Int Fin

Sample Midterm 1 Questions 1. Which of the adjacent does not constitute a form of transfer international enthronization? a. Franchising b. International trade c. Joint ventures d. Acquisitions of alert operations e. institution of vernal foreign subsidiaries 2. Which of the sideline theories identifies specialization as a effort for world(prenominal) business? a. theory of comparative advantage. b. imperfect markets theory. c. product cps theory. d. none of the higher up 3. Agency costs faced by multinational green goddesss (MNCs) may be larger than those faced by purely interior(prenominal) degradeds because a.Monitoring of managers hardened in foreign countries is more difficult. b. Foreign subsidiary managers elevated in different cultures may not follow uniform goals. c. MNCs argon relatively large. d. All of the supra e. A and B completely 4. Which of the following industries would closely likely take advantage of lower costs in some(a) less developed forei gn countries? a. assembly line production. b. narrow sea captain services. c. nuclear missile planning. d. planning for more sophisticated com typeseter technology. 5. The pairing American Free Trade Agreement (NAFTA) amplificationd restrictions on a. rade surrounded by Canada and Mexico. b. trade among Canada and the U. S. c. direct foreign investment in Mexico by U. S. homes. d. none of the above. 6. Which of the following is mentioned in the text as a attainable means by which the judicature may attempt to correct its relaxation of trade position (increase its exports or compress its imports). a. It could attempt to reduce its denture currencys abide by. b. The government could hold firms to engage in outsourcing. c. The government could require that its topical anaesthetic firms pursue outsourcing. d. All of the above are mentioned. . If a countrys government imposes a tariff on imported goods, that countrys current account sense of equilibrium allow for likel y ____ (assuming no retaliation by other governments). a. simplification b. increase c. remain unaffected d. either A or C are possible 8. Assume that a avers bid array on Swiss francs is $. 45 and its ask regularize is $. 47. Its bid-ask percentage spread is a. or so 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 score fluctuations, and it is receiving 100,000 in 90 age, it could a. btain a 90-day out front purchase contract on euros. b. obtain a 90-day frontwards sale contract on euros. c. purchase euros 90 days from straightway at the bandage rate. d. sell euros 90 days from instantaneously at the signalise rate. 10. LIBOR is a. the interest rate comm and charged for loanwords between banks. b. the come flash rate in European countries. c. the uttermost loan rate ceiling on loans in the international funds market. d. the supreme file 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 Nipponese hanker is worth $. 0080, and a Fijian sawbuck bill (F$) is worth $. 5900. What is the order of the hankering in Fijian sawhorses (i. e. , how m any(prenominal) Fijian dollars do you convey to vitiate a yen)? a. 73. 75. b. 125. c. 1. 69. d. 0. 014. e. none of the above 13. A credit entry representing the determine of a foreign currency in dollars is referred to as a(n) ____ quotation a quotation representing the number of units of a foreign currency per dollar is referred to as a(n) ____ quotation. . direct confirmatory b. confirming direct c. direct direct d. indirect indirect e. cannot be answered without more selective information 14. The value of the Australian dollar (A$) at once is $0. 73. Yesterday, the value of the Australian dollar was $0. 69. T he Australian dollar ____ by ____%. a. depreciated 5. 80 b. depreciated 4. 00 c. appreciated 5. 80 d. appreciated 4. 00 15. Baylor Bank believes the unsanded Zealand dollar pull up stakes appreciate over the next five days from $. 48 to $. 50. The following annual interest rank apply Currency Dollars New Zealand dollar (NZ$) Lending prise 7. 10% . 80% Borrowing Rate 7. 50% 7. 25% Baylor Bank has the capacity to borrow either NZ$10 meg or $5 million. If Baylor Banks forecast is correct, what pass on its dollar kale 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 easily in Australia bit 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. upwards b. downward c. either upward or downward (dependi ng on the degree of the increase in Australian inflation) d. none of the above there will be no encroachment 17. The yearly forward rate of the British tick is quoted at $1. 60, and the spot rate of the British pound is quoted at $1. 63. The forward ____ is ____ percent. a. tax deduction 1. 9 b. discount 1. 8 c. agio 1. 9 d. pension 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 bargain for c. purchasing purchasing d. purchasing selling 19. Assume that a speculator purchases a put option on British pounds (with a strike set of $1. 50) for $. 05 per unit. A pound option represents 31,250 units. Assume that at the clock of the purchase, the spot rate of the pound is $1. 51 and continually rises to $1. 62 by the overtaking date. The highest internet profit possible for the speculator ground on the information above is a. $1,5 62. 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 further 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 pes o by investment 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 afterwards the peso declined in value in order to veto 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 diff icult. b. Foreign subsidiary managers raised in different cultures may not follow uniform goals. c. MNCs are relatively 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 computing device 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. Th e 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. th e 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. depreciated 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. oll ar. 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 bas ed 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 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. specul ated 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.