Question 1

The current spot rate for the Norwegian krone is $1 = NKr6.0888. The expected inﬂation rate in Norway is six percent and in the U.S. ﬁve percent. A risk-free asset in the U.S. is yielding 7.5
Percent. What approximate real rate of return should you expect on a risk-free Norwegian security?

Accepted Answer

A)   2.5 percent
B)   3.0 percent
C)   6.5 percent
D)   7.5 percent
E)   8.5 percentF) B) and E)
G) None of the above

Question 2

Suppose the indirect exchange rate for the Canadian dollar is 0.93. Based on this, you know you can buy:

Accepted Answer

A)   $1 U.S. for $0.93 Canadian.
B)   $1.93 U.S. for $1 Canadian.
C)   $1 U.S. for $1.08 Canadian.
D)   $1.08 U.S. for $1 Canadian.
E)   $1 U.S. for $1.93 Canadian.F) A) and B)
G) A) and E)

Question 3

Which one of the following statements is correct assuming that exchange rates are quoted as units of foreign currency per dollar?

Accepted Answer

A)   The exchange rate moves opposite to the value of the dollar.
B)   The exchange rate rises when the Canadian inﬂation rate is higher than the foreign country's.
C)   When a foreign currency appreciates in value it strengthens relative to the dollar.
D)   The exchange rate falls as the dollar strengthens.
E)   The exchange rate is unaffected by differences in the inﬂation rates of the two countries.F) A) and E)
G) D) and E)

Question 4

Provide a deﬁnition for exchange rate risk.

Accepted Answer

The risk related to ...

Question 5

You just returned from some extensive traveling throughout the Americas. You started your trip with $10,000 in your pocket. You spent 1.4 million pesos while in Chile. You spent another 40,000
Bolivars in Venezuela. Then on the way home, you spent 34,000 pesos in Mexico. How many
Dollars did you have left by the time you returned to Canada given the following exchange rates?

Accepted Answer

A)   $3,887
B)   $4,039
C)   $4,117
D)   $4,244
E)   $4,299F) B) and E)
G) A) and B)

Question 6

Which of the following is not a method for repatriating proﬁts from foreign subsidiaries?

Accepted Answer

A)   Management fees for services provided by the parent organization.
B)   Dividends distributed by the subsidiary.
C)   Consulting fees paid to the parent for technical expertise.
D)   Royalties paid for the use of a patent.
E)   Selling common shares.F) B) and D)
G) B) and E)

Question 7

Triangle arbitrage is a proﬁtable situation involving three separate currency exchange transactions.

Accepted Answer

A) True 
 B)False

Question 8

The following describes a translation exposure of exchange rate risk. You sell custom-designed
refrigerators in Canada. The refrigerators are manufactured in Mexico and it takes about 60 days
from the time you agree to a sale and accept payment in Canada until you take delivery of the
refrigerator and pay the Mexican ﬁrm. Your proﬁt, therefore, is affected by changes in the
dollar/peso exchange rate between the order and delivery dates.

Accepted Answer

A) True 
 B)False

Question 9

Assume that the Euro is selling in the spot market for $1.10. Simultaneously, in the 3-month forward market the Euro is selling for $1.12. Which one of the following statements correctly describes this
Situation?

Accepted Answer

A)   The spot market is out of equilibrium.
B)   The forward market is out of equilibrium.
C)   The dollar is selling at a premium relative to the Euro.
D)   The Euro is selling at a premium relative to the dollar.
E)   None of the other four statements correctly describes this situation.F) A) and B)
G) B) and E)

Question 10

Under a ____________, a large borrower issues short-term notes with maturities less than a year.

Accepted Answer

A)   Eurobond agreement.
B)   Gilt arrangement.
C)   Note Issuance Facility.
D)   Eurocurrency arrangement.
E)   EDC agreement.F) None of the above
G) A) and E)

Question 11

Provide a deﬁnition for foreign exchange market.

Accepted Answer

The market where one...

Question 12

To use the home currency approach to analyze a foreign project, you must:

Accepted Answer

A)   Find the net present value of the project in the foreign currency and then convert the net present value into dollars using the current spot rate.
B)   Convert all foreign cash ﬂows into dollars using the current spot rate and then compute the net present value of the project.
C)   Convert all foreign cash ﬂows into dollars using estimated exchange rates for each time period and then compute the net present value of the project.
D)   Find the net present value of the project in the foreign currency and then convert that value into dollars using the one-year forward rate.
E)   Find the net present value of the project in the foreign currency and then convert that value into dollars using an average of the spot and the forward rates.F) B) and C)
G) B) and D)

Question 13

Which of the following is the best deﬁnition of Eurocurrency.

Accepted Answer

A)   Money deposited in a ﬁnancial centre outside of the country whose currency is involved.
B)   International bonds issued in multiple countries but denominated in a single currency (usually the issuer's currency) .
C)   Banks that make loans and accept deposits in foreign currencies.
D)   The implicit exchange rate between two currencies (usually non-U.S.)  quoted in some third currency (usually the U.S. dollar) .
E)   Second borrower in currency swap. Counterparty borrows funds in currency desired by principal.F) A) and B)
G) B) and D)

Question 14

Provide a deﬁnition for Export Development Canada (EDC).

Accepted Answer

Federal Crown corpor...

Question 15

According to this morning's The National Post, you can exchange $1 CDN for $.93 U.S. today. Thus, the ________ is $.93 Canadian.

Accepted Answer

A)   Backward rate.
B)   Forward rate.
C)   Spot rate.
D)   Triangle rate.
E)   Futures rate.F) B) and E)
G) A) and E)

Question 16

The International Fisher Effect says that _____ rates are equal across countries.

