FIN 565 Week 8 Final Exam (Collection)
(FIN 565 Week 8 Final Exam)
FIN 565 Week 8 Final Exam (Version 1)
- Question: (TCO A) A high home inflation rate relative to other countries would the home country’s current account balance, other things being equal. A high growth in the home income level relative to other countries would the home country’s current account balance, other things being equal. (Points :5)
- Question: (TCO A) Assume the Canadian dollar is equal to $0.98 and the Brazilian real is equal to $0.28. The value of the Brazilian real in Canadian dollars is (Points : 5)
- Question: (TCOB) Assume that IRP holds and the euro’s interest rate is 9%, whereas the U.S. interest rate is 12%. Then, the euro’s interest rate increases to 11%, whereas the U.S. interest rate remains the same. As a result of the increase in the interest rate on euros, the euro’s forward ..will in order to maintain (Points :5)
- Question: (TCOC) A strong dollar is normally expected to cause(Points:5) high unemployment and high inflation in the United States.
- Question: (TCO D) Assume no transactions costs exist for any futures or forward contracts. The price of British pound futures with a settlement date 180 days from now will (Points : 5)
- Question: (TCO H) Other things being equal, the financial leverage of MNCs will be higher if the governments of their home countries are likely to rescue them (in the event of failure) and if their home countries are likely to experience a recession. (Points :5)
- Question: (TCO E) Other things being equal, firms from a particular home country will engageinmoreinternationalacquisitionsiftheyexpectforeigncurrenciesto against their home currency and if their cost of capital is relatively . (Points :5)
- Question: (TCO F) The agency costs of an MNC are likely to be lower if it (Points : 5) scatters its subsidiaries across many foreign countries.
- Question: (TCO I) With a(n) ,the exporter ships the goods to the importer while still retaining actual title to the merchandise. (Points :5)
- Question: (TCOG) If a U.S. firm’s expenses are more susceptible to exchange rate movements than revenue, the firm will if the dollar . (Points :5)
- Question: TCO D) A firm wants to use an option to hedge NZ$12.5 million in receivables from New Zealand firms. The premium is $0.02. The exercise price is $0.50. If the option is exercised, what is the total amount of dollars received (after accounting for the premium paid)? (Points :12)
- Question: (TCO B) Assume the following information. You have $300,000 to invest. The spot bid rate for the euro is $1.08. The spot ask quote for the euro is $1.10. The 180-day forward rate (bid) of the euro is $1.08. The 180-day forward rate (ask) of the euro is$1.10. … interest rate in the U.S. is6%. .. day interest rate in Europe is 8%. If you conduct CIA, what amount will you have after 180 days? Show your work. (Points :12)
- Question: (TCO D) You purchase a call option on pounds for a premium of $0.03 per unit, with an exercise price of $1.64; the option will not be exercised until the expiration date, if at If the spot rate on the expiration date is $1.65, what is your net profit per unit? Show your work. (Points : 12)
- Question: (TCO D) What are major differences between currency futures and forward contracts? List at least five of them. (Points : 14)
- Question: (TCO A) Why would firms issue stock in foreign markets? (Points :25)
- Question: (TCOC) Discuss the following scenario below and how it would affect Asian exchange rates during a crisis. A decline in Asian interest rates and capital flows and investment in the country (P
- Question: (TCOF) What are the three common theories as to why firms become motivated to expand their business internationally? List them and explain each (Points :25)
- Question: (TCOD) List the factors that affect currency call option premiums, and briefly explain the relationship that exists for (Points :25)
- Question: (TCO B) Respond to the following items regarding testing
- Describe a method for testing whether IRP exists. (10points)
- Why are transactions costs, currency restrictions, and differential tax laws important when evaluating whether CIA can be beneficial? (Points :25)
- Question: Question 6. 6. (TCO F) Snyder Golf Co., a U.S. firm that sells high-quality golf clubs in the United States, wants to expand internationally by selling the same golf clubs in Brazil.
- Describe the tradeoffs that are involved for each method (e.g., exporting, direct foreign investment, etc.) that Snyder could use to achieve its goal. (Points : 25)
- Question: (TCOG) How does translation exposure affect a business with a high percentage of business conducted by subsidiaries? What factors come into play? (Points :25)
- Question: (TCOE) List and describe four factors to consider in multinational budgeting.(Points:25) Factors to consider in Multinational Capital Budgeting:
FIN 565 Week 8 Final Exam (Version 2)
- Question: (TCOA) A high home inflation rate relative to other countries would the home country’s current
- Question: (TCOA) The U.S. dollar is not ever used as a medium of exchange in any Latin American countries.
