Int Fin

Sample midterm 1 Questions 1. Which of the pas meter does not constitute a form of lay irrelevant enthronisation? a. Franchising b. International trade c. Joint ventures d. Acquisitions of existing trading operations e. mental home of new foreign subsidiaries 2. Which of the following theories identifies specialization as a primer for transnational business? a. theory of comparative advantage. b. imperfect markets theory. c. product speech rhythm theory. d. none of the supra 3. Agency be faced by transnational toilets (MNCs) may be larger than those faced by strictly municipal watertights beca part a.Monitoring of managers located in foreign countries is more difficult. b. Foreign adjunct managers raise in different cultures may not follow equal goals. c. MNCs argon relatively large. d. All of the above e. A and B just now 4. Which of the following industries would most likely take advantage of lower costs in some less developed foreign countries? a. assembly row production. b. narrow down professional services. c. nuclear missile planning. d. planning for more ripe electronic computer technology. 5. The North American Free Trade Agreement (NAFTA) change magnitude restrictions on a. rade amongst Canada and Mexico. b. trade between Canada and the U. S. c. require foreign investment in Mexico by U. S. firms. d. none of the above. 6. Which of the following is mentioned in the text as a possible means by which the judicature may try to rectify its equilibrium of trade position (increase its exports or slenderise its imports). a. It could take in charge to reduce its home currencys grade. b. The brass could contract firms to engage in outsourcing. c. The government could require that its local firms pursue outsourcing. d. All of the above are mentioned. . If a countrys government imposes a tariff on imported goods, that countrys current posting balance volition likely ____ (assuming no retaliation by former(a) governments). a. devolve b. increase c. remain unaffected d. each A or C are possible 8. Assume that a banks bid count on Swiss francs is $. 45 and its ask pose is $. 47. Its bid-ask percentage scattering is a. some 4. 44%. b. about 4. 26%. c. about 4. 03%. d. about 4. 17%. 9. If a U. S. firm desires to avoid the risk from exchange crop fluctuations, and it is receiving 100,000 in 90 long time, it could a. btain a 90-day away purchase contract on euros. b. hold up a 90-day forward sale contract on euros. c. purchase euros 90 geezerhood from nowaold age at the grime rate. d. sell euros 90 days from now at the bed rate. 10. LIBOR is a. the spare-time activity rate comm alone aerated for imparts between banks. b. the average inflation rate in European countries. c. the utmost loan rate ceiling on loans in the international silver market. d. the upper limit deposit rate ceiling on deposits in the international property market. e. the maximum interest rate offered on bonds that are iss ued in London. 11. Eurobonds a. an be issued only by European firms. b. can be change only to European investors. c. A and B d. none of the above 12. A Japanese yen is cost $. 0080, and a Fijian one dollar bill sign bill (F$) is worth $. 5900. What is the rank of the yen in Fijian dollars (i. e. , how mevery Fijian dollars do you take away to buy a yen)? a. 73. 75. b. 125. c. 1. 69. d. 0. 014. e. none of the above 13. A reference book representing the nurse of a foreign currency in dollars is referred to as a(n) ____ citation a quotation representing the number of units of a foreign currency per dollar is referred to as a(n) ____ quotation. . direct collateral b. indirect direct c. direct direct d. indirect indirect e. cannot be answered without more randomness 14. The value of the Australian dollar (A$) today is $0. 73. Yesterday, the value of the Australian dollar was $0. 69. The Australian dollar ____ by ____%. a. depreciated 5. 80 b. depreciated 4. 00 c. appreciated 5. 80 d. appreciated 4. 00 15. Baylor Bank believes the freshly Zealand dollar will appreciate over the next five days from $. 48 to $. 50. The following annual interest evaluate apply specie Dollars tonic Zealand dollar (NZ$) Lending say 7. 10% . 80% borrowing Rate 7. 50% 7. 25% Baylor Bank has the capacity to borrow both NZ$10 million or $5 million. If Baylor Banks forecast is correct, what will its dollar derive be from speculation over the five-day period (assuming it does not use any of its existing consumer deposits to capitalize on its expectations)? a. $521,325. b. $500,520. c. $104,262. d. $413,419. e. $208,044. 