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Multiple Choice Identify the letter of the choice that best completes the statement or answers the question. ____ 1. Which of the following theories identifies specialization as a reason for international business? a. theory of comparative advantage. b. imperfect markets theory. c. product cycle theory. d. none of the above. ____ 2. A product cycle is the process by which a firm provides a specialized sales or service strategy, support assistance, and possibly an initial investment in the franchise in exchange for periodic fees. a. true. b. false. ____ 3. Which of the following is not a provision or result of the Single European Act of 1987? a. increased regulatory uniformity among European countries. b. the phasing in of a common currency for all European countries by 1992. c. the removal of many taxes on goods traded between European countries. d. firms' ability to achieve economies of scale. e. all of the above. ____ 4. Which of the following is not mentioned in the text as an additional risk resulting from international business? a. exchange rate fluctuations. b. political risk. c. interest rate risk. d. exposure to foreign economies. ____ 5. Due to the larger opportunity set of funding sources around the world from which an MNC can choose, an MNC may be able to obtain capital at a lower cost than a purely domestic firm. a. true. b. false. ____ 6. Although MNCs may need to convert currencies occasionally, they do not face any exchange rate risk, as exchange rates are stable over time. a. true. b. false.
7. If the home currency begins to appreciate against other currencies, this should ____________ the current account balance, other things equal (assume that substitutes are readily available in the countries, and that the prices charged by firms remain the same). a. increase b. have no impact on c. reduce d. all of the above are equally possible
8. According to the text, international trade (exports plus imports combined) as a percentage of GDP is: a. higher in the U.S. than in European countries. b. lower in the U.S. than in European countries. c. higher in the U.S. than in about half the European countries, and lower in the U.S. than the others. d. about the same in the U.S. as in European countries.
9. Like the International Monetary Fund (IMF), the _______________ is composed of a collection of nations as members. However, unlike the IMF, it uses the private rather than the government sector to achieve its objectives. a. World Bank b. International Financial Corporation (IFC) c. World Trade Organization (WTO) d. International Development Association (IDA) e. Bank for International Settlements (BIS)
____ 10. A weakening of the U.S. dollar with respect to the British pound would likely reduce the U.S. exports to Britain and increase U.S. imports from Britain. a. true. b. false. ____ 11. The World Bank extends loans only to developed nations, while the International Development Association (IDA) extends loans only to developing nations. a. true. b. false. ____ 12. Portfolio investment represents transactions involving long-term financial assets (such as stocks and bonds) between countries that do not affect the transfer of control. a. true. b. false. ____ 13. Intracompany trade represents the exporting of products by one country to other countries below cost.
0080. true. the equivalent of between $10. Governments intervened to prevent exchange rates from moving more than 1 percent above or below their initially established levels. ____ 17. The agreement lasted from 1944 until 1971.000. b.014.5900. d. ____ 14. d. how many Fijian dollars do you need to buy a yen)? a. fixed within narrow boundaries. Which of the following is not true regarding the Bretton Woods Agreement? a. c. floating. the equivalent of $1. that is currencies were not exchanged. A tariff is a maximum limit on imports.000. c. ____ 16. 0.e. It called for fixed exchange rates between currencies. e. A Japanese yen is worth $. false. ____ 15. Each country used gold to back its currency. none of the above. a.000 to $10. d. false. 125.69. the equivalent of $1 million or more. b. b. b.000 and $100. d. c. From 1944 to 1971. and a Fijian dollar (F$) is worth $. true. e. floating. but gold was used to pay for all foreign transactions. 73.75. c..000. 1. ____ 18. . nonexistent. What is the value of the yen in Fijian dollars (i.000 and $200. and not subject to central bank intervention. ____ 19. The Single European Act and the Basel Accord prevented a trend toward increased globalization in the banking industry. b. Eurocurrency market transactions normally represent: a.a. the equivalent of between $100. the exchange rate between any two currencies was typically: a. but subject to central bank intervention. b. All of the above are true regarding the Bretton Woods Agreement.
