1. When performing capital budgeting analysis on international projects, managers (Points : 1) [removed]find it more difficult to estimate the incremental cash flows for foreign projects [removed] have to deal with foreign exchange rate risk on international capital investments. [removed]must incorporate a country risk premium when evaluating foreign business activities. [removed] All of the above. 2. A European quote is the same as (Points : 1) [removed]an American quote. [removed]an indirect quote. [removed]a direct quote. [removed]a cross quote. 3. Which one of the following statements about Eurobonds is NOT true? (Points : 1) [removed] Multinational firms can use Eurobonds to finance international or domestic projects. [removed] Eurobonds are bearer bonds and do not have to be registered. [removed] Eurobonds are bonds that have to be registered. [removed] Eurobonds also pay interest annually. 4. Long-term debt sold by a foreign firm to investors in a foreign country and denominated in that country’s currency is called a (Points : 1) [removed] Eurobond. [removed]municipal bond. [removed]foreign bond. [removed]currency bond. 5. The major participants in the foreign exchange markets are (Points : 1) [removed]multinational commercial banks, large investment banking firms, and domestic firms. [removed]multinational commercial banks, local banks and domestic firms. [removed]multinational commercial banks, large investment banking firms, and small currency boutiques that specialize in foreign exchange transactions. [removed] None of the above 6. The ways that a foreign government can adversely affect the risk of a foreign project include allEXCEPT: (Points : 1) [removed] Change tax laws in a way that adversely impacts the firm. [removed] Impose laws related to labor, wages, and prices that are more restrictive than those applicable for domestic firms. [removed] Remove tariffs and quotas on any imports. [removed] Disallow any remittance of funds from the subsidiary to the parent firm for either a limited period of time or the duration of the project. 7. Hedging:Tamcon Industries has purchased equipment from a Brazilian firm for a total cost of 1,272,500 Brazilian reals (BR). The firm has to pay in 30 days. Citicorp has given the firm a 30-day forward quote of $0.6123/real. Assume that on the day the payment is due, the spot rate is at $0.6317/BR. How much would Tamcon save by hedging with a forward contract? Round to the nearest dollar. (Points : 3) [removed] $24,687 [removed] $803,838 [removed] $779,152 [removed] $31,278 8. Spot rate: Given that the spot rate is ¥106.74/$ and the 180-day forward quote is ¥100.37/$, we can say that (Points : 3) [removed]the U.S. dollar is at a forward premium against the yen. [removed]the yen is at a forward premium against the U.S. dollar. [removed]the yen is at a forward discount against the U.S. dollar. [removed]the dollar is at neither a premium nor a discount against the yen. 9. Hedging: Palermo Corp. sold equipment to a French firm. Payment of €4,275,000 will be due in 90 days. Palermo has the option of selling the euros at a 90-day forward rate of $1.5922/€. If it waits 90 days to sell the euros, the expected spot rate is $1.5645/€. How much dollar revenue will Palermo lose by not selling forward the euros? Round to the nearest dollar. (Points : 3) [removed] $124,687 [removed] $118,418 [removed] $159,023 [removed] $131,278 Which of the following economic benefits do the foreign exchange markets provide?[removed]A mechanism to transfer purchasing power via exports and imports.[removed]A mechanism for hedging the risk associated with currency fluctuations.[removed]A channel for businesses to acquire credit for international transactions. If the foreign exchange rate is the price in dollars for a foreign currency, then the exchange rate quote is called:[removed]a European quote[removed]an indirect quote Bartman Corporation observes that the Swiss franc (SF) is being quoted at $0.6164/SF, while the Swedish krona (SK) is quoted at $0.1981/SK. What is the SK/SF cross rate? Given that the spot rate is $1.5276/€ and the 90-day forward quote is $1.5174/€, we can say that:[removed]the dollar is at neither a premium nor a discount against the euro[removed]the U.S. dollar is at a forward discount against the euro[removed]the euro is at a forward premium against the U.S. dollar[removed]the U.S. dollar is at a forward premium against the euro All of the following represent differences between Eurobonds and domestic US bonds except that[removed]many Eurobonds are sold without credit ratings.[removed]Eurobonds pay coupon interest annually.[removed]Eurobonds are issued as bearer bonds and do not have to be registered.[removed]investors in Eurobonds regularly pay taxes on the interest they receive. All other things remaining constant, if the US$/£ exchange rate changes from $1.65/£ to $1.45/£ , which of the following will occur?[removed]Demand for British goods will decrease.[removed]Demand for British goods will increase.[removed]British demand for US goods will decrease. Which of the following statements regarding the forward rate is false?[removed]The forward rate is what one party agrees to pay for money in the future.[removed]The forward rate is established on the day that the agreement is made and defines the exchange rate that will be used in the future.[removed]Forward rates are important because business transactions may extend over long periods.[removed]The forward rate quoted on a particular date is very often equal to the spot rate on the same day. All of the following represent differences between Eurobonds and domestic US bonds except that[removed]Eurobonds pay coupon interest annually.[removed]investors in Eurobonds regularly pay taxes on the interest they receive.[removed]Eurobonds are issued as bearer bonds and do not have to be registered.[removed]many Eurobonds are sold without credit ratings.
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