国际财务管理作业Chapter 3 - Test Bank

Chapter 2—International Flow of Funds1. Recently, the U.S. experienced an annual balance of trade representing a ____.a. large surplus (exceeding $100 billion)b. small surplusc. level of zerod. deficit2. A high home inflation rate relative to other countries would ____ the home country's current accountbalance, other things equal. A high growth in the home income level relative to other countries would ____ the home country's current account balance, other things equal.a. increase; increaseb. increase; decreasec. decrease; decreased. decrease; increase3. If a country's government imposes a tariff on imported goods, that country's current account balancewill likely ____ (assuming no retaliation by other governments).a. decreaseb. increasec. remain unaffectedd. either A or C are possible4. ____ purchases more U.S. exports than the other countries listed here.a. Italyb. Spainc. Mexicod. Canada5. An increase in the current account deficit will place ____ pressure on the home currency value, otherthings equal.a. upwardb. downwardc. nod. upward or downward (depending on the size of the deficit)6. If the home currency begins to appreciate against other currencies, this should ____ the currentaccount balance, other things equal (assume that substitutes are readily available in the countries, and that the prices charged by firms remain the same).a. increaseb. have no impact onc. reduced. all of the above are equally possible7. The International Financial Corporation was established to:a. enhance development solely in Asia through grants.b. enhance economic development through non-subsidized loans (at market interest rates).c. enhance economic development through low-interest rate loans (below-market rates).d. enhance economic development of the private sector through investment in stock ofcorporations.8. The World Bank was established to:a. enhance development solely in Asia through grants.b. enhance economic development through non-subsidized loans (at market interest rates).c. enhance economic development through low-interest rate loans (below-market rates).d. enhance economic development of the private sector through investment in stock ofcorporations.9. The International Development Association was established to:a. enhance development solely in Asia through grants.b. enhance economic development through non-subsidized loans (at market interest rates).c. enhance economic development through low-interest rate loans (below-market rates).d. enhance economic development of the private sector through investment in stock ofcorporations.10. Which of the following would likely have the least direct influence on a country's current account?a. inflation.b. national income.c. exchange rates.d. tariffs.e. a tax on income earned from foreign stocks.11. The "J curve" effect describes:a. the continuous long-term inverse relationship between a country's current account balanceand the country's growth in gross national product.b. the short-run tendency for a country's balance of trade to deteriorate even while itscurrency is depreciating.c. the tendency for exporters to initially reduce the price of goods when their own currencyappreciates.d. the reaction of a country's currency to initially depreciate after the country's inflation ratedeclines.12. An increase in the use of quotas is expected to:a. reduce the country's current account balance, if other governments do not retaliate.b. increase the country's current account balance, if other governments do not retaliate.c. have no impact on the country's current account balance unless other governmentsretaliate.d. increase the volume of a country's trade with other countries.13. The U.S. typically has a balance of trade surplus in its trade with ____.a. Chinab. Japanc. A and Bd. none of the above14. The North American Free Trade Agreement (NAFTA) increased restrictions on:a. trade between Canada and Mexico.b. trade between Canada and the U.S.c. direct foreign investment in Mexico by U.S. firms.d. none of the above.15. According to the text, international trade (exports plus imports combined) as a percentage of GDP is:a. higher in the U.S. than in European countries.b. lower in the U.S. than in European countries.c. higher in the U.S. than in about half the European countries, and lower in the U.S. than theothers.d. about the same in the U.S. as in European countries.16. The direct foreign investment positions by U.S. firms have generally ____ over time. Restrictions bygovernments on direct foreign investment have generally ___ over time.a. increased; increasedb. increased; decreasedc. decreased; decreasedd. decreased; increased17. Which of the following countries purchases the largest amount of exports by U.S. firms?a. Mexicob. Japanc. Canadad. France18. The primary component of the current account is the:a. balance of trade.b. balance of money market flows.c. balance of capital market flows.d. unilateral transfers.19. As a result of the European Union, restrictions on exports between ____ were reduced or eliminated.a. member countries and the U.S.b. member countriesc. member countries and European non-membersd. none of the above20. Over the last several years, international trade has generally:a. increased for most major countries.b. decreased for most major countries.c. stayed about constant for most major countries.d. increased for about half the major countries and decreased for the others.21. Which is not a concern about the North American Free Trade Agreement (NAFTA)?a. its impact on U.S. inflation.b. its impact on U.S. unemployment.c. lower environmental standards in Mexico.d. different health laws for workers in Mexico.22. A General Agreement on Tariffs and Trade (GATT) accord in 1993 called for:a. increased trade restrictions outside of North America.b. lower trade restrictions around the world.c. uniform environmental standards around the world.d. uniform worker health laws.23. Which of the following is mentioned in the text as a possible means by which the government mayattempt to improve its balance of trade position (increase its exports or reduce its imports).a. It could attempt to reduce its home currency's value.b. The government could require firms to engage in outsourcing.c. The government could require that its local firms pursue outsourcing.d. All of the above are mentioned.24. The demand for U.S. exports tends to increase when:a. economic growth in foreign countries decreases.b. the currencies of foreign countries strengthen against the dollar.c. U.S. inflation rises.d. none of the above.25. "Dumping" is used in the text to represent the:a. exporting of goods that do not meet quality standards.b. sales of junk bonds to foreign countries.c. removal of foreign subsidiaries by the host government.d. exporting of goods at prices below cost.26. ____ is (are) income received by investors on foreign investments in financial assets (securities).a. Portfolio incomeb. Direct foreign incomec. Unilateral transfersd. Factor income27. A weak home currency may not be a perfect solution to correct a balance of trade deficit because:a. it reduces the prices of imports paid by local companies.b. it increases the prices of exports by local companies.c. it prevents international trade transactions from being prearranged.d. foreign companies may reduce the prices of their products to stay competitive.28. Intracompany trade makes up approximately ____ percent of all international trade.a. 50b. 70c. 25d. 13e. 529. Like the International Monetary Fund (IMF), the ____ is composed of a collection of nations asmembers. However, unlike the IMF, it uses the private rather than the government sector to achieve its objectives.a. World Bankb. International Financial Corporation (IFC)c. World Trade Organization (WTO)d. International Development Association (IDA)e. Bank for International Settlements (BIS)30. The World Bank's Multilateral Investment Guarantee Agency (MIGA):a. offers various forms of export insurance.b. offers various forms of import insurance.c. offers various forms of exchange rate risk insurance.d. provides loans to developing countries.e. offers various forms of political risk insurance.31. Also known as the "central banks' central bank," the ____ attempts to facilitate cooperation amongcountries with regard to international transactions and provides assistance to countries experiencing a financial crisis.a. World Bankb. International Financial Corporation (IFC)c. World Trade Organizationd. International Development Association (IDA)e. Bank for International Settlements (BIS)32. Direct foreign investment into the U.S. represents a ____.a. capital inflowb. trade inflowc. capital outflowd. trade outflow33. A balance of trade surplus indicates an excess of imports over exports.a. Trueb. False34. A weakening