Question 1

Expected future value of a currency is reflected in its spot rate.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following factors will not increase the value of a currency in foreign markets?

Accepted Answer

A)   High interest rates
B)   High inflation
C)   Positive balance of payments
D)   Strong stock market rallyE) B) and C)
F) B) and D)

Question 3

Which of the following hedging strategies is not used to minimize transaction exposure?

Accepted Answer

A)   Eurobond market
B)   Forward exchange market
C)   Money market
D)   Currency futures marketE) B) and D)
F) None of the above

Question 4

A particular country's pattern of importing more than is being exported is likely to:

Accepted Answer

A)   depress that country's currency.
B)   depress other countries' currencies.
C)   increase the value of that country's currency.
D)   increase the currency relative to the US dollar.E) A) and D)
F) B) and C)

Question 5

Forward contracts tend to be created in organized exchanges like the International Money Market of the Toronto Futures Exchange.

Accepted Answer

A) True 
 B)False

Question 6

You are leaving Mexico and have 3,500 pesos to change into dollars. The exchange rate is now 1,500 pesos to the dollar. How many dollars will you receive?

Accepted Answer

A)   $0.43
B)   $2.33
C)   $23.33
D)   $30.00E) A) and D)
F) All of the above

Question 7

The current spot exchange rate between the Japanese yen and the Canadian dollar is *75.00/$. The yen is expected to appreciate by 6% 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)   *70.50/$
B)   *79.50/$
C)   *84.00/$
D)   *75.00/$E) C) and D)
F) B) and C)

Question 8

When a bank issues a letter of credit the bank absorbs ALL of the credit risk to the exporter.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following statements about foreign affiliates funding is most accurate?

Accepted Answer

A)   In general, foreign affiliates are more profitable than domestic businesses.
B)   Foreign affiliates usually lower 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)   Bank lending to foreign affiliates is based on some sort of a guarantee by the parent firm.E) All of the above
F) A) and B)

Question 10

The future rates of currency tend to increase for dates further in the future because of the increasing uncertainty over time.

Accepted Answer

A) True 
 B)False

Question 11

Cash management considerations tend not to be the major determinants of transfer pricing policy.

Accepted Answer

A) True 
 B)False

Question 12

Currency exchange rates may be either floating or fixed.

Accepted Answer

A) True 
 B)False

Question 13

Canadian firms expand their operations outside of Canada's borders because the average rate of return for foreign investment is often higher than the rate of return on domestic investments.

Accepted Answer

A) True 
 B)False

Question 14

Assume the following spot and forward rates for the New Zealand dollar ($/NZD).
  a) What is the U.S. dollar value of one New Zealand dollar in the spot market?
b) Suppose you issued a 90-day forward contract to exchange 100,000 New Zealand dollars into U.S. dollars. How many U.S. dollars are involved?
c) How many New Zealand dollars can you get for one U.S. dollar in the spot market?
d) What is the 120-day forward premium?

Accepted Answer

a) $.6921
b) $.6988 * 100,000 ...

Question 15

The interplay between interest rate differentials and exchange rates such that each adjusts until the foreign exchange market and the money market reach equilibrium is called the:

Accepted Answer

A)   Purchasing Power Parity Theory.
B)   Balance of Payments.
C)   Interest Rate Parity Theory.
D)   Money Differential Parity.E) C) and D)
F) B) and D)

Question 16

Which of the following is not a reason for Canadian firms operating in foreign markets?

Accepted Answer

A)   Less expensive labour
B)   Better economic and political environment
C)   Tax incentives
D)   Achieve international diversificationE) A) and B)
F) None of the above

Question 17

Multinational corporations may take several forms. An exporter could be described as:

Accepted Answer

A)   an multinational corporation which produces a product within its own borders, but sells in a foreign market.
B)   the least risky political arrangement.
C)   an multinational corporation willing to commit itself to a long-term foreign investment.
D)   accepting goods from other countries to sell locally.E) A) and B)
F) None of the above

Question 18

Why do foreign investments offer higher rates of return than the rate of return on domestic investments?

Accepted Answer

Foreign investments offer higher rates o...

Question 19

If in 20X2, the Canadian dollar's exchange rate with the Sudanese dinar was.0069 dollars per dinar and in 20X5, the exchange rate was.0062 dollars per dinar, it would indicate that in the period from 20X2 to 20X5, the dollar:

Accepted Answer

A)   strengthened against the dinar.
B)   weakened against the dinar.
C)   was unrelated to the value of the dinar.
D)   the answer cannot be determined without knowing the number of dinars needed to buy a dollar.E) None of the above
F) A) and B)

Question 20

A loan arrangement between a parent company and its foreign affiliate which avoids the exchange markets entirely is called a:

Accepted Answer

A)   parallel loan.
B)   EDC direct loan.
C)   fronting loan.
D)   could be any one depending on the circumstances.E) B) and C)
F) A) and C)

Exam 21: International Financial Management

Cash management considerations tend not to be the major determinants of transfer pricing policy.