16. If inflation increases substantially in Australia slice U. S. inflation remains unchanged, this is expected to place ____ pressure on the value of the Australian dollar with respect to the U. S. ollar. a. upward b. downward c. either upward or downward (depending on the degree of the increase in Australian inflation) d. none of the above there will be no uphold 17. The one-year forward rate of the British hammer in is quoted at $1. 60, and the spot rate of the British pound is quoted at $1. 63. The forward ____ is ____ percent. a. fire 1. 9 b. discount 1. 8 c. premium 1. 9 d. premium 1. 8 18. If your firm expects the euro to substantially depreciate, it could speculate by ____ euro call woofs or ____ euros forward in the forward exchange market. a. selling selling . selling buying c. purchase purchasing d. purchasing selling 19. Assume that a speculator purchases a put option on British pounds (with a make a motion harm of $1. 50) for $. 05 per unit. A pound option represents 31,250 units. Assume that at the time of the purchase, the spot rate of the pound is $1. 51 and continually rises to $1. 62 by the sack date. The highest net profit possible for the speculator establish on the information above is a. $1,562. 50. b. ?$1,562. 50. c. ?$1,250. 00. d. ?$625. 00. 20. You purchase a call option on pounds for a premium of $. 3 per unit, with an exercise price of $1. 64 the option will not be exercised until the expiration date, if at all. If the spot rate on the expiration date is $1. 65, your net profit per unit is a. ?$. 03. b. ?$. 02. c. ?$. 01. d. $. 02. e. none of the above 21. A U. S. corporation has purchased currency call options to hedge a 70,000 pound payable. The premium is $. 02 and the exercise price of the option is $. 50. If the spot rate at the time of maturity is $. 65, what is the total amount paid by the corporation if it acts rationally? a. $33,600. b. $46,900. c. $44,100. d. $36,400. 22.Which of the following is not true regarding the Mexican peso crisis? a. Mexico back up firms and consumers to buy an excessive amount of imports because the peso was stronger than it should have been. b. umteen speculators based in the U. S. speculated on the potential decline in the peso by investing their funds in Mexico. c. In December of 1994, the exchange bank of Mexico allowed the peso t o float freely. d. The central bank of Mexico increased interest rates after the peso declined in value in arrange to thwart investors from withdrawing their investments in Mexicos debt securities. e. All of the above are true.Int FinSample Midterm 1 Questions 1. Which of the following does not constitute a form of direct foreign investment? a. Franchising b. International trade c. Joint ventures d. Acquisitions of existing operations e. Establishment of new foreign subsidiaries 2. Which of the following theories identifies specialization as a reason for international business? a. theory of comparative advantage. b. imperfect markets theory. c. product cycle theory. d. none of the above 3. Agency costs faced by multinational corporations (MNCs) may be larger than those faced by purely domestic firms because a.Monitoring of managers located in foreign countries is more difficult. b. Foreign subsidiary managers raised in different cultures may not follow uniform goals. c. MNCs are r elatively large. d. All of the above e. A and B only 4. Which of the following industries would most likely take advantage of lower costs in some less developed foreign countries? a. assembly line production. b. specialized professional services. c. nuclear missile planning. d. planning for more sophisticated computer technology. 5. The North American Free Trade Agreement (NAFTA) increased restrictions on a. rade between Canada and Mexico. b. trade between Canada and the U. S. c. direct foreign investment in Mexico by U. S. firms. d. none of the above. 6. Which of the following is mentioned in the text as a possible means by which the government may attempt to improve its balance of trade position (increase its exports or reduce its imports). a. It could attempt to reduce its home currencys value. b. The government could require firms to engage in outsourcing. c. The government could require that its local firms pursue outsourcing. d. All of the above are mentioned. . If a countrys government imposes a tariff on imported goods, that countrys current account balance will likely ____ (assuming no retaliation by other governments). a. decrease b. increase c. remain unaffected d. either A or C are possible 8. Assume that a banks bid rate on Swiss francs is $. 45 and its ask rate is $. 47. Its bid-ask percentage spread is a. about 4. 44%. b. about 4. 26%. c. about 4. 03%. d. about 4. 17%. 