of the U.S. dollar with respect to the British pound would likely reduce the U.S. exportsto Britain and increase U.S. imports from Britain over time.a. Trueb. False35. The World Bank extends loans only to developed nations, while the International DevelopmentAssociation (IDA) extends loans only to developing nations.a. Trueb. False36. The World Bank frequently enters into cofinancing agreements. Under these agreements, financing isprovided by the World Bank and/or official aid agencies, export credit agencies, or commercial banks.a. Trueb. False37. The balance of payments is a measurement of all transactions between domestic and foreign residentsover a specified period of time.a. Trueb. False38. Changes in country ownership of long-term and short-term assets are measured in the balance ofpayments with the capital account.a. Trueb. False39. Portfolio investment represents transactions involving long-term financial assets (such as stocks andbonds) between countries that do not affect the transfer of control.a. Trueb. False40. The current account represents the investment in fixed assets in foreign countries that can be used toconduct business operations.a. Trueb. False41. Exporting of products by one country to other countries at prices below cost is called elasticity.a. Trueb. False42. Direct foreign investment by U.S.-based MNCs occurs primarily in the Bahamas and Brazil.a. Trueb. False43. The J curve effect is the initial worsening of the U.S. trade balance due to a weakening dollar becauseof established trade relationships that are not easily changed; as the dollar weakens, the dollar value of imports initially rises before the U.S. trade balance is improved.a. Trueb. False44. Portfolio investments represent transactions involving long-term financial assets (such as stocks andbonds) between countries that do not affect the transfer of control.a. Trueb. False45. Intracompany trade represents the exporting of products by one country to other countries below cost.a. Trueb. False46. A tariff is a maximum limit on imports.a. Trueb. False47. A country's net outflow of funds ____ affect its interest rates, and ____ affect its economic conditions.a. does; doesb. does; does notc. does not; does notd. does not; does48. The sale of patent rights by a U.S. firm to a Russian firm reflects a credit to the U.S. balance ofpayments account.a. Trueb. False49. A U.S. purchase of patent rights from a firm in Mexico reflects a credit to the U.S. balance ofpayments account.a. Trueb. False50. Regarding the U.S. balance of payments, capital account items are relatively minor compared to thefinancial account items.a. Trueb. False51. In recent years, the U.S. has had a relatively (compared to other countries) ____ balance of trade ____with China.a. small; surplusb. large; surplusc. small; deficitd. large; deficit52. The Central American Trade Agreement (CAFTA) is intended to raise tariffs and regulations betweenthe U.S., the Dominican Republic, and Central American countries.a. Trueb. False53. U.S. government officials would likely prefer that China devalue the yuan against the dollar.a. Trueb. False54. Assume that some U.S. firms will purchase supplies from either China or from U.S. firms. If theChinese yuan appreciates against the dollar, it should reduce the U.S. balance of trade deficit with China.a. Trueb. False55. Assume the U.S. has a balance of trade surplus with the country of Thor. When individuals in Thormanufacture CDs and DVDs that look almost exactly like the original product produced in the U.S.and other countries, they ____ the U.S. balance of trade surplus with Thor. This activity is called ____.a. reduce; flippingb. reduce; piratingc. increase; piratingd. increase; flipping56. Japan's annual interest rate has been relatively ____ compared to other countries for several years,because the supply of funds in its credit market has been very ____.a. low; smallb. high; smallc. low; larged. high; large57. Without the international capital flows, there would be ____ funding available in the U.S. across allrisk levels, and the cost of funding would be ____ regardless of the firm's risk level.a. more; lowerb. more; higherc. less; lowerd. less; higher58. The primary component of the capital account is the balance of trade.a. Trueb. False59. A balance of trade surplus indicates an excess of merchandise imports over merchandise exports.a. Trueb. False60. An American tourist visiting Germany and spending money there (for lodging, food, etc.) will reducethe U.S. current account deficit and reduce Germany's current account balance.a. Trueb. False61. A balance of trade deficit indicates an excess of imports over exports.a. Trueb. False62. The capital account reflects changes in country ownership of long-term (but not short-term) assets.a. Trueb. False63. Outsourcing allows some MNCs to reduce costs but shifts jobs to other countries.a. Trueb. False64. A weakening of the U.S. dollar with respect to the British pound would likely reduce U.S. exports tothe U.K. and increase U.S. imports from the U.K.a. Trueb. False65. The World Bank extends loans only to developed nations, while the International DevelopmentAssociation (IDA) extends loans only to developing nations.a. Trueb. False66. The ____ is the difference between exports and imports.a. balance of tradeb. balance on goods and servicesc. balance of paymentsd. current accounte. capital account67. Which of the following will probably not result in an increase in a country's current account balance(assuming everything else constant)?a. A decrease in the country's rate of inflationb. A decrease in the country's national income levelc. An increase in government restrictions in the form of tariffs or quotasd. An appreciation of the country's currencye. All of the above will result in an increased current account balance.68. Which of the following factors probably does not directly affect a country's capital account and itscomponents?a. Inflationb. Interest ratesc. Withholding taxes on foreign incomed. Exchange rate movementse. All of the above will directly affect a country's capital account.69. The ____, an accord among 117 nations, called for lower tariffs around the world.a. General Agreement on Tariffs and Trade (GATT)b. North American Free Trade Agreement (NAFTA)c. Single European Act of 1987d. European Union Accorde. None of the above70. Which of the following is not likely to represent a strategy by the government of Country X to reduceits balance of trade deficit with Country Y?a. The government of Country X eliminates environmental restrictions.b. The government of Country X subsidizes firms in its country to facilitate dumping.c. The government of Country X provides tax breaks to firms in specific industries.d. The government of Country X removes a tariff on goods imported from Country Y.71. Which of the following statements is not true?a. Exporters commonly complain that they are being mistreated because the currency of theircountry is too weak.b. Outsourcing affects the balance of trade because it means that a service is purchased inanother country.c. Sometimes, trade policies are used to punish countries for various actions.d. Tariffs imposed by the EU have caused some friction between EU countries thatcommonly import products and other EU countries.e. All of the above are true.72. Which of the following would increase the current account of Country X? Country Y is Country X'ssole trading partner.a. Inflation increases in countries X and Y by comparable amounts.b. Country X's and Country Y's currencies depreciate by the same amount.c. Country X imposes tariffs on imports from Country Y, and Country Y retaliates byimposing an identical tax on X's exports.d. The central banks of Country X and Country Y reduce the money supply to increaseinterest rates.e. Country X imposes a quota on imports, and Country Y retaliates by imposing an identicalquota on X's exports.73. ____ represent aid, grants, and gifts from one country to another.a. Transfer paymentsb. Factor incomec. The balance of traded. The balance of paymentse. The capital account74. Which of the following is not a goal of the International Monetary Fund (IMF)?a. To promote cooperation among countries on international monetary issuesb. To promote stability in exchange ratesc. To enhance a country's long-term economic growth via the extension of structuraladjustment loansd. To promote free tradee. To promote free mobility of capital funds across countries75. According to the "J curve effect," a weakening of the U.S. dollar relative to its trading partners'currencies would result in an initial ____ in the current account balance, followed by a subsequent ____ in the current account balance.a. decrease; increaseb. increase; decreasec. decrease; decreased. increase; increase。

