QUESTION 1

1. A UK bank quoted the following exchange rate pair on 21/10/200X : [1.5301 ; 1.5333]. The trading volume on that date for this bank was 10,000,000 $ bought and 10,000,000$ sold:

   The banks spread in GBP from this quotation on this date was:

   		7920000
   		Need extra data
   		None of the choices
   		25586560
   		27279
   		13639

5 points

QUESTION 2

1. The exchange rate between two currencies X and Y has moved from 1X= 1.05 Y to 1Y = 0.8 X. what is you remark about the two currencies?

   		Underlying has strengthened while the variable has weakened
   		Variable has strengthened while Underlying has weakened
   		Fixed has strengthened while base has weakened
   		There is no change at all
   		Base has strengthened while the variable has weakened
   		None of the choices is correct

5 points

QUESTION 3

1. HOWARD Plc a French exporting company expects to receive Dollars 120,000 in 3 months.

   Spot rate is US$1.6=1EUR

   The companys French balances receive credit Interest of 5% per annum

   ABC can borrow 3 months in US in Dollars at 2% per annum

   Forward rate 3 months is fixed at 1EUR=1.3$

   Assume that the 3 Month period consists of 90 days

   Using the Money market what could be the proceeds to the exporter in EUR at the end of the 3 months period:

   		123755
   		120000
   		75546
   		74626
   		123821
   		None of the choices

5 points

QUESTION 4

1. A UK exporter expects to receive 30,000$ in 6 months time. She was quoted the following exchange rate pair : [1.3058 ; 1.3082 ]. How much would the exporter expect to pay to the bank in GBP.

   		22974
   		15316
   		Impossible as the bank will only display one rate
   		22932
   		None of the choices
   		26116

5 points

QUESTION 5

1. Under the following quotation from a bank to a client GBP:USD 1.6065-1.6080, the following is true:

   		None
   		The bank will buy the USD at GBP 1 = USD 1.6080 , The client will sell USD at GBP 1 = USD 1.6065
   		The bank will buy USD at GBP 1 = USD 1.6080 , The bank will sell USD at GBP 1 = USD 1.6065
   		The client will buy the USD at GBP 1 = USD 1.6080 , The bank will sell USD at GBP 1 = USD 1.6065
   		The bank will sell USD at GBP 1 = USD 1.6080 , The client will buy USD at GBP 1 = USD 1.6065
   		The quote spread = 15%

5 points

QUESTION 6

1. A MNC has equity worth 7bn and debt worth 4bn. It also has an annual cost of equity of 15% and annual cost of debt of 6% The MNC is subject to profit tax at an annual rate of 25%. What is the after-tax weighted average cost of capital (WACC)?

   		11.73%
   		11.1818%
   		8.3118%
   		8.0%
   		We need two tax rates as this company is an MNC
   		None

5 points

QUESTION 7

1. 1. A UK bank quoted the following exchange rate pair on 21/10/200X : [1.3050 ;1.5030 ]. The trading volume on that date for this bank was 20,000,000 $ bought and 20,000,000$ sold:

   The banks spread in GBP from this quotation on this date was:

   		25586560
   		Need extra data
   		None of the choices
   		2018950
   		7920000
   		12793280

5 points

QUESTION 8

1. Under the following quotation from a bank to a client GBP:USD 1.6080-1.6070

   		The client will buy the USD at GBP 1 = USD 1.6080 , The bank will sell USD at GBP 1 = USD 1.6070
   		The bank will sell USD at GBP 1 = USD 1.6070 , The client will buy USD at GBP 1 = USD 1.6080
   		The bank will buy the USD at GBP 1 = USD 1.6080 , The client will sell USD at GBP 1 = USD 1.6065
   		The bank will buy USD at GBP 1 = USD 1.6080 , The bank will sell USD at GBP 1 = USD 1.6070
   		None
   		The quote spread = 0.1%

5 points

QUESTION 9

1. XYZ LLP a UK exporting company expects to receive US$ 150,000 in 6 months

   Spot rate is US$1.2=1

   The companys sterling balances receive credit Interest of 3% per annum

   ABC can borrow 6 months in US dollars at 5% per annum

   Forward rate 6 months is fixed at 1GBP=1.5$

   Assume that the 6 Month period consists of 180 days

   Do you recommend using:

   		Money Market
   		Forward Market
   		Both Give the same result as they are just two different methods
   		Both Forward and Money market are equally likely
   		We cannot calcualte . Need extra information
   		None of the choices

5 points

QUESTION 10

1. CHARLES Plc a French exporting company expects to receive Dollars 120,000 in 3 months

   Spot rate is US$1.6=1EUR

   The companys French balances receive credit Interest of 5% per annum

   ABC can borrow 3 months in US in Dollars at 2% per annum

   Forward rate 3 months is fixed at 1EUR=1.3$

   Assume that the 3 Month period consists of 90 days

   Which of the following statements is true?

   		Forward and money markets methods can never give the same result in general
   		The spot rate is not relevant to decide if Forward is better than Money market
   		None of the choices is true
   		Money Market is recommended for the exporter in this case
   		Forward and money Markets Give the same result as they are just two different methods that can be used interchangeably
   		Forward Market is recommended for the exporter in this case

5 points

QUESTION 11

1. 1. A UK company has an overall cost of 70m$ and expects to receive 50M$ from its US branch. what is the exchange rate that will make the company breaks even.

   		None of the choices
   		Both 1GBP= 1.4$ and 1GBP= 0.714$ are correct
   		1GBP= 0.714$ only is correct
   		1GBP= 1.4$ only is correct
   		1$= 0.714 GBP only is correct
   		Both 1GBP= 1.4$ and 1$= 0.714 GBP are correct

5 points

QUESTION 12

1. The overall strategic objective of all Multinational Companies is to:

   		None of the choices
   		Maximise dividendes payments
   		Maximise profit
   		Maximise international sales
   		Maximise short-term earnings
   		Minimise risk

5 points

QUESTION 13

1. For a UK exporter invoicing client in the US in Dollars, the forex risk could be that:

   		The GBP strengthens against the Dollar
   		None of the choices
   		Both Dollar and Pound Weakening are good case scenarios for the exporter
   		Both GBP and Dollar stay stable in terms of fluctuation with respect to each others.
   		The Dollars strengthens against the GBP
   		Both Dollar and Pound Strenthning are good case scenarios for the exporter

5 points

QUESTION 14

1. For a US exporter invoicing client in France in Dollars, the forex risk could be that:

   		Both EURO and Dollar stenghtening are good case scenarios for the exporter
   		Both EURO and Dollar weakening are good case scenarios for the exporter
   		The EURO strengthens against the Dollar
   		None of the choices
   		The Dollars strengthens against the EURO
   		Both EURO and Dollar stay stable in terms of fluctuation with respect to each others.