Question 1(0.2 points)

Country risk should be incorporated into the international capital budgeting analysis by

Question 1 options:

including the country risk premium to sunk costs.

adjusting the firm's discount rate for the additional risk.

increasing cash flow estimates from the project.

None of these

Question 2(0.2 points)

Celio, Inc. sold equipment to a French firm and will receive 1,249,425 in 30 days. If the company entered a forward contract to sell the euros at the 30-day forward rate of $1.5512/, what is the dollar revenue received? (Round your final answer to the nearest dollar.)

Question 2 options:

$1,249,425

$1,312,224

$805,457

$1,938,108

Question 3(0.2 points)

The production of goods and services has become highly globalized due to emergence of large multinational companies.

Question 3 options:

TrueFalse

Question 4(0.2 points)

Globalization refers to the removal of barriers to free trade and the closer integration of national economies.

Question 4 options:

TrueFalse

Question 5(0.2 points)

If the exchange rate is the price in foreign currency for a dollar, the quote is called direct quote.

Question 5 options:

TrueFalse

Question 6(0.2 points)

The major participants in the foreign exchange markets are

Question 6 options:

multinational commercial banks, large investment banking firms, and domestic firms.

None of these

multinational commercial banks, large investment banking firms, and small currency boutiques.

multinational commercial banks, local banks and domestic firms.

Question 7(0.2 points)

Long-term loans of a Eurocurrency made to multinational corporations and governments of poor credit quality are called Eurocredits.

Question 7 options:

TrueFalse

Question 8(0.2 points)

Bartman, Corp. 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? (Round your final answer to four decimal places.)

Question 8 options:

SK2.1467/SF

SK3.1116/SF

SK0.3214/SF

SK0.4183/SF

Question 9(0.2 points)

The Euromarkets are

Question 9 options:

vast, largely unregulated money and capital markets existing in Tokyo, Hong Kong, and Singapore.

vast, regulated money and capital markets with major financial centers in the euro zone.

None of these

vast, regulated money and capital markets with major financial centers in the United Kingdom.

Question 10(0.2 points)

When performing capital budgeting analysis on international projects, managers

Question 10 options:

must incorporate a country risk premium when evaluating foreign business activities.

find it more difficult to estimate the incremental cash flows for foreign projects.

All of these

have to deal with foreign exchange rate risk on international capital investments.

Question 11(0.2 points)

Venkat Ram purchased a pair of dress shoes in Italy for 131.25. If the spot exchange rate is $1.5621/, what is the dollar cost of the shoes? (Round your final answer to two decimal places.)

Question 11 options:

$205.03

$84.02

131.25

84.02

Question 12(0.2 points)

Most companies find it easier to estimate the incremental cash flows for foreign projects than for domestic projects.

Question 12 options:

TrueFalse

Question 13(0.2 points)

Which of the following statements about Eurocredits is true?

Question 13 options:

Eurocredits are short- to medium-term loans made to multinational corporations and governments of medium to high credit quality.

The international banking system gathers funds from businesses and governments in the Eurocurrency market and then allocates funds to banks that have the most profitable lending opportunities.

All of these

Eurocredits are denominated in all major Eurocurrencies, although the dollar is the overwhelming favorite.

Question 14(0.2 points)

Legal systems can vary on simple matters, such as opening a business, selecting a site location, and hiring employees.

Question 14 options:

TrueFalse

Question 15(0.2 points)

Starling, Corp. purchased some components from a Mexican manufacturer. They have to pay 110 million Mexican Pesos for the goods today. The spot rate today is MP10.3540/$. What is the dollar cost of this payable? (Round your final answer to the nearest dollar.)

Question 15 options:

$1,138,940,000

$110,000,000

$11,110,235

$10,623,913

Question 16(0.2 points)

The bid quote is the rate at which the dealer will sell foreign currency.

Question 16 options:

TrueFalse

Question 17(0.2 points)

Stockholder wealth maximization is the accepted goal for firms in all countries around the world.

Question 17 options:

TrueFalse

Question 18(0.2 points)

If a firm is located in a country with a relatively unstable political environment, management will require a lower rate of return on capital projects.

Question 18 options:

TrueFalse

Question 19(0.2 points)

While the production of goods and services has become globalized, American consumers only purchase domestic goods.

Question 19 options:

TrueFalse

Question 20(0.2 points)

Factors that can cause international business transactions to differ from domestic deals include all EXCEPT

Question 20 options:

exchange rate risk, legal systems, and country risk.