Chapter 4—Exchange Rate Determination1. The value of the Australian dollar (A$) today is $0.73. Yesterday, the value of the Australian dollarwas $0.69. The Australian dollar ____ by ____%.a. depreciated; 5.80b. depreciated; 4.00c. appreciated; 5.80d. appreciated; 4.00SOLUTION: ($0.73 − $0.69)/$0.69 = 5.80%2. If a currency's spot rate market is ____, its exchange rate is likely to be ____ to a single large purchaseor sale transaction.a. liquid; highly sensitiveb. illiquid; insensitivec. illiquid; highly sensitived. none of the above.3. ____ is not a factor that causes currency supply and demand schedules to change.a. Relative inflation ratesb. Relative interest ratesc. Relative income levelsd. Expectationse. All of the above are factors that cause currency supply and demand schedules to change.4. A large increase in the income level in Mexico along with no growth in the U.S. income level isnormally expected to cause (assuming no change in interest rates or other factors) a(n) ____ inMexican demand for U.S. goods, and the Mexican peso should ____.a. increase; appreciateb. increase; depreciatec. decrease; depreciated. decrease; appreciate5. An increase in U.S. interest rates relative to German interest rates would likely ____ the U.S. demandfor euros and ____ the supply of euros for sale.a. reduce; increaseb. increase; reducec. reduce; reduced. increase; increase6. Investors from Germany, the United States, and the U.K. frequently invest in each other basedon prevailing interest rates. If British interest rates increase, German investors are likely to buy ____ dollar-denominated securities, and the euro is likely to ____ relative to the dollar.a. fewer; depreciateb. fewer; appreciatec. more; depreciated. more; appreciate7. When the "real" interest rate is relatively low in a given country, then the currency of that country istypically expected to be:a. weak, since the country's quoted interest rate would be high relative to the inflation rate.b. strong, since the country's quoted interest rate would be low relative to the inflation rate.c. strong, since the country's quoted interest rate would be high relative to the inflation rate.d. weak, since the country's quoted interest rate would be low relative to the inflation rate.8. Assume that the inflation rate becomes much higher in the U.K. relative to the U.S. This will place____ pressure on the value of the British pound. Also, assume that interest rates in the U.K. begin to rise relative to interest rates in the U.S. The change in interest rates will place ____ pressure on the value of the British pound.a. upward; downwardb. upward; upwardc. downward; upwardd. downward; downward9. In general, when speculating on exchange rate movements, the speculator will borrow the currencythat is expected to appreciate and invest in the country whose currency is expected to depreciate.a. Trueb. False10. Baylor Bank believes the New Zealand dollar will appreciate over the next five days from $.48 to$.50. The following annual interest rates apply:Currency Lending Rate Borrowing RateDollars 7.10% 7.50%New Zealand dollar (NZ$) 6.80% 7.25%Baylor Bank has the capacity to borrow either NZ$10 million or $5 million. If Baylor Bank's forecast is correct, what will its dollar profit be from speculation over the five-day period (assuming it does not use any of its existing consumer deposits to capitalize on its expectations)?a. $521,325.b. $500,520.c. $104,262.d. $413,419.e. $208,044.SOLUTION:1. Borrow $5 million.2. Convert to NZ$: $5,000,000/$.48 = NZ$10,416,667.3. Invest the NZ$ at an annualized rate of 6.80% over five days.NZ$10,416,667 × [1 + 6.80% (5/360)]= NZ$10,426,5054. Convert the NZ$ back to dollars:NZ$10,426,505 × $.50 = $5,213,2525. Repay the dollars borrowed. The repayment amount is:$5,000,000 × [1 + 7.5% (5/360)]= $5,000,000 × [1.00104]= $5,005,2086. After repaying the loan, the remaining dollar profit is:$5,213,252 − $5,005,208 = $208,04411. Assume the following information regarding U.S. and European annualized interest rates:Currency Lending Rate Borrowing RateU.S. Dollar ($) 6.73% 7.20%Euro (€) 6.80% 7.28%Trensor Bank can borrow either $20 million or €20 million. The current spot rate of the euro is $1.13.Furthermore, Trensor Bank expects the spot rate of the euro to be $1.10 in 90 days. What is Trensor Bank's dollar profit from speculating if the spot rate of the euro is indeed $1.10 in 90 days?a. $579,845.b. $583,800.c. $588,200.d. $584,245.e. $980,245.SOLUTION:1. Borrow €20 million.2. Convert the €20 million to €20,000,000 × $1.13 = $22,600,000.3. Invest the $22,600,000 at an annualized rate of 6.73% for 90 days.$22,600,000 × [1 + 6.73% (90/360)]= $22,980,2454. Determine euros owed: €20,000,000 × [1 + 7.28% (90/360)] = €20,364,000.5. Determine dollars needed to repay euro loan: €20,364,000 × $1.10 = $22,400,400.6. The dollar profit is $22,980,245 − $22,400,400 = $579,845.12. The equilibrium exchange rate of pounds is $1.70. At an exchange rate of $1.72 per pound:a. U.S. demand for pounds would exceed the supply of pounds for sale and there would be ashortage of pounds in the foreign exchange market.b. U.S. demand for pounds would be less than the supply of pounds for sale and there wouldbe a shortage of pounds in the foreign exchange market.c. U.S. demand for pounds would exceed the supply of pounds for sale and there would be asurplus of pounds in the foreign exchange market.d. U.S. demand for pounds would be less than the supply of pounds for sale and there wouldbe a surplus of pounds in the foreign exchange market.e. U.S. demand for pounds would be equal to the supply of pounds for sale and there wouldbe a shortage of pounds in the foreign exchange market.13. Assume that Swiss investors have francs available to invest in securities, and they initially view U.S.and British interest rates as equally attractive. Now assume that U.S. interest rates increase while British interest rates stay the same. This would likely cause:a. the Swiss demand for dollars to decrease and the dollar will depreciate against the pound.b. the Swiss demand for dollars to increase and the dollar will depreciate against the Swissfranc.c. the Swiss demand for dollars to increase and the dollar will appreciate against the Swissfranc.d. the Swiss demand for dollars to decrease and the dollar will appreciate against the pound.14. The real interest rate adjusts the nominal interest rate for:a. exchange rate movements.b. income growth.c. inflation.d. government controls.e. none of the above15. If U.S. inflation suddenly increased while European inflation stayed the same, there would be:a. an increased U.S. demand for euros and an increased supply of euros for sale.b. a decreased U.S. demand for euros and an increased supply of euros for sale.c. a decreased U.S. demand for euros and a decreased supply of euros for sale.d. an increased U.S. demand for euros and a decreased supply of euros for sale.16. If inflation in New Zealand suddenly increased while U.S. inflation stayed the same, there would be:a. an inward shift in the demand schedule for NZ$ and an outward shift in the supplyschedule for NZ$.b. an outward shift in the demand schedule for NZ$ and an inward shift in the supplyschedule for NZ$.c. an outward shift in the demand schedule for NZ$ and an outward shift in the supplyschedule for NZ$.d. an inward shift in the demand schedule for NZ$ and an inward shift in the supply schedulefor NZ$.17. If the U.S. and Japan engage in substantial financial flows but little trade, ____ directly influencestheir exchange rate the most. If the U.S. and Switzerland engage in much trade but little financial flows, ____ directly influences their exchange rate the most.a. interest rate differentials; interest rate differentialsb. inflation and interest rate differentials; interest rate differentialsc. income and interest rate differentials; inflation differentialsd. interest rate differentials; inflation and income differentialse. inflation and income differentials; interest rate differentials18. If inflation increases substantially in Australia while U.S. inflation remains unchanged, this is expectedto place ____ pressure on the value of the Australian dollar with respect to the U.S. dollar.a. upwardb. downwardc. either upward or downward (depending on the degree of the increase in Australianinflation)d. none of the above; there will be no impact19. Assume that British corporations begin to purchase more supplies from the U.S. as a result of severallabor strikes by British suppliers. This action reflects:a. an increased demand for British pounds.b. a decrease in the demand for British pounds.c. an increase in the supply of British pounds for sale.d. a decrease in the supply of British pounds for sale.20. The exchange rates of smaller countries are very stable because the market for their currency is veryliquid.a. Trueb. False21. The phrase "the dollar was mixed in trading" means that:a. the dollar was strong in some periods and weak in other periods over the last month.b. the volume of trading was very high in some periods and low in other periods.c. the dollar was involved in some currency transactions, but not others.d. the dollar strengthened against some currencies and weakened against others.22. Assume that the U.S. places a strict quota on goods imported from Chile and that Chile does notretaliate. Holding other factors constant, this event should immediately cause the U.S. demand for Chilean pesos to ____ and the value of the peso to ____.a. increase; increaseb. increase; declinec. decline; declined. decline; increase23. Any event that increases the U.S. demand for euros should result in a(n) ____ in the value of the eurowith respect to ____, other things being equal.a. increase; U.S. dollarb. increase; nondollar currenciesc. decrease; nondollar currenciesd. decrease; U.S. dollar24. Any event that reduces the U.S. demand for Japanese yen should result in a(n) ____ in the value of theJapanese yen with respect to ____, other things being equal.a. increase; U.S. dollarb. increase; nondollar currenciesc. decrease; nondollar currenciesd. decrease; U.S. dollar25. Any event that increases the supply of British pounds to be exchanged for U.S. dollars should result ina(n) ____ in the value of the British pound with respect to ____, other things being equal.a. increase; U.S. dollarb. increase; nondollar currenciesc. decrease; nondollar currenciesd. decrease; U.S. dollar26. Any event that reduces the supply of Swiss francs to be exchanged for U.S. dollars should result in a(n)____ in the value of the Swiss franc with respect to ____, other things being equal.a. increase; U.S. dollarb. increase; nondollar currenciesc. decrease; nondollar currenciesd. decrease; U.S. dollar27. Assume that the U.S. experiences a significant decline in income, while Japan's income remains steady.This event should place ____ pressure on the value of the Japanese yen, other things being equal.