Fin 535

Business Finance

Fin 535

Question Description

I’m working on a Business exercise and need support.

Question 1

The least risky method by which firms conduct
international business is:
Answer

Franchising.

The acquisitions of existing
operations.

International
Trade.

The establishment of new
subsidiaries.

Licensing

5 points

Question 2

Assume that an American firm wants to engage in
international business without major investment in the foreign country. Which
method is least appropriate in this situation?
Answer

International
Trade

Licensing

Franchising

Direct foreign
investment

5 points

Question 3

Which of the following does not constitute a
form of direct foreign investment?
Answer

Franchising

International
trade

Joint
ventures

Acquisitions of existing
operations

Establishment of new foreign
subsidiaries

5 points

Question 4

An MNC may be more exposed to agency problems
if most of its shares are held by:
Answer

a few mutual
funds

a widely dispersed set of
individual investors

a few pension
funds

individual
stockholders

5 points

Question 5

With regard to corporate goals, an MNC is
mostly concerned with maximizing ____, and a purely domestic firm is mostly
concerned with maximizing ____.
Answer

shareholder wealth; short-term
earnings

shareholder wealth; shareholder
wealth

short-term earnings; sales
volume

short-term earnings; shareholder
wealth

5 points

Question 6

____ purchases more U.S. exports than the
other countries listed here.
Answer

Italy

Spain

Mexico

Canada

5 points

Question 7

____ represent aid, grants, and gifts from one
country to another.
Answer

Transfer
payments

Factor
income

The balance of
trade

The balance of
payments

The capital
account

5 points

Question 8

The World Bank was established
to:

Answer

	enhance development solely in Asia through grants.
	enhance economic development through non-subsidized loans (at market interest rates).
	enhance economic development through low-interest rate loans (below-market rates).
	enhance economic development of the private sector through investment in stock of corporations.

5 points

Question 9

A General Agreement on Tariffs and Trade
(GATT) accord in 1993 called for:
Answer

increased trade restrictions
outside of North America.

lower trade restrictions around the
world.

uniform environmental standards
around the world.

uniform worker health
laws.

5 points

Question 10

The ____, an accord among 117 nations, called
for lower tariffs around the world.
Answer

General Agreement on Tariffs and
Trade (GATT)

North American Free Trade Agreement
(NAFTA)

Single European Act of
1987

European Union
Accord

5 points

Question 11

If a U.S. firm desires to avoid the risk from
exchange rate fluctuations, and it will need C$200,000 in 90 days to make
payment on imports from Canada, it could:

Answer

	obtain a 90-day forward purchase contract on Canadian dollars.
	obtain a 90-day forward sale contract on Canadian dollars.
	purchase Canadian dollars 90 days from now at the spot rate.
	sell Canadian dollars 90 days from now at the spot rate.

5 points

Question 12

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

derivative

long-term
credit

money

foreign
exchange

5 points

Question 13

Futures contracts are typically ____; forward
contracts are typically ____.
Answer

sold on an exchange; sold on an
exchange

offered by commercial banks; sold
on an exchange

sold on an exchange; offered by
commercial banks

offered by commercial banks;
offered by commercial banks

5 points

Question 14

Which currency is used the most to denominate
Eurobonds?
Answer

the British
pound.

the Japanese
yen.

the U.S.
dollar.

the Swiss
franc.

5 points

Question 15

A syndicated loan:

Answer

	represents a loan by a single bank to a syndicate of corporations.
	represents a loan by a single bank to a syndicate of country governments.
	represents a direct loan by a syndicate of oil-producing exporters to a less developed country.
	represents a loan by a group of banks to a borrower.

5 points

Question 16

Assume that Swiss investors have francs
available to invest in securities, and they initially view U.S. and British
interest rates as equally attractive. Now assume that U.S. interest rates
increase while British interest rates stay the same. This would likely
cause:

Answer

	the Swiss demand for dollars to decrease and the dollar will depreciate against the pound.
	the Swiss demand for dollars to increase and the dollar will depreciate against the Swiss franc.
	the Swiss demand for dollars to increase and the dollar will appreciate against the Swiss franc.
	the Swiss demand for dollars to decrease and the dollar will appreciate against the pound.

