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Fin 535

ybfgvapunetr08

Business Finance

Question Description





Question 1






  2.  

    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






  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






  2.  

    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






  2.  

    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






  2.  

    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






  2.  

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

    Answer



    Italy




    Spain




    Mexico




    Canada



5 points  


Question 7






  2.  

    ____ 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






  2.  

    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






  2.  

    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






  2.  

    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






  2.  

    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






  2.  

    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






  2.  

    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






  2.  

    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






  2.  

    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






  2.  

    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






  2.  

    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






  2.  

    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






  2.  

    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






  2.  

    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






  2.  

    Currency options are commonly traded through
    the ____ system.

    Answer



    robot




    Euro




    GLOBEX




    Scope



5 points  


Question 22






  2.  

    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






  2.  

    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






  2.  

    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






  2.  

    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






  2.  

    Which of the following countries have not
    adopted the euro?

    Answer



    Germany




    Italy




    Switzerland




    France



5 points  


Question 27






  2.  

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

    Answer



    monetary




    fiscal




    worker
    compensation




    foreign
    relations


5 points  


Question 28






  2.  

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

    Answer



    euro exchange
    rate




    fixed




    dirty
    float




    flexible



5 points  


Question 29






  2.  

    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






  2.  

    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






  2.  

    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






  2.  

    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






  2.  

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

    Answer



    forward realignment
    arbitrage




    triangular
    arbitrage




    covered interest
    arbitrage




    locational
    arbitrage


5 points  


Question 34






  2.  

    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






  2.  

    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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avprfgzrt (101)
UT Austin
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