a. European currency options can be exercised _______. A put option on British pounds has a strike (exercise) price of $1. there will be no impact ____ 21. only on the expiration date c. d. ____ 23. only on the expiration date. at a discount.48. inflation remains unchanged. b. ____ 20. Currency futures contracts sold on an exchange: a. b.S. this is expected to place _______ pressure on the value of the Australian dollar with respect to the U. true. any time up to the expiration date. This put option can be referred to as: a.S. and are standardized. The futures market and the forward market are primarily used for speculating. d. contain a right but not a commitment to the owner. . only on the expiration date d. The futures market is primarily used for hedging while the forward market is primarily used for speculating. out of the money. c. American currency options can be exercised _______. b. any time up to the expiration date b. downward c.55. c. at the money. dollar. d. c. The futures market and the forward market are primarily used for hedging. in the money. and can be tailored to the desire of the owner. b. contain a commitment to the owner. and can be tailored to the desire of the owner.a. a. either upward or downward (depending on the degree of the increase in Australian inflation) d. contain a commitment to the owner. only on the expiration date. The present exchange rate is $1. and are standardized. any time up to the expiration date ____ 24. If inflation increases substantially in Australia while U. false. Which of the following is true? a. upward b. The futures market is primarily used by speculators while the forward market is primarily used for hedging. contain a right but not a commitment to the owner. any time up to the expiration date. none of the above. ____ 22.
The lower bound of the call option premium is the greater of zero and the difference between the spot rate and the exercise price. a. downward. a. b. true. true. d. establishing that exchange rates of most major currencies were to be allowed to fluctuate 1% above or below their initially set values. which places _______ pressure on U.____ 25. false.S. upward. all of the above are instruments used to cover foreign currency positions. true. c. ____ 26. bond prices. d. the establishment of the European Monetary System (EMS). b. A weaker dollar places _______ pressure on U. which in turn places _______ pressure on U. a. The highest amount a buyer of a call or a put option can lose is the exercise price. upward. If an actual put option premium is less than what is suggested by the put-call parity relationship. ____ 29. c. establishing specific rules for when tariffs and quotas could be imposed by governments. false. ____ 28. the upper bound of a currency call option is the spot rate. ____ 30. arbitrage can be conducted. b. b. options. non-deliverable forward contracts. downward d. upward.-based MNCs to cover their foreign currency positions? a. upward . upward. upward b. ____ 27. A primary result of the Bretton Woods Agreement was: a.S. interest rates. downward. forward contracts. upward. downward. inflation. a. futures contracts. b. e. downward c. false. Which of the following is not an instrument used by U.S. establishing that exchange rates of most major currencies were to be allowed to fluctuate freely without boundaries (although the central banks did have the right to intervene when necessary).S.
locational arbitrage . c.S. buy dollars with foreign currency. b. true. b. Which of the following countries was probably the least affected (directly or indirectly) by the Asian crisis? a. U. Thailand. ____ 35. e. false. Under a fixed exchange rate system. true. The euro is the currency: a. lower interest rates. b. If interest rate parity exists. ____ 32. ____ 33. Russia. forward realignment arbitrage b. then _______ is not feasible. Malaysia. inflation would have a greater impact on inflation in other countries than it would under a freely floating exchange rate system. a. ____ 34. An advantage of a fixed exchange rate system is that governments are not required to constantly intervene in the foreign exchange market to maintain exchange rates within specified boundaries.____ 31. China. a. adopted in all European countries as of 1999. none of the above. covered interest arbitrage d. sell dollars for foreign currency. Indonesia. adopted in all western European countries as of 1999. triangular arbitrage c. d. false. ____ 36. b. b.S. a. none of the above. c. Assume that the U. It has been argued that the exchange rate can be used as a policy tool. adopted in all eastern European countries as of 1999. d. Which of the following is an appropriate action given this scenario? a. c. d. government would like to reduce inflation.