5 points

Question 17

Which of the following events would most
likely result in an appreciation of the U.S. dollar?
Answer

U.S. inflation is very
high.

The Fed indicates that it will
raise U.S. interest rates.

Future U.S. interest rates are
expected to decline.

Japan is expected to increase
interest rates in the near
future.

5 points

Question 18

When the "real" interest rate is relatively
low in a given country, then the currency of that country is typically expected
to be:

Answer

	weak, since the country's quoted interest rate would be high relative to the inflation rate.
	strong, since the country's quoted interest rate would be low relative to the inflation rate.
	strong, since the country's quoted interest rate would be high relative to the inflation rate.
	weak, since the country's quoted interest rate would be low relative to the inflation rate.

5 points

Question 19

Any event that reduces the U.S. demand for
Japanese yen should result in a(n) ____ in the value of the Japanese yen with
respect to ____, other things being equal.
Answer

increase; U.S.
dollar

increase; nondollar
currencies

decrease; nondollar
currencies

decrease; U.S.
dollar

5 points

Question 20

The equilibrium exchange rate of pounds is
$1.70. At an exchange rate of $1.72 per pound:

Answer

	U.S. demand for pounds would exceed the supply of pounds for sale and there would be a shortage of pounds in the foreign exchange market.
	U.S. demand for pounds would be less than the supply of pounds for sale and there would be a shortage of pounds in the foreign exchange market.
	U.S. demand for pounds would exceed the supply of pounds for sale and there would be a surplus of pounds in the foreign exchange market.
	U.S. demand for pounds would be less than the supply of pounds for sale and there would be a surplus of pounds in the foreign exchange market.
	U.S. demand for pounds would be equal to the supply of pounds for sale and there would be a shortage of pounds in the foreign exchange market.

5 points

Question 21

Currency options are commonly traded through
the ____ system.
Answer

robot

Euro

GLOBEX

Scope

5 points

Question 22

European currency options can be exercised
____; American currency options can be exercised
____.

Answer

	any time up to the expiration date; any time up to the expiration date
	any time up to the expiration date; only on the expiration date
	only on the expiration date; only on the expiration date
	only on the expiration date; any time up to the expiration date

5 points

Question 23

If you have a position where you might be
obligated to buy Euros, you are:
Answer

a call
writer.

a put
writer.

a put
buyer.

a futures
seller.

5 points

Question 24

Currency futures contracts sold on an
exchange:

Answer

	contain a commitment to the owner, and are standardized.
	contain a commitment to the owner, and can be tailored to the desire of the owner.
	contain a right but not a commitment to the owner, and can be tailored to the desire of the owner.
	contain a right but not a commitment to the owner, and are standardized.

5 points

Question 25

If the spot rate of the euro increased
substantially over a one-month period, the futures price on euros would likely
____ over that same period.
Answer

increase
slightly

decrease
substantially

increase
substantially

stay the
same

5 points

Question 26

Which of the following countries have not
adopted the euro?
Answer

Germany

Italy

Switzerland

France

5 points

Question 27

Countries that have adopted the euro must
agree on a single ____ policy.
Answer

monetary

fiscal

worker
compensation

foreign
relations

5 points

Question 28

During the period 1944-1971, the U.S. used a
____ system.
Answer

euro exchange
rate

fixed

dirty
float

flexible

5 points

Question 29

A weak dollar is normally expected to
cause:
Answer

high unemployment and high
inflation in the U.S.

high unemployment and low
inflation in the U.S.

low unemployment and low inflation
in the U.S.

low unemployment and high
inflation in the U.S.

5 points

Question 30

Which of the following is the most likely
reason for revaluation of a currency?
Answer

To reduce
inflation.

To stimulate the local
economy.

To increase the amount of
exports.

To increase balance-of-trade
surplus.