(Assume that interest rates and other factors are not affected.)a. upwardb. downwardc. nod. upward and downward (offsetting)28. News of a potential surge in U.S. inflation and zero Chilean inflation places ____ pressure on the valueof the Chilean peso. The pressure will occur ____.a. upward; only after the U.S. inflation surgesb. downward; only after the U.S. inflation surgesc. upward; immediatelyd. downward; immediately29. Assume that Canada places a strict quota on goods imported from the U.S. and that the U.S. does notretaliate. Holding other factors constant, this event should immediately cause the supply of Canadian dollars to be exchanged for U.S. dollars to ____ and the value of the Canadian dollar to ____.a. increase; increaseb. increase; declinec. decline; declined. decline; increase30. Assume that Japan places a strict quota on goods imported from the U.S. and the U.S. places a strictquota on goods imported from Japan. This event should immediately cause the U.S. demand forJapanese yen to ____, and the supply of Japanese yen to be exchanged for U.S. dollars to ____.a. increase; increaseb. increase; declinec. decline; declined. decline; increase31. Which of the following is not mentioned in the text as a factor affecting exchange rates?a. relative interest rates.b. relative inflation rates.c. government controls.d. expectations.e. all of the above are mentioned in the text as factors affecting exchange rates.32. If a country experiences high inflation relative to the U.S., its exports to the U.S. should ____, itsimports should ____, and there is ____ pressure on its currency's equilibrium value.a. decrease; increase; upwardb. decrease; decrease; upwardc. increase; decrease; downwardd. decrease; increase; downwarde. increase; decrease; upward33. If a country experiences an increase in interest rates relative to U.S. interest rates, the inflow of U.S.funds to purchase its securities should ____, the outflow of its funds to purchase U.S. securities should ____, and there is ____ pressure on its currency's equilibrium value.a. increase; decrease; downwardb. decrease; increase; upwardc. increase; decrease; upwardd. decrease; increase; downwarde. increase; increase; upward34. An increase in U.S. inflation relative to Singapore inflation places upward pressure on the Singaporedollar.a. Trueb. False35. When expecting a foreign currency to depreciate, a possible way to speculate on this movement is toborrow dollars, convert the proceeds to the foreign currency, lend in the foreign country, and use the proceeds from this investment to repay the dollar loan.a. Trueb. False36. Since supply and demand for a currency are constant (primarily due to government intervention),currency values seldom fluctuate.a. Trueb. False37. Relatively high Japanese inflation may result in an increase in the supply of yen for sale and areduction in the demand for yen.a. Trueb. False38. The main effect of interest rate movements on exchange rates is through their effect on internationaltrade.a. Trueb. False39. Country X frequently engages in trade flows with the U.S. (such as imports and exports). Country Yfrequently engages in capital flows with the U.S. (such as financial investments). Everything else held constant, an increase in U.S. interest rates would affect the exchange rate of Country X's currency more than the exchange rate of Country Y's currency.a. Trueb. False40. Increases in relative income in one country vs. another result in an increase in the first country'scurrency value.a. Trueb. False41. Trade-related foreign exchange transactions are more responsive to news than financial flowtransactions.a. Trueb. False42. Signals regarding future actions of market participants in the foreign exchange market sometimesresult in overreactions.a. Trueb. False43. The markets that have a smaller amount of foreign exchange trading for speculatory purposes than fortrade purposes will likely experience more volatility than those where trade flows play a larger role.a. Trueb. False44. Liquidity of a currency can affect the extent to which speculation can impact the currency's value.a. Trueb. False45. Forecasting a currency's future value is difficult, because it is difficult to identify how the factorsaffecting the currency value will change, and how they will interact to impact the currency's value.a. Trueb. False46. The standard deviation should be applied to values rather than percentage movements when comparingvolatility among currencies.a. Trueb. False47. Movements of foreign currencies tend to be more volatile for shorter time horizons.a. Trueb. False48. If a currency's spot market is ____, its exchange rate is likely to be ____ to a single large purchase orsale transaction.a. liquid; highly sensitiveb. illiquid; insensitivec. liquid; insensitived. none of the above49. The value of euro was $1.30 last week. During last week the euro depreciated by 5%. What is thevalue of euro today?a. $1.365b. $1.235c. $1.330d. $1.30SOLUTION: $1.3 × (1 − .05) = $1.23550. Government controls can only affect the supply of a given currency for sale and not the demand.a. Trueb. False51. If one foreign currency will appreciate against the dollar, then all foreign currencies will appreciateagainst the dollar but by different degrees.a. Trueb. False52. Assume that the income levels in U.K. start to rise, while U.S. income levels remain unchanged. Thiswill place ____ pressure on the value of British pound. Also, assume that U.S. interest rates rise, while the British pound remains unchanged. This will place ____ pressure on the value of British pound.a. downward; downwardb. upward; downwardc. upward; upwardd. downward; upward53. If the Fed announces that it will decrease the U.S. interest rates, and European Central Bank takes noaction, then the value of euro will ____ against the value of U.S. dollar. The Fed's action is called ____ intervention.a. appreciate; directb. depreciate; directc. appreciate; indirectd. depreciate; indirect54. Assume that the total value of investment transactions between U.S. and Mexico is minimal. Alsoassume that total dollar value of trade transactions between these two countries is very large. Now assume that Mexico's inflation has suddenly increased, and Mexican interest rates have suddenlyincreased. Overall, this would put ____ pressure on the value of Mexican peso. The inflation effect should be ____ pronounced than the interest rate effect.a. downward; moreb. upward; morec. downward; lessd. upward; less55. If U.S. experiences a sudden surge in inflation and surge in interest rates while Japanese inflation andinterest rates remain unchanged, the value of Japanese yen will ____ against the U.S. dollar.a. appreciateb. depreciatec. remain unchangedd. cannot be determined from the information provided.56. If the Japanese yen is expected to appreciate against the U.S. dollar and interest rates in the U.S. andJapan are similar, banks may try speculating on this anticipated exchange rate movement by borrowing ____ and investing in ____.a. yen; dollarsb. yen; yenc. dollars; yend. dollars; dollars57. British investors frequently invest in the U.S. or Italy, depending on the prevailing interest rates. IfItalian interest rates suddenly rise high above U.S. rates, the investors will ____ the supply of pounds to be exchanged for dollars and thus put ____ pressure on the value of the pound against the U.S.dollar.a. increase; downwardb. decrease; upwardc. increase; upwardd. decrease; downward58. The equilibrium exchange rate of the Swiss franc is $0.90. At an exchange rate $.83:a. U.S. demand for Swiss francs would exceed the supply of francs for sale and there wouldbe a shortage of francs in the foreign exchange market.b. U.S. demand for Swiss francs would be less than the supply of francs for sale and therewould be a shortage of francs in the foreign exchange market.c. U.S. demand for Swiss francs would exceed the supply of francs for sale and there wouldbe a surplus of francs in the foreign exchange market.d. U.S. demand for Swiss francs would be less than the supply of francs for sale and therewould be a surplus of Swiss francs in the foreign exchange market.59. Financial flow foreign exchange transactions are more responsive to news than trade-relatedtransactions.a. Trueb. False60. Assume that the British government eliminates all controls on imports by British companies. Otherthings being equal, the U.S. demand for pounds would ____, the supply of pounds for sale would ____, and the equilibrium value of the pound would ____.a. increase; increase; increaseb. decrease; increase; decreasec. remain unchanged; increase; decreased. remain unchanged; increase; increase61. Country X frequently engages in trade flows with the U.S. (such as imports and exports). Country Yfrequently engages in capital flows with the U.S. (such as financial investments). Everything else held constant, an increase in U.S. inflation would affect the exchange rate of Country Y's currency more than the exchange rate of Country X's currency.a. Trueb. False62. Assume that U.S. inflation is expected to surge in the near future. The expectation of surge in inflationwill most likely place ____ pressure on U.S. dollar immediately.a. upwardb. downwardc. nod. cannot be determined63. When the Japanese yen appreciates against the U.S. dollar, this means that the U.S. dollar isstrengthening relative to the yen.a. Trueb. False64. Illiquid currencies tend to exhibit less volatile exchange rate movements than liquid currencies.a. Trueb. False65. The supply curve for a currency is downward sloping since U.S. corporations would be encouraged topurchase more foreign goods when the foreign currency is worth less.a. Trueb. False66. Relatively high Japanese inflation may result in an increase in the supply of yen for sale and areduction in the demand for yen, other things being equal.a. Trueb. False67. If the British government desires an appreciation in its currency with respect to the U.S. dollar, itwould consider intervening in the foreign exchange market by buying dollars with pounds.a. Trueb. False68. Country X frequently engages in trade flows with the U.S. (such as imports and exports). Country Yfrequently engages in financial flows with the U.S. (such as financial investments). Everything else held constant, an increase in U.S. interest rates would affect the exchange rate of Country X's currency more than the exchange rate of Country Y's currency.a. Trueb. False69. Illiquid currencies tend to exhibit ____ volatile exchange rate movements, as the equilibrium prices oftheir currencies adjust to ____ changes in supply and demand conditions.a. less; even minorb. less; only largec. more; even minord. more; only largee. none of the above70. Which of the following is not mentioned in the text as a factor affecting exchange rates?a. Relative interest ratesb. Relative inflation ratesc. Government controlsd. Expectationse. All of the above are mentioned in the text as factors affecting exchange rates.71. Which of the following events would most likely result in an appreciation of the U.S. dollar?a. U.S. inflation is very high.b. The Fed indicates that it will raise U.S. interest rates.c. Future U.S. interest rates are expected to decline.d. Japan is expected to increase interest rates in the near future.72. Which of the following interactions will likely have the least effect on the dollar's value? Assumeeverything else is held constant.a. A reduction in U.S. inflation accompanied by an increase in real U.S. interest ratesb. A reduction in U.S. inflation accompanied by an increase in nominal U.S. interest ratesc. An increase in U.S. inflation accompanied by an increase in nominal, but not real, U.S.interest ratesd. An increase in Singapore's inflation accompanied by an increase in real U.S. interest ratese. An increase in Singapore's interest rates accompanied by an increase in U.S. inflation.73. If a country experiences high inflation relative to the U.S., its exports to the U.S. should ____, itsimports should ____, and there is ____ pressure on its currency's equilibrium value.a. decrease; increase; upwardb. decrease; decrease; upwardc. increase; decrease; downwardd. decrease; increase; downwarde. increase; decrease; upward74. If a country experiences an increase in interest rates relative to U.S. interest rates, the inflow of U.S.funds to purchase its securities should ____, the outflow of its funds to purchase U.S. securities should ____, and there is ____ pressure on its currency's equilibrium value.a. increase; decrease; downwardb. decrease; increase; upwardc. increase; decrease; upwardd. decrease; increase; downwarde. increase; increase; upward。