what is the dollar profit you will have realized after 180 days? a.500. dollar should _______.000 to invest Current spot rate of Australian dollar (A$) 180-day forward rate of the Australian dollar 180-day interest rate in the U.62 $. and the exchange rate of the Mexican peso (MXP) with respect to the U.0% If you conduct covered interest arbitrage. You just received a gift from a friend consisting of 1. increase the probability the IFE will hold. b. appreciate. d.00. Assume the following information: You have $900. c.S. appreciate e. c. ____ 39. the exchange rate of the New Zealand dollar (NZ) with respect to the U. appreciate c.548. You observe that exchange rate quotes for the baht are currently $. B and C. NZ$1 = MXP2. Because there are sometimes no substitutes for traded goods. depreciate b. this will: a. which you would like to exchange for Australian dollars (A$). 180-day interest rate in Australia = = = = $.903.5% 3. depreciate. as you and others perform triangular arbitrage.S.48.64 3. Under purchasing power parity.576. appreciate. none of the above.S. and $1 = MXP5. A$25.000. b. appreciate ____ 38.043. d. $31. reduce the probability that PPP shall hold.93. a.000 Thai baht. increase the probability that PPP shall hold. How many Australian dollars should you expect to receive for your baht? a.023. depreciate. Given this information. the future spot exchange rate is a function of the initial spot rate in equilibrium and: . depreciate d. ____ 41.____ 37. dollar should _______. c. while quotes for the Australian dollar are $. $27. $61. A$39. $56. A$553. ____ 40. d. remain stable. Assume the following exchange rates: $1 = NZ$3. b.
weaken c. d. a. semistrong-form efficiency c. The interest rate variable is inversely related to the exchange rate. ____ 45. The interest rate variable is directly related to the exchange rate.4. higher. Forecasting performance has improved substantially in recent years. The interest rate variable is directly related to the exchange rate. and its currency will _______. Which of the following is true? a. The interest rate variable is inversely related to the exchange rate. then _______ would be refuted. According to the international Fisher effect. and the inflation variable is directly related to the exchange rate. higher. Assume the regression coefficient of the interest rate differential variable is -. and the inflation variable is directly (positively) related to the interest rate variable. its inflation rate will likely be _______ than other countries. b. but not all relevant private information. ____ 44. a. if Venezuela has a much higher nominal rate than other countries. Assume a forecasting model uses inflation differentials and interest rate differentials to forecast the exchange rate. none of the above.a. A and B . strong-form efficiency d. b. b. the income differential. Use of the absolute forecast error as a percent of the realized value is a good measure to use in detecting a forecast bias. d. strengthen ____ 43. ____ 42. weaken d. and the inflation variable is directly related to the exchange rate. the forward discount or premium. lower. c. Forecasts in recent years have been very accurate. and the inflation variable is directly related to the interest rate variable. the inflation differential. None of the above. c. lower. and the coefficient of the inflation differential variable is . If today's exchange rate reflects all relevant public information about the euro's exchange rate.5. strengthen b. Which of the following is true according to the text? a. weak-form efficiency b. c. d.
A forecasting technique based on fundamental relationships between economic variables and exchange rates. is referred to as technical forecasting. ____ 50. such as inflation. rather than nominal amounts. true. a. false. even though the company has used a market-based forecast based on the forward rate. Gamma Corporation has incurred large losses over the last ten years due to exchange rate fluctuations of the Egyptian pound (EGP). Gamma has reason to believe that its past forecasts have ______________ the realized spot rate. . using the volatility of historical exchange rate movements as a forecast for the future. a. deriving the exchange rate's implied standard deviation from the currency option pricing model. management believes its forecasts to be biased.3. percentages. b. true. using a time series of volatility patterns in previous periods. correctly estimated d. ____ 49. b. false.e. When measuring forecast performance of different currencies. Thus. where St is the spot rate of the pound in year t and Ft-1 is the forward rate of the pound in year t-1. a. Foreign exchange markets appear to be strong-form efficient. true. true. false. none of the above ____ 47. The following regression model was estimated to determine if the forecasts over the last ten years were biased: St . Thus. a. Market-based forecasting involves the use of historical exchange rate data to predict future values. Which of the following is not a method of forecasting exchange rate volatility? a. using the absolute forecast error as a percentage of the realized value to improve your forecast. d. false. b. underestimated c. Regression results reveal coefficients of a0 and a1 = 1. it is often useful to adjust for their relative sizes. Consequently. are often used to compute forecast errors. a. b. ____ 48.a0 + a1Ft-1 + µ t. overestimated b. B and C ____ 46. ____ 51. b. c.