Accepted Answer

A)   spot
B)   one-year future
C)   nominal
D)   inﬂation
E)   realF) All of the above
G) B) and E)

Question 17

The foreign exchange market is the world's largest ﬁnancial market.

Accepted Answer

A) True 
 B)False

Question 18

International Pooch is headquartered in Canada, but is considering the construction of a plant in
Japan. If they use the foreign currency approach to calculating the NPV, they will:[LINE][LINE]1)
Discount yen cash ﬂows at the required return on yen investments;[LINE]2) Compute the NPV in
yen;[LINE]3) Convert the yen NPV to a dollar NPV.

Accepted Answer

A) True 
 B)False

Question 19

Which one of the following statements concerning political risk is correct?

Accepted Answer

A)   Political risk can be eliminated by operating only within Canada.
B)   Reducing the parent company involvement in a foreign operation reduces political risk.
C)   Borrowing funds from the government under which a foreign subsidiary operates reduces political risk.
D)   Political risk is independent of the nature of the business.
E)   The more stable a foreign country, the greater the political risk of operating a foreign subsidiary within that country.F) C) and E)
G) C) and D)

Question 20

Eurobond is another name for a foreign bond.

Accepted Answer

A) True 
 B)False

Exam 21: International Corporate Finance

The foreign exchange market is the world's largest ﬁnancial market.

Correct Answer
verified

Which one of the following statements concerning political risk is correct?

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Triangle arbitrage is a proﬁtable situation involving three separate currency exchange transactions.

Correct Answer
verified

Provide a deﬁnition for exchange rate risk.

Correct Answer
verified
The risk related to ...
View Answer

Under a ____________, a large borrower issues short-term notes with maturities less than a year.

Correct Answer
verified

Eurobond is another name for a foreign bond.

Correct Answer
verified

According to this morning's The National Post, you can exchange $1 CDN for $.93 U.S. today. Thus, the ________ is $.93 Canadian.

Correct Answer
verified

The current spot rate for the Norwegian krone is $1 = NKr6.0888. The expected inﬂation rate in Norway is six percent and in the U.S. ﬁve percent. A risk-free asset in the U.S. is yielding 7.5 Percent. What approximate real rate of return should you expect on a risk-free Norwegian security?

Correct Answer
verified

Provide a deﬁnition for Export Development Canada (EDC).

Correct Answer
verified
Federal Crown corpor...
View Answer

The International Fisher Effect says that _____ rates are equal across countries.

Correct Answer
verified

Provide a deﬁnition for foreign exchange market.

Correct Answer
verified
The market where one...
View Answer

Correct Answer
verified

Which of the following is not a method for repatriating proﬁts from foreign subsidiaries?

Correct Answer
verified

To use the home currency approach to analyze a foreign project, you must:

Correct Answer
verified

Suppose the indirect exchange rate for the Canadian dollar is 0.93. Based on this, you know you can buy:

Correct Answer
verified

Which of the following is the best deﬁnition of Eurocurrency.

Correct Answer
verified

Assume that the Euro is selling in the spot market for $1.10. Simultaneously, in the 3-month forward market the Euro is selling for $1.12. Which one of the following statements correctly describes this Situation?

Correct Answer
verified

Which one of the following statements is correct assuming that exchange rates are quoted as units of foreign currency per dollar?

Correct Answer
verified

Exam 21: International Corporate Finance

The foreign exchange market is the world's largest ﬁnancial market.

Correct AnswerverifiedShow Answer

Which one of the following statements concerning political risk is correct?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Triangle arbitrage is a proﬁtable situation involving three separate currency exchange transactions.

Correct AnswerverifiedShow Answer

Provide a deﬁnition for exchange rate risk.

Correct AnswerverifiedThe risk related to ...View AnswerShow Answer

Under a ____________, a large borrower issues short-term notes with maturities less than a year.

Correct AnswerverifiedShow Answer

Eurobond is another name for a foreign bond.

Correct AnswerverifiedShow Answer

According to this morning's The National Post, you can exchange $1 CDN for $.93 U.S. today. Thus, the ________ is $.93 Canadian.

Correct AnswerverifiedShow Answer

The current spot rate for the Norwegian krone is $1 = NKr6.0888. The expected inﬂation rate in Norway is six percent and in the U.S. ﬁve percent. A risk-free asset in the U.S. is yielding 7.5 Percent. What approximate real rate of return should you expect on a risk-free Norwegian security?

Correct AnswerverifiedShow Answer

Provide a deﬁnition for Export Development Canada (EDC).

Correct AnswerverifiedFederal Crown corpor...View AnswerShow Answer

The International Fisher Effect says that _____ rates are equal across countries.

Correct AnswerverifiedShow Answer

Provide a deﬁnition for foreign exchange market.

Correct AnswerverifiedThe market where one...View AnswerShow Answer

Correct AnswerverifiedShow Answer

Which of the following is not a method for repatriating proﬁts from foreign subsidiaries?

Correct AnswerverifiedShow Answer

To use the home currency approach to analyze a foreign project, you must:

Correct AnswerverifiedShow Answer

Suppose the indirect exchange rate for the Canadian dollar is 0.93. Based on this, you know you can buy:

Correct AnswerverifiedShow Answer

Which of the following is the best deﬁnition of Eurocurrency.

Correct AnswerverifiedShow Answer

Assume that the Euro is selling in the spot market for $1.10. Simultaneously, in the 3-month forward market the Euro is selling for $1.12. Which one of the following statements correctly describes this Situation?

Correct AnswerverifiedShow Answer

Which one of the following statements is correct assuming that exchange rates are quoted as units of foreign currency per dollar?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The risk related to ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Federal Crown corpor...
View Answer

Correct Answer
verified

Correct Answer
verified
The market where one...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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