Question 1 (1 point)

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In the case of short-term financing, the forces of supply and demand are among the main factors determining exchange rates in Eurocurrency markets.

Question 1 options:

	True
	False

Question 2 (1 point)

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Although several economic and political factors can influence foreign exchange rate movements, by far the most important explanation for long-term changes in exchange rates is fiscal policy that a country adopts.

Question 2 options:

	True
	False

Question 3 (1 point)

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Hedging strategies are techniques used to offset or protect against risk and include borrowing or lending in different currencies.

Question 3 options:

	True
	False

Question 4 (1 point)

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FASB No. 52 is a statement issued by the Financial Accounting Standards Board requiring American MNCs to first convert the financial statement accounts of foreign subsidiaries into the country's functional currency and then translate the accounts into the parent firm's currency using the ________ method.

Question 4 options:

	all-current-rate
	historical rate
	average rate
	weighted average

Question 5 (1 point)

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Macro political risk and micro political risk in international business refer to the risk ________.

Question 5 options:

	that will affect an individual firm or specific industry and the risk that will affect all foreign firms, respectively
	that will affect all foreign firms and the risk that will affect an individual firm or specific industry, respectively
	of the devaluation of the host country's currency and the risk of sudden taxes on exporting the manufactured goods of a particular industry, respectively
	of sudden taxes on exporting the manufactured goods of a particular industry and the risk of the devaluation of the host country's currency, respectively

Question 6 (1 point)

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In the United States, the interest rate on a one-year, risk-free Treasury bond is 3%. In the United Kingdom, the rate on an equivalent one-year bond is 5%. The spot exchange rate is $2 per 1. If interest rate parity holds, the one-year forward exchange rate expressed in terms of dollars per pound must be ________.

Question 6 options:

	1.0194
	0.4905
	2.0388
	0.9810

Question 7 (1 point)

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For foreign bonds, interest rates are usually not directly correlated with the domestic rates prevailing in the respective countries.

Question 7 options:

	True
	False

Subsection

Question 8 (1 point)

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The market value of a warrant is ________ the intrinsic value of the warrant.

Question 8 options:

	above
	less than or equal to
	equal to
	below

Question 9 (1 point)

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A firm currently has outstanding a 5 percent, $1,000 convertible bond. The bond is convertible into 25 shares of common stock and callable at $1,050. The current market price of the firm's stock is $41 per share. The bond holder will ________.

Question 9 options:

	convert the bond into stock
	do nothing and wait until the stock price goes up further
	allow the call to be exercised
	sell the bond on the secondary market

Question 10 (1 point)

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When warrants are used as "sweeteners" by a new firm, the firm is essentially allowing creditors to ________.

Question 10 options:

	protect their interest
	receive extra income
	share the possible future success of the firm
	vote along with common stockholders