5 points

Question 31

Assume that interest rate parity holds. U.S.
interest rate is 13% and British interest rate is 10%. The forward rate on
British pounds exhibits a ____ of ____ percent.
Answer

discount;
2.73

premium;
2.73

discount;
3.65

premium;
3.65

5 points

Question 32

Based on interest rate parity, the larger the
degree by which the foreign interest rate exceeds the U.S. interest rate,
the:

Answer

	larger will be the forward discount of the foreign currency.
	larger will be the forward premium of the foreign currency.
	smaller will be the forward premium of the foreign currency.
	smaller will be the forward discount of the foreign currency.

5 points

Question 33

If interest rate parity exists, then ____ is
not feasible.
Answer

forward realignment
arbitrage

triangular
arbitrage

covered interest
arbitrage

locational
arbitrage

5 points

Question 34

Points above the IRP line represent
situations where:

Answer

	covered interest arbitrage is feasible from the perspective of domestic investors and results in the same yield as investing domestically.
	covered interest arbitrage is feasible from the perspective of domestic investors and results in a yield above what is possible domestically.
	covered interest arbitrage is feasible from the perspective of foreign investors and results in a yield above what is possible in their local markets.
	covered interest arbitrage is not feasible for neither domestic nor foreign investors.

5 points

Question 35

Which of the following is an example of
triangular arbitrage initiation?

Answer

	buying a currency at one bank's ask and selling at another bank's bid, which is higher than the former bank's ask.
	buying Singapore dollars from a bank (quoted at $.55) that has quoted the South African rand (SAR)/Singapore dollar (S$) exchange rate at SAR2.50 when the spot rate for the rand is $.20.
	buying Singapore dollars from a bank (quoted at $.55) that has quoted the South African rand/Singapore dollar exchange rate at SAR3.00 when the spot rate for the rand is $.20.
	converting funds to a foreign currency and investing the funds overseas.

5 points

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UT Austin

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	Franchising.
	The acquisitions of existing operations.
	International Trade.
	The establishment of new subsidiaries.
	Licensing

	International Trade
	Licensing
	Franchising
	Direct foreign investment

	Franchising
	International trade
	Joint ventures
	Acquisitions of existing operations
	Establishment of new foreign subsidiaries

	a few mutual funds
	a widely dispersed set of individual investors
	a few pension funds
	individual stockholders

	shareholder wealth; short-term earnings
	shareholder wealth; shareholder wealth
	short-term earnings; sales volume
	short-term earnings; shareholder wealth

	Transfer payments
	Factor income
	The balance of trade
	The balance of payments
	The capital account

	increased trade restrictions outside of North America.
	lower trade restrictions around the world.
	uniform environmental standards around the world.
	uniform worker health laws.

	General Agreement on Tariffs and Trade (GATT)
	North American Free Trade Agreement (NAFTA)
	Single European Act of 1987
	European Union Accord

	sold on an exchange; sold on an exchange
	offered by commercial banks; sold on an exchange
	sold on an exchange; offered by commercial banks
	offered by commercial banks; offered by commercial banks

	the British pound.
	the Japanese yen.
	the U.S. dollar.
	the Swiss franc.

	Italy
	Spain
	Mexico
	Canada

	derivative
	long-term credit
	money
	foreign exchange

	increase; U.S. dollar
	increase; nondollar currencies
	decrease; nondollar currencies
	decrease; U.S. dollar

	robot
	Euro
	GLOBEX
	Scope

	U.S. inflation is very high.
	The Fed indicates that it will raise U.S. interest rates.
	Future U.S. interest rates are expected to decline.
	Japan is expected to increase interest rates in the near future.

	increase slightly
	decrease substantially
	increase substantially
	stay the same

	high unemployment and high inflation in the U.S.
	high unemployment and low inflation in the U.S.
	low unemployment and low inflation in the U.S.
	low unemployment and high inflation in the U.S.

	To reduce inflation.
	To stimulate the local economy.
	To increase the amount of exports.
	To increase balance-of-trade surplus.

	forward realignment arbitrage
	triangular arbitrage
	covered interest arbitrage
	locational arbitrage

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