- Question: (TCOB)Assume that Swiss investors are benefiting from CIA due to a high U.S.interestrate.Which force results from the act of this CIA?
- Question: (TCOC) A strong dollar is normally expected to cause High unemployment and high inflation in the United States.
- Question: (TCOD)A firm sells a currency futures contract and then decides before the settlement date that it no longer wants to maintain such a position. It can close out its position by buying an identical futures contract.
- Question: (TCOH) The cost of capital for MNCs based in the United States has been generally than MNCs based in Germany and than MNCs based in Japan.
- Question: (TCO E) Other things being equal, firms from a particular home country will engage in more international acquisitions if they expect foreign currencies to against their home currency and if their cost of capital is relatively .
- Question: (TCOF)Whichisnotawayinwhichagencyproblemscanbereducedthroughcorporatecontrol?
- Question: (TCOI)If IRP exists and transaction costs are zero, foreign financing with a simultaneous forward purchase of the currency borrowed will result in an effective financing rate that is
- Question: (TCOG) Which is an example of economic exposure but not an example of transaction exposure?
- Question: (TCOD)A firm wants to use an option to hedge NZ$12.5 million in receivables from New Zealand firms. The premium is $0.02. The exercise price is $0.50. If the option is exercised, what is the total amount of dollars received (after accounting for the premium paid)?
- Question: (TCO B) Assume the following You have $900,000 to invest.
- Question: (TCOD) You purchase a call option on pounds for a premium of $ 0.03 per unit, with an exercise price of $1.64; the option will not be exercised until the expiration date, if at all. If the spot rate on the expiration date is $1.65, what is your net profit per unit? Show your work.
- Question: (TCOD)What are major characteristics of currency futures contracts? List at least five of them.
- Question: (TCO A) Answer the following questions regarding international financial markets. Recently, Walmart established two retail outlets in the city of …… Walmart is likely to build additional outlets in Shanzenor in other Chinese cities in the future. How would the Walmart outlets in China use the spot market in foreign exchange? How might Walmart utilize the international money market when it is establishing other Walmart
- Question: (TCO C) Answer the following questions regarding factors affecting exchange rates. Mexico tends to have much higher inflation than the United States and also much higher interest rates than the United States. Inflation and interest rates are much more volatile in Mexico than in industrialized countries. The value of the Mexican pesois typically more volatile than the currencies of industrialized countries, from a U.S. perspective; it has typically depreciated from one year to the next, but the degree of depreciation has varied substantially. What are some factors influencing this?
- Question: (TCOF) List at least three methods that MNCs engage in international business. Explain each briefly.
- Question: (TCOD)What are the advantages and disadvantages to a U.S. corporation that uses currency options on euros rather than a forward contract on euros to hedge its exposure in euros?
- Question: (TCOB) The opening of Russia’s market has resulted in a highly volatile Russian currency (the ruble). Russia’s inflation has commonly exceeded 20% per month. Russian interest rates commonly exceed 150%, but this is sometimes less than the annual inflation rate in Russia. What is happening to the purchasing power of Russian consumers based on this exchange system of rubles? What will be the foreign demand for rubles to purchase Russian goods? Will rubles appreciate or depreciate against the U.S. dollar?
- Question: (TCO F) Snyder Golf Co., a U.S. firm that sells high-quality golf clubs in the United States, wants to expand internationally by selling the same golf clubs in Brazil. Describe the trade offs that are involved For each method (e.g.,exporting, direct foreign investment, etc.) that Snyder could use to achieve its goal.
- Question: (TCOG) How does translation exposure affect a business with a high percentage of business conducted by subsidiaries? What factors come into play?
- Question: (TCO E) Answer the following questions regarding DFI strategy. a. Bronco Corp. has decided to establish a subsidiary in Taiwan that will produce stereo sand sell them there. It expects that its cost of producing these stereos will be one third the cost of producing them in the United States. Assuming that its production cost estimates are accurate, is Bronco’s strategy sensible? Explain. (10 points) b. Ocean MNC establishes a subsidiary, DFI remains an ongoing decision. What does this statement mean?
(FIN 565 Week 8 Final Exam, FIN 565 Week 8 Final Exam, FIN 565 Week 8 Final Exam, FIN 565 Week 8 Final Exam, FIN 565 Week 8 Final Exam, FIN 565 Week 8 Final Exam)