Chapter 1—Multinational Financial Management: An Overview1. The commonly accepted goal of the MNC (跨国公司) is to:a. maximize short-term earnings.b. maximize shareholder wealth (股东财富).c. minimize risk.d. A and C.e. maximize international sales.ANS: B PTS: 12. With regard to corporate goals, an MNC (跨国公司) is mostly concerned with maximizing ____, and apurely domestic firm (纯粹的国内企业) is mostly concerned with maximizing ____.a. shareholder wealth (股东财富); short-term earningsb. shareholder wealth (股东财富); shareholder wealth (股东财富)c. short-term earnings; sales volumed. short-term earnings; shareholder wealth (股东财富)ANS: B PTS: 13. For the MNC (跨国公司), agency costs (代理成本) are typically:a. non-existent.b. larger than agency costs (代理成本) of a small purely domestic firm (纯粹的国内企业).c. smaller than agency costs (代理成本) of a small purely domestic firm (纯粹的国内企业).d. the same as agency costs (代理成本) of a small purely domestic firm (纯粹的国内企业).ANS: B PTS: 14. Which of the following (下列哪个) could reduce agency problems (代理问题) for an MNC (跨国公司)?a. stock options as managerial compensation.b. hostile takeover (收购) threat.c. investor monitoring.d. all of the above (上述全部) are forms of corporate control that could reduce agencyproblems (代理问题) for an MNC (跨国公司).ANS: D PTS: 15. The valuation (评价) of an MNC (跨国公司) should rise when an event causes the expected cashflows (预期的现金流) from foreign to ____ and when foreign currencies denominating these cashflows are expected to ____.a. decrease; appreciateb. increase; appreciatec. decrease; depreciated. increase; depreciateANS: B PTS: 16. Which of the following (下列哪个) theories identifies specialization (专业化) as a reason forinternational business (国际商务)?a. Theory of Comparative Advantage (比较优势理论) (比较优势).b. Imperfect markets (不完全的市场) theory.c. product cycle (产品周期) theory.d. none of the aboveANS: A PTS: 17. Which of the following (下列哪个) theories identifies the non-transferability of resources (资源的不可转移性) as a reason for international business (国际商务)?a. Theory of Comparative Advantage (比较优势理论) (比较优势).b. Imperfect markets (不完全的市场) theory.c. product cycle (产品周期) theory.d. none of the aboveANS: B PTS: 18. Which of the following (下列哪个) theories suggests that firms seek to penetrate new markets (进入新的市场) over time?a. Theory of Comparative Advantage (比较优势理论) (比较优势).b. Imperfect markets (不完全的市场) theory.c. product cycle (产品周期) theory.d. none of the aboveANS: C PTS: 19. Which of the following (下列哪个) industries would most likely take advantage of lower costs insome less developed foreign countries?a. assembly line production.b. specialized professional services.c. nuclear missile planning.d. planning for more sophisticated computer technology.ANS: A PTS: 110. Due to the risks involved in international business (国际商务), firms should:a. only consider international business (国际商务) in major countries.b. maintain international business (国际商务) to no more than 20% of total business.c. maintain international business (国际商务) to no more than 35% of total business.d. none of the aboveANS: D PTS: 111. A product cycle (产品周期) is the process by which a firm provides a specialized sales or servicestrategy, support assistance, and possibly an initial investment in the franchise in exchange for periodic fees.a. Trueb. FalseANS: F PTS: 112. Licensing (许可) is the process by which a firm provides its technology (copyrights, patents,trademarks, or trade names) in exchange for fees or some other specified benefits.a. Trueb. FalseANS: T PTS: 113. The agency costs (代理成本) of an MNC (跨国公司) are likely to be lower if it:a. scatters its subsidiaries across many foreign countries.b. increases its volume of international business (国际商务).c. uses a centralized management style.d. A and B.ANS: C PTS: 114. An MNC (跨国公司) may be more exposed to agency problems (代理问题) if most of its shares areheld by:a. a few mutual funds (共同基金)b. a widely dispersed set of individual investorsc. a few pension funds (养老基金)d. all of the above (上述全部) would prevent agency problems (代理问题)ANS: B PTS: 115. The Sarbanes-Oxley Act improves corporate governance (公司治理) of MNCs (跨国公司) because it:a. makes executives more accountable for verifying financial statementsb. eliminates stock options as a form of compensationc. ties executive compensation to firm performanced. places a limit on the amount of funds that managers can spendANS: A PTS: 116. MNCs (跨国公司) can improve their internal control (内部控制) process by all of the following,except (除了):a. establishing a centralized data base of informationb. ensuring that all data are reported consistently among subsidiariesc. ensuring that the MNC (跨国公司) always borrows from countries where interest rates arelowestd. using a system that checks internal data for unusual discrepanciesANS: C PTS: 117. Franchising (特许经营) is the process by which national governments sell state owned operations tocorporations and other investors.a. Trueb. FalseANS: F PTS: 118. The parent of MNC (跨国公司) can implement compensation plans (补偿计划) that directly rewardthe subsidiary (子公司) managers for enhancing the value (价值) of the MNC (跨国公司).a. Trueb. FalseANS: T PTS: 119. If a publicly-traded MNC (跨国公司)'s managers make poor decisions that reduce its value (价值), itmay encourage other firms to acquire it.a. Trueb. FalseANS: T PTS: 120. Institutional investors such as mutual funds (共同基金) or pension funds (养老基金) which have largeholdings (控股) of an MNC (跨国公司)'s stock do not normally want to take control of it and therefore have no influence over management of the MNC (跨国公司).a. Trueb. FalseANS: F PTS: 121. In comparing exporting (出口) to direct foreign investment (国外直接投资) (DFI), an exporting (出口)operation will likely incur ____ fixed production costs (固定生产成本) and ____ transportation costs (运输成本) than DFI.a. higher; higherb. higher; lowerc. lower; lowerd. lower; higherANS: D PTS: 122. Which of the following (下列哪个) is an example of direct foreign investment (国外直接投资)?a. exporting (出口) to a country.b. establishing Licensing (许可) arrangements in a country.c. purchasing existing companies in a country.d. investing directly (without brokers) in foreign stocks.ANS: C PTS: 123. According to the text (教科书), a disadvantage of Licensing (许可) is that:a. it prevents a firm from importing (进口).b. it is difficult to ensure quality control of the production process.c. it prevents a firm from exporting (出口).d. none of the aboveANS: B PTS: 124. ____ are most commonly classified as a direct foreign investment (国外直接投资).a. Foreign acquisitions (国外并购)b. Purchases of international stocksc. Licensing (许可) agreementsd. Exporting (出口) transactionsANS: A PTS: 125. Imperfect markets (不完全的市场) represent conditions under which factors of production (生产要素)are immobile.a. Trueb. FalseANS: T PTS: 126. The Sarbanes-Oxley Act (SOX) was enacted in 2002 required MNCs (跨国公司) and other firms toimplement an internal reporting process that could be easily monitored by executives and the board of directors.a. Trueb. FalseANS: T PTS: 127. If markets were perfect, then labor and other costs of production would be perfectly stable (nomovement across borders).a. Trueb. FalseANS: F PTS: 128. The valuation (评价) of an MNC (跨国公司) is reduced if the required return on its investments inforeign countries is reduced.a. Trueb. FalseANS: F PTS: 129. Which of the following (下列哪个) is not mentioned in the text (教科书) as an additional riskresulting from international business (国际商务)?a. exchange rate fluctuations.b. political risk (政治风险).c. interest rate risk.d. exposure (曝险) to foreign economies.ANS: C PTS: 130. Licensing (许可) obligates a firm to provide ____, while Franchising (特许经营) obligates a firm toprovide ____.a. a specialized sales or service strategy; its technologyb. its technology; a specialized sales or service strategyc. its technology; its technologyd. a specialized sales or service strategy; a specialized sales or service strategye. its technology; an initial investmentANS: B PTS: 131. Which of the following (下列哪个) is not a way in which agency problems (代理问题) can be reducedthrough corporate control?a. executive compensation.b. threat of hostile takeover (收购).c. acquisition of a foreign subsidiary (子公司).d. monitoring by large shareholders.ANS: C PTS: 132. The goal of a multinational corporation (MNC (跨国公司)) is the maximization of shareholder wealth(股东财富).a. Trueb. FalseANS: T PTS: 133. A centralized management style, where major decisions about a foreign subsidiary (子公司) are madeby the parent company, results in an increase in agency costs (代理成本).a. Trueb. FalseANS: F PTS: 134. If a U.S. firm sets up a plant in Mexico to benefit from (受益于) low cost labor, it will likely have acomparative advantage (比较优势) over other firms in Mexico that sell the same product.a. Trueb. FalseANS: F PTS: 135. Although MNCs (跨国公司) may need to convert currencies occasionally, they do not face anyexchange rate risk (汇率风险), as exchange rates are stable over time.a. Trueb. FalseANS: F PTS: 136. One of the most prevalent factors conflicting with the realization of the goal of an MNC (跨国公司) isthe existence of agency problems (代理问题).a. Trueb. FalseANS: T PTS: 137. A centralized management style for an MNC (跨国公司) results in relatively (相对) high agency costs(代理成本).a. Trueb. FalseANS: F PTS: 138. The Imperfect markets (不完全的市场) theory states that factors of production (生产要素) aresomewhat immobile, allowing firms to capitalize on a foreign country's resources.a. Trueb. FalseANS: T PTS: 139. If a U.S.-based MNC (跨国公司) focused completely on importing (进口), then its valuation (评价)would likely be adversely affected (受到不利影响) if most currencies were expected to appreciate against the dollar over time.a. Trueb. FalseANS: T PTS: 140. The acquisition of a foreign subsidiary (子公司) is commonly considered by MNCs (跨国公司)because the cost is less expensive than establishing a new subsidiary (子公司) of the same size.a. Trueb. FalseANS: F PTS: 141. If a U.S.