9. If a U. S. firm desires to avoid the risk from exchange rate fluctuations, and it is receiving 100,000 in 90 days, it could a. btain a 90-day forward purchase contract on euros. b. obtain a 90-day forward sale contract on euros. c. purchase euros 90 days from now at the spot rate. d. sell euros 90 days from now at the spot rate. 10. LIBOR is a. the interest rate commonly charged for loans between banks. b. the average inflation rate in European countries. c. the maximum loan rate ceiling on loans in the international money market. d. the maximum deposit rate ceiling on deposits in the international money market. e. the maximum interest rate offered on bonds that are issued in London. 11. Eurobonds a. an be issued only by European firms. b. can be sold only to European investors. c. A and B d. none of the above 12. A Japanese yen is worth $. 0080, and a Fijian dollar (F$) is worth $. 5900. What is the value of the yen in Fijian dollars (i. e. , how many Fijian dollars do you need to buy a yen)? a. 73. 75. b. 125. c. 1. 69. d. 0. 014. e. none of the above 13. A quotation representing the value of a foreign currency in dollars is referred to as a(n) ____ quotation a quotation representing the number of units of a foreign currency per dollar is referred to as a(n) ____ quotation. . direct indirect b. indirect direct c. direct direct d. indirect indirect e. cannot be answered without more information 14. The value of the Australian dollar (A$) today is $0. 73. Yesterday, the value of the Australian dollar was $0. 69. The Australian dollar ____ by ____%. a. dep reciated 5. 80 b. depreciated 4. 00 c. appreciated 5. 80 d. appreciated 4. 00 15. Baylor Bank believes the New Zealand dollar will appreciate over the next five days from $. 48 to $. 50. The following annual interest rates apply Currency Dollars New Zealand dollar (NZ$) Lending Rate 7. 10% . 80% Borrowing Rate 7. 50% 7. 25% Baylor Bank has the capacity to borrow either NZ$10 million or $5 million. If Baylor Banks forecast is correct, what will its dollar profit be from speculation over the five-day period (assuming it does not use any of its existing consumer deposits to capitalize on its expectations)? a. $521,325. b. $500,520. c. $104,262. d. $413,419. e. $208,044. 16. If inflation increases substantially in Australia while U. S. inflation remains unchanged, this is expected to place ____ pressure on the value of the Australian dollar with respect to the U. S. ollar. a. upward b. downward c. either upward or downward (depending on the degree of the increase in Australian inflation ) d. none of the above there will be no impact 17. The one-year forward rate of the British pound is quoted at $1. 60, and the spot rate of the British pound is quoted at $1. 63. The forward ____ is ____ percent. a. discount 1. 9 b. discount 1. 8 c. premium 1. 9 d. premium 1. 8 18. If your firm expects the euro to substantially depreciate, it could speculate by ____ euro call options or ____ euros forward in the forward exchange market. a. selling selling . selling purchasing c. purchasing purchasing d. purchasing selling 19. Assume that a speculator purchases a put option on British pounds (with a strike price of $1. 50) for $. 05 per unit. A pound option represents 31,250 units. Assume that at the time of the purchase, the spot rate of the pound is $1. 51 and continually rises to $1. 62 by the expiration date. The highest net profit possible for the speculator based on the information above is a. $1,562. 50. b. ?$1,562. 50. c. ?$1,250. 00. d. ?$625. 00. 20. You purchase a call opt ion on pounds for a premium of $. 3 per unit, with an exercise price of $1. 64 the option will not be exercised until the expiration date, if at all. If the spot rate on the expiration date is $1. 65, your net profit per unit is a. ?$. 03. b. ?$. 02. c. ?$. 01. d. $. 02. e. none of the above 21. A U. S. corporation has purchased currency call options to hedge a 70,000 pound payable. The premium is $. 02 and the exercise price of the option is $. 50. If the spot rate at the time of maturity is $. 65, what is the total amount paid by the corporation if it acts rationally? a. $33,600. b. $46,900. c. $44,100. d. $36,400. 22.Which of the following is not true regarding the Mexican peso crisis? a. Mexico encouraged firms and consumers to buy an excessive amount of imports because the peso was stronger than it should have been. b. Many speculators based in the U. S. speculated on the potential decline in the peso by investing their funds in Mexico. c. In December of 1994, the central bank of Mexico allowed the peso to float freely. d. The central bank of Mexico increased interest rates after the peso declined in value in order to prevent investors from withdrawing their investments in Mexicos debt securities. e. All of the above are true.