b.000 outflow. a. 30% of the MNC's funds are lev and 70% are leu. Consider an MNC that is exposed to the Bulgarian lev (BGL) and the Romanian leu (ROL). 13. b. 12. c. c.000. d. while Subsidiary B has net outflows in Australian dollars of A$1. the standard deviation of this two-currency portfolio is approximately: a. A and B. ____ 55.000 outflow.000. $275.000. b. A firm produces goods for which substitute goods are produced in all countries. ____ 56. e. increase the firm's exports denominated in the local currency. d. c.000 inflow. $500. The correlation coefficient between movements in the value of the lev and the leu is . Based on this information. none of the above. ____ 53. What is the net inflow or outflow as measured in U. true. dollars? a. purely domestic firms only. none of the above. Two highly negatively correlated currencies act almost as if they are the same currency. The expected exchange rate of the Australian dollar is $. The standard deviation of exchange movements is 10% for lev and 15% for leu. a. ____ 57. b. increase the firm's cash outflow required to pay for imported supplies denominated in a foreign currency. b.28%. Translation exposure is less of a concern when earnings are not remitted by the subsidiary to the parent.85. d. true. $500. Appreciation of the firm's local currency should: a.000 inflow. $275. ____ 54.____ 52. increase the returns earned on the firm's foreign bank deposits. Economic exposure can affect: a.55. d. 14. . increase local sales as it reduces foreign competition in local markets. 17.S. c.04%. MNCs only.15%. Subsidiary A of Mega Corporation has net inflows in Australian dollars of A$1.50%.500. false.
d.000. a forward sale of yen. false. e. has 1. Foghat Co. ____ 61. the most appropriate hedge would be: a. c. ____ 62.52 Probability 20% 30% 50% The 90-day forward rate of the Australian dollar is $. . b.____ 58. The forecasted spot rate of the Australian dollar in 180 days is: Future Spot Rate $. purchase euro currency call options.50 per Australian dollar. desired to lock in a minimum rate at which it could sell its net receivables in Japanese yen but wanted to be able to capitalize if the yen appreciates substantially against the dollar by the time payment arrives. 0%. d. ____ 60. e. purchase euros forward. b. a money market hedge. selling yen put options. a. Put options are available for a premium of $. If a Salerno Inc. sell euros forward. Assuming that the firm is correct.48 $.000 euros as receivables due in 30 days.46 $. purchasing yen put options. false. You are the treasurer of Arizona Corporation and must decide how to hedge (if at all) future receivables of 350. What is the probability that the put option will be exercised (assuming Arizona purchased it)? a. the ideal strategy is to: a. remain unhedged. true.02 per unit and an exercise price of $. Firms with more in foreign costs than in foreign revenues will be favorably affected by a stronger foreign currency. c. b. a. purchase euro currency put options.50. and is certain that the euro will depreciate substantially over time. true.000 Australian dollars (A$) 180 days from now. b. purchasing yen call options. A reduction in hedging will probably reduce transaction exposure. ____ 59.