-based MNC (跨国公司) focused completely on exporting (出口), then its valuation (评价)would likely be adversely affected (受到不利影响) if most currencies were expected to appreciate against the dollar over time.a. Trueb. FalseANS: F PTS: 142. If markets were perfect, then labor and other costs of production would be easily transferable.a. Trueb. FalseANS: T PTS: 143. International trade (国际贸易):a. is a relatively (相对) conservative approach to foreign market penetration (市场渗透).b. entails minimal risk.c. does not require large amount of investment.d. all of the above (上述全部).ANS: D PTS: 144. Assume that (假设) an American firm wants to engage in international business (国际商务) withoutmajor investment (重大投资) in the foreign country. Which method is least (最不)appropriate in this situation?a. International trade (国际贸易)b. Licensing (许可)c. Franchising (特许经营)d. Direct foreign investment (国外直接投资)ANS: D PTS: 145. The valuation (评价) of MNC (跨国公司) accounts for all the cash flows received by the foreignsubsidiaries plus all the cash flows remitted by the subsidiaries.a. Trueb. FalseANS: F PTS: 146. The MNC (跨国公司)'s value (价值) depends on all of the following, except (除了):a. MNC (跨国公司)'s required rate of return (必要回报率)b. Amount of MNC (跨国公司)'s cash flows in particular currencyc. The exchange rate at which cash flows are converted to dollarsd. The value (价值) of MNC (跨国公司) depends on all of the above (上述全部) factorsANS: D PTS: 147. Which of the following (下列哪个) is not an example of political risk (政治风险)?a. Government may impose taxes on subsidiary (子公司)b. Government may impose barriers on subsidiary (子公司)c. Consumers may boycott the MNC (跨国公司)d. Consumers' income levels will decrease, thus decreasing consumption.ANS: D PTS: 148. A microeconomic perspective focuses on external forces such as economic conditions that can affectthe value (价值) of an MNC (跨国公司).a. Trueb. FalseANS: F PTS: 149. Assume that (假设) an MNC (跨国公司) has a subsidiary (子公司) in Italy, which exports its productsto various countries in Europe. Since all of the countries where it exports use Euro as their currency, this MNC (跨国公司) is not subject to the exchange rate risk (汇率风险).a. Trueb. FalseANS: F PTS: 150. International trade (国际贸易) generally results in ____ exposure (曝险) to international political risk(政治风险) and ____ exposure (曝险) to international economic conditions, when compared to other methods of international business (国际商务).a. higher; lowerb. higher; higherc. lower; higherd. lower; lowerANS: D PTS: 151. Assume that (假设) Boca Co. wants to expand its business to Japan, and wants complete control overthe operations in Japan. Which method of international business (国际商务) is most appropriate for Boca Co?a. Joint ventureb. Licensing (许可)c. Partial acquisition of existing Japanese firmd. Establishment (建立) of Japanese subsidiary (子公司)ANS: B PTS: 152. A decentralized management style of MNC (跨国公司) results in relatively (相对) high agency costs(代理成本).a. Trueb. FalseANS: T PTS: 153. The Establishment (建立) of a new subsidiary (子公司) is commonly considered by MNCs (跨国公司)because the cost is less expensive than acquiring a foreign subsidiary (子公司) of the same size.a. Trueb. FalseANS: T PTS: 154. Assume that (假设) Live Co. has expected cash flows (预期的现金流) of $200,000 from domesticoperations, SF200,000 from Swiss operations, and 150,000 euros from Italian operations at the end of the year. The Swiss franc's value (价值) and euro's value (价值) are expected to be $.83 and $1.29 respectively, at the end this year. What are the expected dollar cash flows of Live Co?a. $200,000b. $559,500c. $582,500d. $393,500ANS: B PTS: 155. Saller Co. has a subsidiary (子公司) in Mexico. The expected cash flows (预期的现金流) in pesos tobe received in the future from this subsidiary (子公司) have not changed since last month, but thevaluation (评价) of Saller Co. has declined since last month. What could've caused this decline invalue (价值)?a. A weaker Mexican economyb. Lower Mexican interest ratesc. Depreciation of the Mexican pesod. Appreciation of the Mexican peso.ANS: C PTS: 156. Jensen Co. wants to establish a new subsidiary (子公司) in Mexico that will sell computers to Mexicancustomers and remit earnings back to the U.S. parent. The value (价值) of this project will befavorably affected if the value (价值) of the peso ____ while it establishes the new subsidiary (子公司) and ____ when the subsidiary (子公司) starts operations.a. depreciates; appreciatesb. appreciates; appreciatesc. appreciates; depreciatesd. depreciates; depreciatesANS: A PTS: 157. A macroeconomic perspective focuses on the financial management decisions that affect the value (价值) of MNC (跨国公司).a. Trueb. FalseANS: F PTS: 158. An MNC (跨国公司) will always use the same required rate of return (必要回报率) in the valuation(评价) of foreign projects, as it would for its domestic projects.a. Trueb. FalseANS: F PTS: 159. Livingston Co. has a subsidiary (子公司) in Korea. The subsidiary (子公司) reinvests half of its netcash flows into operations and remits half to the parent. Livingston's expected cash flows (预期的现金流) from domestic business are $100,000 and the Korean subsidiary (子公司) is expected to generate 100 million Korean won at the end of the year. The expected value (价值) of won is $.0012. What are the expected dollar cash flows of Livingston Co.?a. $100,000b. $200,000c. $160,000d. $60,000ANS: C PTS: 160. A U.S.-based MNC (跨国公司) has many foreign subsidiaries in Europe and does not expect toincrease its investment there. Its value (价值) should increase if the value (价值) of the euro weakens over time.a. Trueb. FalseANS: F PTS: 161. If managers of foreign subsidiaries make decisions that maximize the value (价值)s of their respectivesubsidiaries, they automatically maximize the value (价值) of the entire corporation.a. Trueb. FalseANS: F PTS: 162. A decentralized management style, where subsidiary (子公司) managers make the relevant decisionsregarding their subsidiary (子公司), may result in better decision making, as subsidiary (子公司) managers are generally better informed about their subsidiary (子公司)'s operations.a. Trueb. FalseANS: T PTS: 163. U.S.-based MNCs (跨国公司) are typically not monitored by mutual funds (共同基金) and pensionfunds (养老基金), as these institutions (机构) rarely hold stock in MNCs (跨国公司).a. Trueb. FalseANS: F PTS: 164. The Sarbanes-Oxley Act ensures a more transparent process for managers to report on the productivityand financial condition of their firm.a. Trueb. FalseANS: T PTS: 165. The Theory of Comparative Advantage (比较优势理论) (比较优势) begins by assuming that a givenfirm first becomes established in its home country and may subsequently penetrate foreign markets via geographic or product differentiation.a. Trueb. FalseANS: F PTS: 166. Under the Imperfect markets (不完全的市场) Theory, it is assumed that factors of production (生产要素) are entirely mobile, so that firms can capitalize on a foreign country's resources.a. Trueb. FalseANS: F PTS: 167. Under the Product cycle (产品周期) Theory, foreign demand can be initially satisfied by exporting (出口).a. Trueb. FalseANS: T PTS: 168. Licensing (许可) allows firms to use their technology in foreign markets without a major investment(重大投资) in foreign countries.a. Trueb. FalseANS: T PTS: 169. International trade (国际贸易) is the most common form of direct foreign investment (国外直接投资)(DFI).a. Trueb. FalseANS: F PTS: 170. When the parent's home currency (本国货币) is weak, remitted funds from foreign subsidiaries willconvert to a smaller amount of the home currency (本国货币).a. Trueb. FalseANS: F PTS: 171. A purely domestic firm (纯粹的国内企业) may be affected by exchange rate fluctuations if it faces atleast (最不)some foreign competition.a. Trueb. FalseANS: T PTS: 172. One form of an exposure (曝险) to political risk (政治风险) is terrorism (恐怖主义).a. Trueb. FalseANS: T PTS: 173. The goal of a multinational corporation (MNC (跨国公司)) isa. The minimization of taxes remitted from foreign subsidiaries.b. The Establishment (建立) of subsidiaries in any country where operations would provide areturn over and above the cost of capital, even if better projects are available domestically.c. The maximization of shareholder wealth (股东财富).d. The maximization of social benefits resulting from actions such as the employment offoreign managers.ANS: C PTS: 174. Agency costs (代理成本) faced by multinational corporations (MNCs (跨国公司)) may be larger thanthose faced by purely domestic firm (纯粹的国内企业)s becausea. Monitoring of managers located in foreign countries is more difficult.b. Foreign subsidiary (子公司) managers raised in different cultures may not follow uniformgoals.c. MNCs (跨国公司) are relatively (相对) large.d. All of the above (上述全部)e. A and B onlyANS: D PTS: 175. Which of the following (下列哪个) is not one of the more common methods used by MNCs (跨国公司) to improve their internal control (内部控制) process?a. Establishing a centralized database of informationb. Ensuring that all data are reported consistently among subsidiariesc. Speeding the process by which all departments and all subsidiaries have access to the datathat they needd. Making executives more accountable for financial statements by personally verifying theiraccuracye. All of the above (上述全部) are common methods used by MNCs (跨国公司) to improvetheir internal control (内部控制) process.ANS: E PTS: 176. Which of the following (下列哪个) is not mentioned in the text (教科书) as a theory of internationalbusiness (国际商务)?a. Theory of Comparative Advantage (比较优势理论)b. Imperfect markets (不完全的市场) Theoryc. Product cycle (产品周期) Theoryd. Globalization of Business Theorye. All of the above (上述全部) are mentioned in the text (教科书) as theories of internationalbusiness (国际商务)ANS: D PTS: 177. The most risky method(s) by which firms conduct international business (国际商务) is (are):a. Franchising (特许经营).b. The acquisitions of existing operations (现有业务的收购).c. The Establishment (建立) of new subsidiaries.d. All of the above (上述全部)e. B and C onlyANS: E PTS: 178. The least (最不)risky method by which firms conduct international business (国际商务) is:a. Franchising (特许经营).b. The acquisitions of existing operations (现有业务的收购).c. International trade (国际贸易).d. The Establishment (建立) of new subsidiaries.e. Licensing (许可)ANS: C PTS: 179. Which of the following (下列哪个) does not constitute (构成) a form of direct foreign investment (国外直接投资)?a. Franchising (特许经营)b. International trade (国际贸易)c. Joint ventures (合资企业)d. Acquisitions of existing operationse. Establishment (建立) of new foreign subsidiariesANS: B PTS: 1。