Time value of money, expected returns procedures, and size of market.

economic systems, cultural factors, and country risk

legal systems, cultural factors, and economic systems.

Question 21(0.2 points)

Baljit, Inc. purchased machinery from a Japanese firm and will have to pay 278.45 million in 90 days. The bank quotes a forward rate of 105.46/$ to buy the required yen. What is the cost to Baljit in U.S. dollars? (Round your final answer to the nearest dollar.)

Question 21 options:

$2,784,500

$2,640,338

$2,714,300

$2,936,534

Question 22(0.2 points)

Tokyo is the largest foreign exchange trading center.

Question 22 options:

TrueFalse

Question 23(0.2 points)

Economic benefits provided by the foreign exchange markets include

Question 23 options:

a mechanism to transfer purchasing power from individuals who deal in one currency to people who deal in a different currency.

a way for corporations to pass the risk associated with foreign exchange price fluctuations to professional risk-takers.

a channel for importers and exporters to acquire credit for international business transactions.

All of these

Question 24(0.2 points)

A European quote is the same as

Question 24 options:

a cross quote.

a bidding quote.

an indirect quote.

an American quote.

Question 25(0.2 points)

Given that the spot rate is 106.74/$ and the 180-day forward quote is 100.37/$, we can say that

Question 25 options:

the Yen is at a forward discount against the U.S. dollar.

the Yen is at a forward premium against the U.S. dollar.

the U.S. dollar is at neither a premium nor a discount against the Yen.

the U.S. dollar is at a forward premium against the Yen.

Question 26(0.2 points)

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 your final answer to the nearest dollar.)

Question 26 options:

$118,418

$159,023

$124,687

$131,278

Question 27(0.2 points)

Bank of America quoted the 180-day forward rate on the Japanese yen at $0.009702/. The spot rate was quoted at $0.009466/. What is the forward premium or discount on the Japanese yen? (Round your final answer to the nearest percentage.)

Question 27 options:

7% premium

7% discount

5% premium

5% discount

Question 28(0.2 points)

Which of the following statements about the goal of a firm is true?

Question 28 options:

The goal of a Japanese business manager is to increase the wealth and growth of the keiretsu.

Private-sector firms in China focus on providing full employment in the economy.

Corporate wealth maximization is the accepted goal for firms in India.

Firms in Australia focus on maximizing corporate wealth.

Question 29(0.2 points)

European firms focus on maximizing market share rather than stockholder wealth.

Question 29 options:

TrueFalse

Question 30(0.2 points)

Both China and the nations that formerly made up the Soviet Union are currently moving toward centrally planned economies.

Question 30 options:

TrueFalse

Question 31(0.2 points)

Trident Corp. recently purchased machinery parts worth 23.5 million Mexican Pesos (MP). Management needs to find out the U.S. dollar cost of the payables. It has access to two quotes for Canadian dollars (C$): C$1.0774/$ and C$0.0981/MP. What will it cost Trident to purchase 23.5 million Mexican pesos? (Do not round your intermediate calculations. Round your final answer to the nearest dollar.)

Question 31 options:

$2,305,350

$2,139,735

$1,987,325

$2,531,890

Question 32(0.2 points)

Given that the spot rate is $1.5136/ and the 90-day forward quote is $1.4974/, we can say that

Question 32 options:

the U.S. dollar is at a forward premium against the Euro.

the U.S. dollar is at a forward discount against the Euro.

the Euro is at a forward premium against the U.S. dollar.

the dollar is at neither a premium nor a discount against the Euro.

Question 33(0.2 points)

John Travers is planning a holiday to Thailand but is concerned that the U.S. dollar will decline in value before he makes his trip. His travel agent has planned a trip for him for a total cost of 41,250 Thai baht. John plans to purchase the bahts forward and is given a dollar estimate of $1,247.17 based on the 30-day forward quote. What is the forward rate?

Question 33 options:

$1.2471/THB

THB33.0749/$

$0.0242/THB

THB41.2500/$

Question 34(0.2 points)

The spot rate on the London market was 0.5434/$, while the 90-day forward rate was 0.5519/$. What is the annualized forward premium or discount on the U.S. dollar for the period? (Round your final answer to one decimal place.)

Question 34 options:

1.6% premium

6.3% premium

6.3% discount

1.6% discount

Question 35(0.2 points)

Tantrix, Inc. purchased its inventory from an Indian manufacturer at a cost of Rs.5,325,000. The dollar cost of this payable is $125,634.07 at today's spot rate. What is the spot rate today?

