Can everyone give me the answer and explain? thx a lot

Section A Multiple Choice Questions [60 marks] These Questions are worth two (2) marks each. 1) A(n). denomination of its debts. allows a multinational corporation to change the currency of the A) currency swap B) currency option contract C) interest rate swap D) currency future contract are typically larger in the forward market than in the spot market for currency. 2) A) Contract sizes B) Employee costs C) The bid- ask spreads D) Bank fees 3) The cash manager at AmFlex Company needs to buy 1,000,000 British pounds to pay a British supplier. A currency broker quotes him a bid- ask rate of .4865- .5116/US$. What will be the dollar cost of the 1,000,000 pounds? A) $1,954,652 B) $511,587 C) $486,618 D) $2,055,499 4) If the world capital market were fully integrated, the incentive to swap would be because arbitrage opportunities would exist. A) increased; fewer B) reduced; more C) increased; more D) reduced; fewer 5) You pay $3.25 for a call option on Luther Industries that expires in three months with a strike price of $40.00. Three months later, $41.00 per share. Your profit per share on this transaction is closest to? expiration, Luther industries is trading at A) $1.00 B) - $2.25 C) - $1.00 D) $2.25 6) Which of the following is NOT true regarding a letter of credit? A) The importer applies to its loca! bank for the issuance of a letter of credit. B) The exporter applies to its local bank for the issuance of a letter of credit. C) The importer's bank cuts a sales contract based on its assessment of the creditworthiness of the importer. D) The importer and exporter agree on a transaction. Page 3 of 14 7) A currency swaps allows a multinational corporation to change the A) principal and interest rate on its debt B) nature of its debt from a fixed interest rate to a floating interest rate C) forward rate on contracts it secures to hedge exchange rate risk D) currency of denomination of its debts 8) The broker at Deutsche Bank quotes bid- ask rates of 104.15- 30/$. What would be its direct asking price for yen if the bank's /$ ask rate is .6550? A) 164.254 B) .00628A C) 159.24N D) .0061 9) Unlike forward contracts, the size of currency futures contracts are A) a standardized amount that differs for each currency traded B) a function of the initial margin required at the open of the trade C) subject to the forces of supply and demand in the currency spot market D) based on the months in which they expire 10) A(n), to transport the goods to their destination. is a contract issued to an exporter by the shipping company that agrees A) bill of lading B) draft C) consular invoice D) insurance certificate 11) Which one of the following is an advantage to the investor of a currency futures contract as compared to a forward contract? A) more currencies availabie B) more flexibility in contract size C) more payment dates D) more liquidity when the investor wishes to sell the contract 12) When a futures contract is purchased, A) the only cash flow is at the maturity of the contract B) the buyer must deposit a certain amount of cash into a margin account C) no money changes hands D) the futures commission merchant marks up the price to cover his commission 13) When a bank accepts a time draft for payment and sells it in the money markets, it is known as a A) banker's acceptance. B) forfait transaction. C) time draft. D) trade acceptance. 14) When an exporter is dealing with a high credit risk customer, payment is most often used. as a form of A) banker's acceptance B) open account C) draft D) cash in advance 15) The Fisher Effect decomposes nominal interest rates into the expected rate of inflation. and the A) nominal exchange rate B) expected real interest rate C) expected real exchange rate D) expected forward rate of return 16) Suppose that the value of a firm increases when the euro strengthens relative to the dollar, an appropriate hedge would be to A) liquidate euro liabilities. B) find another currency that is highly correlated to sell forward. C) buy euros forward. D) convert some of the firm's debt into euros. is the use of derivative securities to take positions in financial markets that 17) offset the underlying sources of risk that arise in a company's normal course of business. A) Hedging B) Option premium C) Risk management D) Asset securitization 18) What is the name given to a small service facility that is staffed by a parent bank personnel and designed to assist the clients of the parent bank in their dealings with information about local business practices and credit evaluation of the MNC's foreign customers? 18) What is the name given to a small service facility that is staffed by a parent bank personnel and designed to assist the clients of the parent bank in their dealings with information about local business practices and credit evaluation of the MNC's foreign customers? A) foreign branch of a bank B) international banking facility C) representative office D) offshore banking center 19) Which one of the following is the best advice for the MNC that wants to structure an investment so as to minimize the chance that political risk events will adversely affect the firm? A) focus on the long term B) refuse to bargain with the government C) rely on common available supplies D) use local resources Page 5 of 14 20) Cross- listing of stocks and demutualization have led to the exchanges. of stock A) externalization B) securitization C) order- driven trading systems D) globalization 21) Which of the following was created in an effort to promote free trade? A) World Trade Organization B) the Sarbanes- Oxley Act C) the Organization for Economic Cooperation and Development D) multilateral development banks 22) Which type of bond is denominated in one or more currencies but is traded in external markets outside the borders of the countries issuing the currencies? A) Eurobond B) domestic bond C) international bond D) foreign bond 23) When parity conditions are not in effect in currency and money markets, traders could make extraordinary profits from a practice known as A) covered interest rate parity B) forward market arbitrage C) covered interest rate arbitrage D) triangular arbitrage 24) If market efficiency is identified with parity, currency markets that are no opportunities for currency traders to earn profits. provide A) in parity B) not in parity C) in purchasing power parity D) in interest rate parity only 25) In which one of the following systems would it be least difficult to quantify the currency risk? A) pegged exchange rate system B) currency board C) target zone system D) floating exchange system 26) What is the name of the contract where corporations, institutional investors, and individuals are required to pay or to receive a specific amount of foreign currency at a specific exchange rate at a particular date in the future? A) forward currency contract B) forward foreign exchange market C) forward rate contract D) future hedge contract 27) If a nation's income exceeds its spending, then A) the nation must run a current account surplus. B) the nation must run a capital account deficit. C) savings will exceed domestic investment. D) all of the above. 28) The World Bank's main goal is to ensure the stability of A) only the financial system in both developed and developing countries. B) the international monetary and financial system in developing countries. C) the international monetary and financial system only in developed countries. D) the international monetary and financial system in both developed and developing countries. 29) A balance of trade deficit results in a current account A) deficit. B) IMF intervention. C) World Bank loan. D) surplus. 30) On December 3,2001, spot Japanese yen were sold at $0.008058. Suppose the 180- day forward Japanese yen was selling at a 1.91% annualized premium, what is the 180- day forward rate of the yen? A) 0.008550 B) 0.008245 C) 0.008457 D) 0.008135