国际财务管理作业31、远期外汇交易（1）（远期汇率计算）某日英国伦敦的外汇市场报价如下：英镑对美元的即期汇率为：1GBP ＝USD1.5392 / 1.5402，2个月的远期点数21/24；英镑对法国法郎的即期汇率为：1GBP＝FRF7.6590 / 7.6718，2个月的远期点数252/227，试计算：英镑对美元以及英镑对法国法郎两个月的远期汇率分别为多少？解：英镑对美元两个月的远期汇率1GBP＝USD（1.5392+0.0021）/ （1.5402+0.0024）1GBP＝USD1.5413/1.5426英镑对法国法郎两个月的远期汇率1GBP＝FRF(7.6590-0.0252) / (7.6718-0.0227)1GBP＝FRF7.6338/7.6491（2）巴黎外汇市场美元对欧元的即期汇率是1美元=0.8200-0.8240欧元，三个月远期贴水为340-330，我某公司出口一批机床，原报价每台机床30 000欧元。

现法国进口商要求我改用美元向其报价，且三个月后才能收汇。

问我应改报多少美元?解：（1）首先弄清l美元=0.8200-0.8240欧元为直接标价法，直接标价法下升水加贴水减三个月后美元对欧元的汇率：1美元=(0.8200-0.0340)-(0.8240-0.0330)欧元即l美元=0.7860-0.7910欧元（2）其次清楚0.7860为买入价，0.7910为卖出价（3）再有改报多少美元，最初报价30 000欧元，表明最后要得到的是欧元，这样改报的美元数应该能够换回所需要的欧元数，那么卖给银行美元用买入价即改报美元数：30 000／0.7860=38170美元（3）P教材85：第四题解：收：5000÷100×81.21=4060.5万元人民币减少损失为50万元（4）某个澳大利亚进口商从日本进口一批商品，日本厂商要求澳方在3个月内支付10亿日元的货款。

当时外汇市场的行情是：即期汇率：1澳元＝100.00～100.12日元3月期远期汇水数：2.00～1.90故3月期远期汇率为：1 澳元＝98.00～98.22日元如果该澳大利亚进口商在签订进口合同时预测3个月后日元对澳元的即期汇率将会升值到：1澳元＝80.00—80.10日元问题：1）若澳大利亚进口商不采取避免汇率风险的保值措施，现在就支付10亿日元，则需要多少澳元?2)若现在不采取保值措施，而是延迟到3个月后支付10亿日元，则到时需要支付多少澳元?3)若该澳大利亚进口商现在采取套期保值措施，应该如何进行?3个月后他实际支付多少澳元?解：1)该澳大利亚进口商签订进口合同时就支付10亿日元，需要以1澳元＝100.00日元的即期汇率向银行支付10亿/100.00=0.1亿澳元，即10,000,000澳元。