true. . Under this scenario. decrease b. true.b. MNCs generally do not perceive their foreign exchange management as a profit center. a. translation losses _______. decrease or increase. true. Assume the correlation coefficient between the returns on existing projects and the return on a proposed foreign project is 1. Also assume the returns on existing projects and the new project are equal. true. a. If a U. b. are not taxed ____ 67. a. depending on the exact size of the returns and standard deviations d. or even existing plants) in foreign countries. are taxed c. and gains on forward contracts used to hedge translation exposure _______. A money market hedge involves taking a money market position to cover a future payables or receivables position. 80%.S. a. b. ____ 66. ____ 64. false. none of the above. a. Hedging the position of individual subsidiaries is generally necessary. are tax deductible. are not tax deductible. increase c. none of the above ____ 68. are taxed b. b. even if the overall performance of the MNC is already insulated by the offsetting positions between subsidiaries. c. false. false. are not taxed d. Direct foreign investment (DFI) represents investment in real assets (such as land. the ideal situation from the parent's perspective is a ____ after the subsidiary is established. are tax deductible. b. and funds from the subsidiary will be periodically sent to the parent. With regard to hedging translation exposure. 50%. parent is setting up a French subsidiary. buildings. false. undertaking the proposed project will ___________ the variance of the firm's overall returns. a. and that the existing projects have a lower standard deviation than the proposed project. ____ 65. ____ 63. are not tax deductible. d. ____ 69.
Revenues are expected to increase by 9% over the • . B and C are both ideal. Refer to Exhibit 14-1. a.000.848.848. If a host government restricts the remittances from a foreign subsidiary. -$803.14 Year 3 $. All cash flows generated from the project will be remitted to the parent at the end of each year. What is the net present value of the Norwegian project? a. has screened several targets.829. b. weak euro d. only one eligible target remains in Malaysia.12 Year 4 $.135. and the project is of the same risk as Baps' existing projects. at which time it expects to sell the firm for 500 million Malaysian ringgit (MYR) after deducting the amount for any taxes paid. stable euro c.-based MNC. d.803. Inc. The initial investment required by the parent is $5. false. Baps would terminate the project after four years. Assume that Baps Corporation is considering the establishment of a subsidiary in Norway.15 ____ 70. ____ 71.a.S.000.000 Year 2 NOK15. Listed below are the estimated cash flows the Norwegian subsidiary will generate over the project's lifetime in Norwegian kroner (NOK): Year 1 NOK10. true. Baps' cost of capital is 13%. Klimewsky expects a strong Malaysian economy. Exhibit 15-1 Klimewsky.000. Consequently. Baps' exchange rate forecast for the Norwegian kroner over the project's lifetime is listed below: Year 1 $. c. strengthening euro b.000 The current exchange rate of the Norwegian kroner is $. none of the above.048. $5.13 Year 2 $. a possible solution is to let the subsidiary obtain partial financing for the project. a U. $1. b. If the project is undertaken.000 Year 4 NOK20.. Klimewsky would like you to value this target and has provided you with the following information: • Klimewsky expects to keep the target for three years. the estimates for revenues for the next year are MYR300 million. Based on economic and political considerations.000.000 Year 3 NOK17.000.000.
true. • • • • • • ____ 72. none of the above ____ 73. Based on the information provided above. 155.23. false. Klimewsky uses the prevailing exchange rate of the Malaysian ringgit as the expected exchange rate for the next three years. a. Depreciation expenses are expected to be MYR15 million per year for each of the next three years.0 e.5 c. 143. Klimewsky's required rate of return on similar projects is 13%.following two years.9 b. . ____ 74. This exchange rate is currently $. true. The Malaysian tax rate on the target's earnings is expected to be 30%. false. The target has 11 million shares outstanding. The target's current stock price is MYR35 per share. Refer to Exhibit 15-1. b. The target will need MYR9 million in cash each year to support existing operations. a. 138. Inc. a. the net present value of the Malaysian target is $_______ million. • • Cost of goods sold are expected to be 60% of revenues. b. Most countries discourage hostile takeovers.0 d. Selling and administrative expenses are expected to be MYR40 million in each of the next three years. Any cash flows remaining after taxes are remitted by the target to Klimewsky. Premiums required to entice a target's board of directors to approve an acquisition commonly range from 60 percent to 80 percent of the target's market price. 111.
