Quiz 1

Created by keatennorth 

Upgrade to
remove ads

When the foreign exchange market opens in the US each morning, the opening exchange rate quotations will be based on the:

prevailing prices in locations where the foreign exchange markets have been opened (london)

which theory identifies specialization as a reason for international business?

the theory of comparative advantage

Licensing obligates a firm to provide________, while franchising obligates a firm to provide _________.

its technology; a specialized sales or services strategy

(T or F) If a US-based focuses completely on exporting, then its valuation would likely be adversely affected if most currencies were expected to appreciate against the dollar over time.

FALSE

The valuation of an MNC should rise when an event cause the expected cash flows from foreign to ____ and when foreign currencies denominating these cash flows are expected to ____.

increase; appreciate

Who purchases more US exports than the other countries?

Canada

The US typically has a balance of trade surplus with who?

No one

Assume the US has a balance of trade surplus with the Country of Thor. When individuals in Thor manufacture CDs and DVDs that look almost exactly like the original product produced in the US and other countries, they _______ the US balance of surplus with Thor. This activity is called _________.

reduce; pirating

Direct foreign investment into the US represents a ______.

capital inflow

Assume a US 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?

purchase call option

Assume that a bank's bid rate on japanese yen is $.0041 and its ask rate is $.0043. Its bid-ask percentage spread is?

Ask-Bid/ask
=4.65%

The Basel accord is focused on eliminating inconsistencies in _______across countries.

capital requirements

What is not a concern about the North American Free Trade Agreement?

its impact on US inflation

LIBOR is what?

London interbank offer rate
the interest rate commonly charged for loans between banks

A syndicated loan is what?

a loan by a group of banks to a borrower

A japanese yen is worth $.0080, and a Fijian dollar (F$) is worth $.5900. What is the value of the yen in Fijian dollars (how many Fijian dollars do you need to buy a yen)?

.0080/.5900=.014

(T or F) The exchange rates of smaller countries are very stable because the market for their currency is very liquid?

FALSE

An obligation to purchase a specific amount of currency at a future point in time is called a what?

forward contract

The value of the Australian dollar today is $0.73. Yesterday, the value of the Australian dollar was $0.69. The Australian dollar _______ by _______%

.69------>.73
appreciated; 5.8%

If the Japanese yen is expected to appreciate against the US dollar and interest rates in the US and Japan are similar, banks may try speculating on this anticipated exchange rate movement by borrowing _______ and investing in ________

yen increase while dollar decreases
dollars; yen

What five factors influence exchange rates?

-inflation
-income
-interest rates
-government/politics
-expectations

Look at number 2 on your quiz

...

Forward contract

an obligation to purchase a specific amount of currency at a future point in time at a certain exchange rate

currency futures contract

Specifies a standard volume of a particular currency to be exchanged on a specific settlement date

Currency call option

provides the right to buy a specific currency at a specific price (strike price or exercise price)

Currency put option

provides the right to sell a specific currency at a specific price within a specific period of time

If a US based company is valued at the present value of its future dollar cash flows, what two additional factors must be considered to value the company if it begins operations in Mexico?

Mexican earnings and exchange rate associated with the peso
Value=Earnings(Cash flows)/(1+K)^t

The commonly accepted goal of the MNC is to:

maximize shareholder wealth

what could reduce agency problems for an MNC?

stock options as managerial compensation
hostile takeover threat
investor monitoring

The J Curve effect describes what?

the short-run tendency for a country's balance of trade to deteriorate even while its currency is depreciating

The demand for US exports tends to increase when?

the currencies of foreign countries strengthens against the dollar

What are some important bank characteristics to customers in need of foreign exchange?

-quote of competitiveness
-speed of execution
-forecasting advice
-advice about current market conditions

Eurobonds

are usually issued in bearer form
can be sold to anyone

the real interest rate adjusts the nominal interest rate for what?

inflation

Please allow access to your computer’s microphone to use Voice Recording.

Having trouble? Click here for help.

We can’t access your microphone!

Click the icon above to update your browser permissions above and try again

Example:

Reload the page to try again!

Reload

Press Cmd-0 to reset your zoom

Press Ctrl-0 to reset your zoom

It looks like your browser might be zoomed in or out. Your browser needs to be zoomed to a normal size to record audio.

Please upgrade Flash or install Chrome
to use Voice Recording.

For more help, see our troubleshooting page.

Your microphone is muted

For help fixing this issue, see this FAQ.

Star this term

You can study starred terms together

NEW! Voice Recording

Create Set