in supply of a country's imports)  form the basis for the:

Accepted Answer

A)   purchasing power theory of exchange rates.
B)   interest rate parity theory of exchange rates.
C)   balance of payments theory of exchange rates.
D)   government intervention theory of exchange rates.E) B) and C)
F) A) and D)

Question 20

Investors and firms who diversify their Canadian portfolios by buying foreign stocks or investing in foreign subsidiaries take on a much higher level of risk than if they had invested in domestic stocks or companies.

Accepted Answer

A) True 
 B)False

Exam 21: International Financial Management

Assume that you had dollar quotes for the Japanese yen and the British pound. If you want to know the yen/pound exchange rate, you would rely on:

Correct Answer
verified

The most widely used currency in the Eurobond market is the euro.

Correct Answer
verified

In a fronting loan arrangement, the intermediary bank extends a risk-free loan to the foreign affiliate.

Correct Answer
verified
True

A portfolio of international stocks in comparison to purely Canadian stocks generally shows:

Correct Answer
verified

The following are the prices in the foreign exchange market between the Canadian dollar and United States dollar (USD) . What was the discount or premium on 3-month forward and 6 month for United States dollars?

Correct Answer
verified

When Country A's currency strengthens against Country B's, citizens of Country A will:

Correct Answer
verified

While shopping in the Mexican market, you find that limes cost 12 pesos each. You remember that back home they cost 60 cents each. If the Purchasing Power Parity Theory holds, the rate of exchange is:

Correct Answer
verified

Correct Answer
verified
A) $1.6277
B) $1.638...
View Answer

Which of the following statements about foreign affiliates is true?

Correct Answer
verified

Transaction exposure results in foreign exchange gains and losses.

Correct Answer
verified

Which of the following is not an advantage of borrowing on the Eurocurrency market?

Correct Answer
verified

Translation exposure occurs because of changes in foreign exchange rates.

Correct Answer
verified
True

You are on your way to the beautiful Mexican resort of Zijuatenejo. The current exchange rate is 500 pesos to the dollar. When you arrive, you convert $1,000 for how many pesos?

Correct Answer
verified

A foreign affiliate lowers the portfolio risk of its parent company because the foreign and domestic economies tend to be fairly similar.

Correct Answer
verified

If prices double in Vancouver while the prices in San Paulo remain the same, the purchasing power of the dollar relative to the real:

Correct Answer
verified

The following are the prices in the foreign exchange market between the Canadian dollar and another local currency (LC) . What was the discount or premium on 3-month forward for LC?

Correct Answer
verified

The Eurobond market has which of the following characteristics?

Correct Answer
verified

The current spot exchange rate between the Japanese yen and the Canadian dollar is *105/$. The yen is expected to appreciate by 5% against the dollar over the next six months. What do you expect the spot exchange rate between the yen and the dollar to be six months from now?

Correct Answer
verified
B

The belief that shifts in exchange rates result from increasing or decreasing demand for a country's exports (or the corresponding opposite movements in supply of a country's imports) form the basis for the:

Correct Answer
verified

Investors and firms who diversify their Canadian portfolios by buying foreign stocks or investing in foreign subsidiaries take on a much higher level of risk than if they had invested in domestic stocks or companies.

Correct Answer
verified

Exam 21: International Financial Management

Assume that you had dollar quotes for the Japanese yen and the British pound. If you want to know the yen/pound exchange rate, you would rely on:

Correct AnswerverifiedShow Answer

The most widely used currency in the Eurobond market is the euro.

Correct AnswerverifiedShow Answer

In a fronting loan arrangement, the intermediary bank extends a risk-free loan to the foreign affiliate.

Correct AnswerverifiedTrue

A portfolio of international stocks in comparison to purely Canadian stocks generally shows:

Correct AnswerverifiedShow Answer

The following are the prices in the foreign exchange market between the Canadian dollar and United States dollar (USD) . What was the discount or premium on 3-month forward and 6 month for United States dollars?

Correct AnswerverifiedShow Answer

When Country A's currency strengthens against Country B's, citizens of Country A will:

Correct AnswerverifiedShow Answer

While shopping in the Mexican market, you find that limes cost 12 pesos each. You remember that back home they cost 60 cents each. If the Purchasing Power Parity Theory holds, the rate of exchange is:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedA) $1.6277B) $1.638...View AnswerShow Answer

Which of the following statements about foreign affiliates is true?

Correct AnswerverifiedShow Answer

Transaction exposure results in foreign exchange gains and losses.

Correct AnswerverifiedShow Answer

Which of the following is not an advantage of borrowing on the Eurocurrency market?

Correct AnswerverifiedShow Answer

Translation exposure occurs because of changes in foreign exchange rates.

Correct AnswerverifiedTrue

You are on your way to the beautiful Mexican resort of Zijuatenejo. The current exchange rate is 500 pesos to the dollar. When you arrive, you convert $1,000 for how many pesos?

Correct AnswerverifiedShow Answer

A foreign affiliate lowers the portfolio risk of its parent company because the foreign and domestic economies tend to be fairly similar.

Correct AnswerverifiedShow Answer

If prices double in Vancouver while the prices in San Paulo remain the same, the purchasing power of the dollar relative to the real:

Correct AnswerverifiedShow Answer

The following are the prices in the foreign exchange market between the Canadian dollar and another local currency (LC) . What was the discount or premium on 3-month forward for LC?

Correct AnswerverifiedShow Answer

The Eurobond market has which of the following characteristics?

Correct AnswerverifiedShow Answer

The current spot exchange rate between the Japanese yen and the Canadian dollar is *105/$. The yen is expected to appreciate by 5% against the dollar over the next six months. What do you expect the spot exchange rate between the yen and the dollar to be six months from now?

Correct AnswerverifiedB

The belief that shifts in exchange rates result from increasing or decreasing demand for a country's exports (or the corresponding opposite movements in supply of a country's imports) form the basis for the:

Correct AnswerverifiedShow Answer

Investors and firms who diversify their Canadian portfolios by buying foreign stocks or investing in foreign subsidiaries take on a much higher level of risk than if they had invested in domestic stocks or companies.

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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True

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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A) $1.6277
B) $1.638...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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True

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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B

Correct Answer
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Correct Answer
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