____ 78. b. c. and the return on an average stock is 13%. an MNC's "global" target capital structure is: a. b. c. the host government's tax rates charged on remitted earnings. the state of the economy in Germany. MNC Corporation has a beta of 2. ____ 77. none of the above. the possibility of a withholding tax imposed by the German government. false. b. MNCs: a. d. and these changes are negatively correlated. a. d. always debt-intensive. d. ____ 79. c.____ 75. this analysis may indicate that a previously accepted project should be divested. none of the above. true. ____ 76. sometimes different from an MNC's "local" capital structures (at subsidiaries). If potential acquirers are based in different countries.0. According to the text: a. the cost of debt for each country is somewhat stable over time. The country risk characteristic that would best address this concern is: a. Even after an MNC's accept/reject decision of a foreign acquisition has been made. the cost of debt for countries change over time. In fact. According to the text. their required rates of return when considering a specific target will only vary if the desired use of the target is different. the cost of debt for countries change over time. d. The risk-free rate of interest is 5%. It is mainly concerned with the subsidiary's ability to generate sufficient sales there. it should be reassessed at various times. a. the possibility of blocked funds. use only parent financing in foreign countries to support foreign subsidiaries. b. b. false. use only debt financing in foreign countries to support foreign subsidiaries. true. and these changes are positively correlated. the cost of debt for countries change over time. An MNC considers direct foreign investment in Germany. c. ____ 81. b. ____ 80. use only equity financing in foreign countries to support foreign subsidiaries. and are not correlated. always equity-intensive. According to the text. What is the required rate of return on MNC stock? .
39%. 21%. In a(an) ___________ swap. a. ____ 86. hedge exchange rate risk.035 in years 1. more. a. convert to floating-rate debt. currency. interest rate . the funds needed to make coupon payments will increase. what is the financing cost of these bonds? a. d. 2. interest rate. c. none of the above. low b. ____ 85. c.a. b. Minnie Corp. An interest rate swap is commonly used by an issuer of fixed-rate bonds to: a. In general. 13%. remove the default risk of its debt. ____ 82. If the koruna is expected to appreciate from its current level of $.000. 16%. in a(an) ____________ swap. e. low d.03 to $. currency b. none of the above ____ 83. and $.18%. high c. 41%. true. respectively. 17%. MNCs probably prefer to use ____________ foreign debt when their foreign subsidiaries are subject to ___________ local interest rates.034. has decided to issue three-year bonds denominated in 5. B and C e. two parties agree to periodically exchange foreign currencies. ____ 84. a. If the currency denominating a foreign bond depreciates against the firm's home currency.and 3. lock in the interest payments on debt. b.000 Slovakian koruna (SKK) at par. 23. The bonds have a coupon rate of 17%. less. c. more. d. 22. false. 23. two parties agree to exchange payments associated with bonds. b. b. d. $.36%.032.
it would sell euros forward. true. a. c. Bad Company prefers fixed to variable rate debt. a. __________ was established in 1934 with the intention to facilitate Soviet-American trade. If an MNC uses a long-term forward contract to hedge the exchange rate risk associated with a bond denominated in euros. Private Export Funding Corporation (PEFCO) c. Private Export Funding Corporation (PEFCO) c.5%. . Foreign Credit Insurance Association (FCIA) ____ 90. The __________ offers insurance against political and credit risks related to credit from international trade. The objectives of the Export-Import Bank of the United States include the assumption of underlying credit risk and country risk to encourage private lenders to finance export trade and the provision of direct loans to foreign buyers when private lenders are unwilling to do so. b.5%. Good Company prefers variable to fixed rate debt. Export-Import Bank d. currency.c. Export-Import Bank d.5% Given this information: a. b. an interest rate swap will probably not be advantageous to Good Company because it can issue both fixed and variable debt at more attractive rates than Bad Company. an interest rate swap attractive to both parties could result if Good Company agreed to provide Bad Company with variable rate payments at LIBOR + 1% in exchange for fixed rate payments of 10. ____ 88. Foreign Credit Insurance Association (FCIA) ____ 91. none of the above. false. interest rate. ____ 89. d. a. currency ____ 87. Domestic International Sales Corporation (DISC) b. Assume the following information for Good and Bad Companies: Good Company Bad Company Fixed Rate Bond 10% 12% Variable Rate Bond LIBOR + 1% LIBOR + 1. an interest rate swap attractive to both parties could result if Bad Company agreed to provide Good Company with variable rate payments at LIBOR + 1% in exchange for fixed rate payments of 10. Domestic International Sales Corporation (DISC) b. interest rate d.
