Q1: Shareholders can have influence on wider variety of management issues in some countries
Answer
Answer: Correct – True
Q2: The legal protection of shareholders is the same among countries
Answer
Answer: Wrong – False
Q3: Shareholders in some countries may have more power to effectively sue publicly-traded firms if their executives or directors commit financial fraud
Answer
Answer: Correct – True
Q4: In general, common law countries such as the U.S., Canada, and the United Kingdom allow for more legal protection than French civil law countries such as France or Italy
Answer
Answer: Correct – True
Q5: The government enforcement of securities laws varies among countries
Answer
Answer: Correct – True
Q6: The degree of financial information that must be provided by public companies is the same among countries
Answer
Answer: Wrong – False
Q7: In general, stock markets allow for more price efficiency and attract more investors when they have all of the following except
Answer
Answer: Less stringent accounting requirements
Q8: In general, companies are attracted to the stock market in which they are very limited voting rights for shareholders
Answer
Answer: Wrong – False
Q9: If companies can rely on stock markets to obtain funds, they will have to rely more heavily on the____market to raise long-term funds
Answer
Answer: Long-Term credit
Q10: The strike price on a currency option is also known as an exercise price
Answer
Answer: Correct – True
Q11: Assume that the bank’s bid quote of Mexican peso is USD.126 and ask price is USD.129. If you have Mexican pesos, what is the amount of pesos that you need to purchases USD100,000
Answer
Answer: 793651
Q12: When receiving quotations on a currency’s exchange rate, the bank’s bid quote is the rate at which the bank is willing to sell currency
Answer
Answer: Wrong – False
Q13: An obligation to purchase a specific amount of currency at a future point in time is called a
Answer
Answer: Forward contract
Q14: Which of the following is not a method that can be used to invest internationally
Answer
Answer: All of the above are methods that can be used to invest internationally
Q15: The interest rate in developing countries is usually very low
Answer
Answer: Wrong – False
Q16: Assume that USD1 is equal to .85 Euros and 98 yen
Answer
Answer: The value of yen in euros is .0087
Q17: When obtaining a loan, the risk premium paid above LIBOR depends on the
Answer
Answer: Credit risk of the borrower
Q18: The largest global exchange is
Answer
Answer: NYSE Euronext
Q19: Which of the following is not true about syndicated loans
Answer
Answer: The loans are only denominated in U.S. dollars
Q20: The interest rate on the syndicated loan depends on the
Answer
Answer: All the above (Currency denominating the loan/Maturity of the loan/Creditworthiness of the borrower/Interbank lending rate)
Q21: Assume a U.S. firm has to pay for Korean imports in 60 days. It expects that Korean won will depreciate, but it still wants to hedge its risk. What type of hedging is more appropriate in this situation
Answer
Answer: Purchase call option
Q22: Certificates representing bundles of stock of non-U.S. firms are called
Answer
Answer: ADRs
Q23: Assume that the spot rate of the Singapore dollar is USD.664. The ADR of a Singapore firm is convertible into 3 shares of stock. The price of an ADR is USD20. What is the share price of the firm in Singapore dollars
Answer
Answer: 10
Q24: Which of the following is not true regarding ADRs
Answer
Answer: ADRs are denominated in the currency of the stock’s home country
Q25: The more intense the competition for the traded currency, the large the bid/ask spread
Answer
Answer: Wrong – False
Q26: Banks charge larger bid/ask spread than they would on less liquid, less traded currencies
Answer
Answer: Wrong – False
Q27: At any given point in time, a bank’s bid quote will be greater than its ask quote
Answer
Answer: Wrong – False
Q28: An MNC with receivables in Japanese Yen purchases yen forward to hedge its exposure to exchange rate fluctuations
Answer
Answer: Wrong – False
Q29: A currency put option provides the right, but not the obligation, to buy a specific currency at a specific price within a specific period of time
Answer
Answer: Wrong – False
Q30: The LIBOR varies among currencies because the market supply of and demand for funds vary among currencies
Answer
Answer: Correct – True
Q31: The international money market is frequently accessed by MNCs for short-term investment and financing decisions, while longer term financing decisions are made in the international credit market or the international bond market and in international stock markets
Answer
Answer: Correct – True
Q32: Which of the following is not a possible bid/ask quotation for the Barbados dollar
Answer
Answer: USD.52/USD.51
Q33: Your company expects to receive 5,000,000 Japanese yen 60 days from now. You decide to hedge your position by selling Japanese yen forward. The current spot rate of the yen is USD.0089, while the forward rate is USD.0095. You expect the spot rate in 60 days to be USD.0090. How many dollars will you receive for the 5,000,000 yen 60 days from now if you sell yen forward
Answer
Answer: USD47,500
Q34: Which of the following is probably not an example of the use of forward contracts by an MNC
Answer
Answer: Hedging pound payable by selling pounds forward
Q35: ___quoatation; a quotation representing the number of units of a foreign currency per dollar is referred to as a(n)___quotation
Answer
Answer: Direct; Indirect
Q36: You observe a quotation of the Japanese yen (¥) of USD0.007. You are, however interested in the number of yen per dollar. Thus, you calculate the____quotation of____¥/&dollar
Answer
Answer: Indirect; 142.86
Q37: Which of the following is not true regarding electronic communications networks (ECNs)
Answer
Answer: They have a visible trading floor
Q38: Which of the following is probably not appropriate for an MNC wishing to reduce its exposure to British pound payables
Answer
Answer: Buy a pound put option
Q39: Futures contracts are sold on exchanges and are consequently____than forward contracts, which can be____to satisfy an MNC’s needs
Answer
Answer: More standardized; Custom-tailored
Q40: An MNC’s short-term financing decisions are satisfied in the____market, while its medium debt financing decisions are satisfied in the____market
Answer
Answer: International money; International credit
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