Subject: International Finance Management

pressure on the 1. News of potential surge in U.S. inflation and zero Chilean inflation places value of the Chilean peso. The pressure will occur a) Downward; immediately b) Upward; immediately c) Downward; only after the U.S. inflation surges d) Upward; only after the U.S. inflation surges 2. ABC Co. has 1,000,000 euros as receivables due in 30 days, and is certain that the euro will depreciate substantially over time. Assuming that the firm is correct, the ideal strategy is to: a) Buy euros 30 day forward b) Borrow euros for 30 day c) Remain unhedged d) Sell euros 30 day forward 3. Changes in relative rates can affect interational trade activity, which influences the demand for and supply of currencies and therefore influences exchange rates. a) True b) False 4. Investor normally prefer to invest in a country where the taxes on interest or dividend income from investments are relatively low. a) True b) False 5. Assume the spot rate of the euro () is $0.85 today. The spot rate was $0.90 one year ago. The percentage change reflects: a) About 5.56% appreciation of the euro b) About 5.88% depreciation of the euro c) About 5.56% depreciation of the euro d) About 5.88% appreciation of the euro 6. A joint venture that is jointly owned and operated by two or more firms. a) True b) False 7. Future contracts are_forward contracts are a) Offered by commercial banks; offered by commercial banks b) Standardized; customized c) Sold on an exchange; sold on an exchange 8. The spot rate for the Singapore dollar is 0.320. The 30-day forward rate is 0.325. The forward rate contains an annualized of a) Premium: 18.75 b) Premium: 18.46 c) Premium; 1.56 d) Discount; 18.46 e) Discount; 18.75 its 9. If a country experiences high inflation relative to the UK, its exports to the UK should imports from the UK should and its currency should against the British pound. a) Increase, decrease, depreciate b) Increase, decrease, appreciate c) Decrease, increase, appreciate d) Decrease, increase, depreciate