Assume the U. b.89%.24%. b. about 12. and the British one-year interest rate is 6%. what is the effective financing rate for a U. Firms that believe the forward rate is an unbiased predictor of the future spot rate will prefer borrowing the foreign currency. false. Refer to Exhibit 20-3. ____ 94. . c. 14. true. Cameron would like to determine the expected financing rate and the variance of a portfolio consisting of 30% yen and 70% dinar.4%. The spot rate of the pound at the beginning of the year is $1.S. By the end of the year. b. none of the above. b.23 ____ 93. Netting can achieve all but one of the following: a. c. e.98%. b.5%. The one-year forward rate of the pound is $1. d. about 7. about 13. Cameron has gathered the following information: Mean effective financing rate of Japanese yen for six months Mean effective financing rate of Sudanese dinar for six months Standard deviation of Japanese yen's effective financing rate Standard deviation of Sudanese dinar's effective financing rate Correlation coefficient of effective financing rates of these two currencies 4% 1% . false. the pound's spot rate is $2. Exhibit 20-3 Cameron Corporation would like to simultaneously borrow Japanese yen (¥) and Sudanese dinar (SDD) for a six-month period. ____ 92. one-year interest rate is 8%. 17. a.05.1%. Transactions costs are reduced. firm that takes out a one-year. 2. about 11.10 . about 10. Cross border transactions between subsidiaries are reduced. e.3%.00%. What is the expected standard deviation of the portfolio contemplated by Cameron? a. d.95. true. 2. Based on the information.S. ____ 95.a. uncovered British loan? a.20 .3%.97.
false. c. d. Treasury securities during this period. most currencies of industrialized countries depreciated substantially against the dollar. a. banks in most non-U. ____ 96. b. . Preauthorized payment is an arrangement that allows a corporation to charge a customer's bank account up to some limit. in facilitating cash transfers and most other cash management operations for MNCs. Currency conversion costs are reduced.c. true. b. true.S. According to the text: a. banks in most non-U. If non-U. Transaction exposure is eliminated.S. false. ____ 98. zero. false. Assume that their interest rates were similar to the U. c.S.S. ____ 97. d. an MNC with subsidiaries in several different countries has no problems in coordinating its cash transfers since a uniform global banking system exists. but less than the interest rate of their respective countries. more than the interest rate of their respective countries.S. countries are more advanced than the U. firms invested in U. b. In a bilateral netting system. a probability distribution of possible exchange rates may be preferable to a single point estimate. none of the above. countries are as capable as the U.S. Assume that in recent months. transactions between the parent and a subsidiary or between two subsidiaries are consolidated over a specific period of time. b. negative. Since exchange rate forecasts are not always accurate. ____ 99. positive. b.S. their effective yield would have been: a. true. interest rate. ____ 100. a. d. a. in facilitating cash transfers for MNCs.
40. 22. 35. 7. 2. 32. 3. 37. 26. 27. 38. 16. 11. 39. 10.IFM -Madura Answer Section MULTIPLE CHOICE 1. 4. 13. 17. A B B C A B C B B B B A B B A A D D B B A A D B E A A B C C D B D A B C A A A A C . 14. 21. 30. 36. 5. 23. 25. 19. 6. 12. 31. 29. 24. 20. 15. 8. 33. 34. 28. 9. 18. 41.
61. 70. 64. 73. 51. 62. 47. 52. 60. 55. 50. C D B D B A A B B B C E D B B A B B D A C B A A A B A A C A B A B B A C D C C A A B A D A B . 74. 79. 54. 82. 43. 69. 78. 63. 44. 49. 53. 80.42. 71. 46. 48. 45. 58. 57. 59. 85. 72. 81. 87. 65. 76. 77. 86. 68. 83. 56. 84. 75. 66. 67.
B D C A E B B D D A D A A . 91. 92. 98. 96.88. 100. 89. 90. 97. 93. 94. 95. 99.