Correct Answer
verified

The current spot exchange rate between the Japanese yen and the Canadian dollar is *75.00/$. The yen is expected to appreciate by 6% 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

The future rates of currency tend to increase for dates further in the future because of the increasing uncertainty over time.

Correct Answer
verified

Why do foreign investments offer higher rates of return than the rate of return on domestic investments?

Correct Answer
verified
Foreign investments offer higher rates o...
View Answer

Multinational corporations may take several forms. An exporter could be described as:

Correct Answer
verified

Canadian firms expand their operations outside of Canada's borders because the average rate of return for foreign investment is often higher than the rate of return on domestic investments.

Correct Answer
verified

A loan arrangement between a parent company and its foreign affiliate which avoids the exchange markets entirely is called a:

Correct Answer
verified

Which of the following statements about foreign affiliates funding is most accurate?

Correct Answer
verified

Currency exchange rates may be either floating or fixed.

Correct Answer
verified

The interplay between interest rate differentials and exchange rates such that each adjusts until the foreign exchange market and the money market reach equilibrium is called the:

Correct Answer
verified

You are leaving Mexico and have 3,500 pesos to change into dollars. The exchange rate is now 1,500 pesos to the dollar. How many dollars will you receive?

Correct Answer
verified

If in 20X2, the Canadian dollar's exchange rate with the Sudanese dinar was.0069 dollars per dinar and in 20X5, the exchange rate was.0062 dollars per dinar, it would indicate that in the period from 20X2 to 20X5, the dollar:

Correct Answer
verified

Correct Answer
verified
a) $.6921
b) $.6988 * 100,000 ...
View Answer

A particular country's pattern of importing more than is being exported is likely to:

Correct Answer
verified

Which of the following hedging strategies is not used to minimize transaction exposure?

Correct Answer
verified

When a bank issues a letter of credit the bank absorbs ALL of the credit risk to the exporter.

Correct Answer
verified

Which of the following factors will not increase the value of a currency in foreign markets?

Correct Answer
verified

Which of the following is not a reason for Canadian firms operating in foreign markets?

Correct Answer
verified

Expected future value of a currency is reflected in its spot rate.

Correct Answer
verified

Forward contracts tend to be created in organized exchanges like the International Money Market of the Toronto Futures Exchange.

Correct Answer
verified

Exam 21: International Financial Management

Cash management considerations tend not to be the major determinants of transfer pricing policy.

Correct AnswerverifiedShow Answer

The current spot exchange rate between the Japanese yen and the Canadian dollar is *75.00/$. The yen is expected to appreciate by 6% 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 AnswerverifiedShow Answer

The future rates of currency tend to increase for dates further in the future because of the increasing uncertainty over time.

Correct AnswerverifiedShow Answer

Why do foreign investments offer higher rates of return than the rate of return on domestic investments?

Correct AnswerverifiedForeign investments offer higher rates o...View AnswerShow Answer

Multinational corporations may take several forms. An exporter could be described as:

Correct AnswerverifiedShow Answer

Canadian firms expand their operations outside of Canada's borders because the average rate of return for foreign investment is often higher than the rate of return on domestic investments.

Correct AnswerverifiedShow Answer

A loan arrangement between a parent company and its foreign affiliate which avoids the exchange markets entirely is called a:

Correct AnswerverifiedShow Answer

Which of the following statements about foreign affiliates funding is most accurate?

Correct AnswerverifiedShow Answer

Currency exchange rates may be either floating or fixed.

Correct AnswerverifiedShow Answer

The interplay between interest rate differentials and exchange rates such that each adjusts until the foreign exchange market and the money market reach equilibrium is called the:

Correct AnswerverifiedShow Answer

You are leaving Mexico and have 3,500 pesos to change into dollars. The exchange rate is now 1,500 pesos to the dollar. How many dollars will you receive?

Correct AnswerverifiedShow Answer

If in 20X2, the Canadian dollar's exchange rate with the Sudanese dinar was.0069 dollars per dinar and in 20X5, the exchange rate was.0062 dollars per dinar, it would indicate that in the period from 20X2 to 20X5, the dollar:

Correct AnswerverifiedShow Answer

Correct Answerverifieda) $.6921b) $.6988 * 100,000 ...View AnswerShow Answer

A particular country's pattern of importing more than is being exported is likely to:

Correct AnswerverifiedShow Answer

Which of the following hedging strategies is not used to minimize transaction exposure?

Correct AnswerverifiedShow Answer

When a bank issues a letter of credit the bank absorbs ALL of the credit risk to the exporter.

Correct AnswerverifiedShow Answer

Which of the following factors will not increase the value of a currency in foreign markets?

Correct AnswerverifiedShow Answer

Which of the following is not a reason for Canadian firms operating in foreign markets?

Correct AnswerverifiedShow Answer

Expected future value of a currency is reflected in its spot rate.

Correct AnswerverifiedShow Answer

Forward contracts tend to be created in organized exchanges like the International Money Market of the Toronto Futures Exchange.

Correct AnswerverifiedShow 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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Foreign investments offer higher rates o...
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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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) $.6921
b) $.6988 * 100,000 ...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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