Question 35 options:

Rs.42.3850/$

$42.3850/Rs.

$4.2385/Rs.

Rs.4.2385/$

Question 36(0.2 points)

Which of the following statements about the goal of a firm is true?

Question 36 options:

Firms in Germany focus on maximizing corporate wealth.

The goal of a Japanese business manager is to increase the wealth and growth of the keiretsu.

All of these

Stockholder value maximization is the accepted goal for firms in India.

Question 37(0.2 points)

Zylex Corporation's German unit is looking to borrow 4.5 million from Deutsche Bank. Deutsche Bank quotes a rate of three-month LIBOR plus 0.5 percent for the 90-day loan. Currently, the three-month LIBOR is 4.175 percent. If the exchange rate on the payoff date is 0.8334/$, what is the dollar cost of the loan? (Round your final answer to two decimal places.)

Question 37 options:

$63,107.45

$39,143.76

$56,357.99

$126,214.90

Question 38(0.2 points)

The ask quote represents the rate at which

Question 38 options:

the dealer will sell domestic currency to you.

the dealer will sell foreign currency to you.

the dealer will buy domestic currency from the exchange.

the dealer will buy foreign currency from you.

Question 39(0.2 points)

Which of the following statements is true?

Question 39 options:

According to a British buyer, the lower the dollar price of pounds, the greater the number of pounds that must be given up to obtain dollars to buy foreign goods.

All of these

Equilibrium occurs at the price at which the quantity of the currency demanded exactly equals the quantity supplied.

When pounds become less expensive in relation to dollars, British products become less expensive for Americans to buy.

Question 40(0.2 points)

In 2010, the three largest foreign exchange markets based on daily volume are

Question 40 options:

London, New York, and Singapore.

New York, Tokyo, and Zurich.

London, Tokyo, and Zurich.

London, New York, and Tokyo.

Question 41(0.2 points)

Banco Herrero wants to make a bid-ask spread of 0.55 percent on its foreign exchange transactions. If the ask rate on the Mexican peso (MP) is MP10.4192/$, what does the bid rate have to be? (Do not round your intermediate calculation. Round your final answer to four decimal places.)

Question 41 options:

MP10.4249/$

MP10.4192/$

MP10.3619/$

MP10.2165/$

Question 42(0.2 points)

Japanese managers focus on maximizing market share rather than stockholder wealth.

Question 42 options:

TrueFalse

Question 43(0.2 points)

The Eurocurrency market is the

Question 43 options:

medium-term portion of the Euromarket.

long-term portion of the Euromarket.

short-term portion of the Euromarket.

None of these

Question 44(0.2 points)

The difference between the forward rate and the spot rate is called the

Question 44 options:

indirect quote.

direct quote.

forward premium or forward discount.

cross exchange rate.

Question 45(0.2 points)

If the foreign exchange rate is the price in foreign currency for a dollar, then the exchange rate quote is called

Question 45 options:

an American quote.

a directquote.

an indirect quote.

a cross quote.

Question 46(0.2 points)

If the spot rate is quoted as $0.009369/, what is the exchange rate in terms of yen per dollar? (Round your final answer to the four decimal places.)

Question 46 options:

106.7350/$

16.7350/$

0.009369/$

0.936900/$

Question 47(0.2 points)

Which of the following statements about multinational firms is NOT true?

Question 47 options:

Multinational corporations are owned by domestic stockholders only.

All of these

Multinational corporations may purchase raw materials from one country, obtain financing from a capital market in another country, and produce finished goods with labor and capital equipment from a third country.

A multinational corporation is a business firm that operates in more than one country but is headquartered or based in its home country.

Question 48(0.2 points)

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/BR. 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 your final answer to the nearest dollar.)

Question 48 options:

$24,687

$779,152

$803,838

$31,278

Question 49(0.2 points)

A transnational corporation is a business firm that operates in more than one country but is headquartered or based in its home country.

Question 49 options:

TrueFalse

Question 50(0.2 points)

State Bank of India has offered a spot rate quote on Indian rupees (Rs.) of Rs. 42.47/$. The Indian rupee is quoted at a 30-day forward discount of 7.65 percent against the dollar. What is the 30-day forward quote?

Question 50 options:

Rs.45.1226/$

Rs.41.5687/$

Rs.43.5622/$

Rs.42.7407/$