XX浙大远程教育国际财务管理练习题答案完美版第1章国际财务治理导论一、名词说明1.国际企业: 超越国界从事商业活动的企业，包括各种类型、各种规模的参与国际商务的企业。

国内生产、国际销售是国际企业最简单的国际业务。

跨国公司是国际企业进展的较高时期和典型代表。

2.许可经营:许可方企业向受许可方企业提供技术，包括版权、专利技术、技术诀窍或商标以换取使用费的一种经营方式。

当许可方企业与受许可方企业分别位于不同国家时，就形成了国家间的许可经营。

这种方式也能够被看作技术出口。

3.特许经营：是一种专门的许可经营方式，许可方通过向被许可方提供全套专业化企业经营手段，包括商标、企业组织、销售或服务策略和培训、技术支持等定期取得特许权使用费，被许可方则必须同意遵守严格的规则和程序以实现经营的标准化。

特许权使用费通常以被许可方的销售收入为基础收取。

4.分部式组织: 称事业部制组织结构。

其特点是在高层治理者之下，按地区或产品设置若干分部，实行“集中政策，分散经营”的集中领导下的分权治理。

5.混合式组织：事实上专门少有哪家企业是单纯采纳一种结构类型的，采纳两种以上组合方式的称为混合式结构。

6.分权模式: 子公司拥有充分的财务治理决策权，母公司关于其财务治理操纵以间接治理为主。

二、简答题1.国际财务治理与国内企业的财务治理内容有哪些的重要区别。

【答案】国际财务治理是指对国际企业的涉外经济活动进行的财务治理。

财务治理要紧涉及的是如何作出各种最佳的公司财务决定，比如通过适宜的投资、资产结构、股息政策以及人力资源治理，从而达到既定的公司目标（股东财宝最大化）。

国际财务治理与国内财务治理之间的区别要紧表达在以下几个方面：（1）跨国经营和财务活动受外汇风险的阻碍；（2）全球范畴内融资，寻求最佳全球融资战略；（3）跨国经营中商品和资金无法自由流淌；（4）对外投资为股东在全球范畴内分散风险。

2.试述国际财务治理体系的内容。

【答案】国际财务治理体系的内容要紧包括：（1）国际财务治理环境。

CHAPTER 1 GLOBALIZATION AND THE MULTINATIONAL FIRM SUGGESTED ANSWERS TO END-OF-CHAPTER QUESTIONSQUESTIONS1. Why is it important to study international financial managementAnswer: We are now living in a world where all the major economic functions i.e. consumptionproduction and investment are highly globalized. It is thus essential for financial managers to fullyunderstand vital international dimensions of financial management. This global shift is in markedcontrast to a situation that existed when the authors of this book were learning finance some twenty yearsago.At that time most professors customarily and safely to some extent ignored international aspectsof finance. This mode of operation has become untenable since then.2. How is international financial management different from domestic financial managementAnswer: There are three major dimensions that set apart international finance from domestic finance.They are: 1. foreign exchange and political risks 2. market imperfections and 3. expanded opportunity set.3. Discuss the three major trends that have prevailed in international business during the last two decades.Answer: The 1980s brought a rapid integration of international capital and financial markets. Impetus forglobalized financial markets initially came from the governments of major countries that had begun toderegulate their foreign exchange and capital markets. The economic integration and globalization thatbegan in the eighties is picking up speed in the 1990s via privatization. Privatization is the process bywhich a country divests itself of the ownership and operation of a business venture by turning it over tothe free market system. Lastly trade liberalization and economic integration continued to proceed at boththe regional and global levels.4. How is a country‟s economic well-being enhanced through free international trade in goods andservicesAnswer: According to David Ricardo with free international trade it is mutually beneficial for twocountries to each specialize in the production of the goods that it can produce relatively most efficientlyand then trade those goods. By doing so the two countries can increase their combined productionwhich allows both countries to consume more of both goods. This argument remains valid even if acountry can produce both goods more efficiently than the other country. International trade is not a …zero-sum‟ game in which one country benefits at the expense of another country. Rather international tradecould be an …increasing-sum‟ game at which all players become winners.5. What considerations might limit the extent to which the theory of comparative advantage is realisticAnswer: The theory of comparative advantage was originally advanced by the nineteenth centuryeconomist David Ricardo as an explanation for why nations trade with one another. The theory claimsthat economic well-being is enhanced if each country‟s citizens produce what they have a comparativeadvantage in producing relative to the citizens of other countries and then trade products. Underlying thetheory are the assumptions of free trade between nations and that the factors of production landbuildings labor technology and capital are relatively immobile. To the extent that these assumptions donot hold the theory of comparative advantage will not realistically describe international trade.6. What are multinational corporations MNCs and what economic roles do they playAnswer: A multinational corporation MNC can be defined as a business firm incorporated in onecountry that has production and sales operations in several other countries. Indeed some MNCs haveoperations in dozens of different countries. MNCs obtain financing from major money centers around theworld in many different currencies to finance their operations. Global operations force the treasurer‟soffice to establish international banking relationships to place short-term fundsin several currencydenominations and to effectively manage foreign exchange risk.7. Mr. Ross Perot a former Presidential candidate of the Reform Party which is a third political party inthe United States had strongly objected to the creation of the North American Trade AgreementNAFTA which nonetheless was inaugurated in 1994 for the fear of losing American jobs to Mexicowhere it is much cheaper to hire workers. What are the merits and demerits of Mr. Perot‟s position onNAFTA Considering the recent economic developments in North America how would you assess Mr.Perot‟s position on NAFTAAnswer: Since the inception of NAFTA many American companies indeed have invested heavily inMexico sometimes relocating production from the United States to Mexico. Although this might havetemporarily caused unemployment of some American workers they were eventually rehired by otherindustries often for higher wages. Currently the unemployment rate in the U.S. is quite low by historicalstandard. At the same time Mexico has been experiencing a major economic boom. It seems clear thatboth Mexico and the U.S. have benefited from NAFTA. Mr. Perot‟s concern appears to hav e been illfounded.8. In 1995 a working group of French chief executive officers was set up by the Confederation of FrenchIndustry CNPF and the French Association of Private Companies AFEP to study the French corporategovernance structure. The group reported the following among other things “The board of directorsshould not simply aim at maximizing share values as in the U.K. and the U.S. Rather its goal should be toserve the company whose interests should be clearly distinguished from those of its shareholdersemployees creditors suppliers and clients but still equated with their general common interest which isto safeguard the prosperity and continuity of the company”. Evaluate the above recommendation of theworking group.Answer: The recommendations of the French working group clearly show that shareholder wealthmaximization is not a universally accepted goal of corporate management especially outside the UnitedStates and possibly a few other Anglo-Saxon countries including the United Kingdom and Canada. Tosome extent this may reflect the fact that share ownership is not wide spread in most other countries. InFrance about 15 of households own shares.9. Emphasizing the importance of voluntary compliance as opposed to enforcement in the aftermath ofcorporate scandals e.g. Enron and WorldCom U.S. President George W. Bush stated that while tougherlaws might help “ultimately the ethics of American business depends on the conscience of America‟sbusiness leaders.” Describe your view on this statement.Answer: There can be different answers to this question. If business leaders always behave with a highethical standard many of the corporate scandals we have seen lately might not have happened. Since wecannot fully depend on the ethical behavior on the part of business leaders the society should protectitself by adopting therules/regulations and governance structure that would induce business leaders tobehave in the interest of the society at large.10. Suppose you are interested in investing in shares of Nokia Corporation of Finland which is a worldleader in wireless communication. But before you make investment decision you would like to learnabout the company. Visit the website of CNN Financial network and collectinformation about Nokia including the recent stock price history and analysts‟ views of the company.Discuss what you learn about the company. Also discuss how the instantaneous access to information viainternet would affect the nature and workings of financial markets.Answer: As students might have learned from visiting the website information is readily available evenfor foreign companies like Nokia. Ready access to international information helpsintegrate financialmarkets dismantling barriers to international investment and financing. Integration however may help afinancial shock in one market to be transmitted to other markets.MINI CASE: NIKE‟S DECISION Nike a U.S.-based company with a globally recognized brand name manufactures athletic shoes insuch Asian developing countries as China Indonesia and Vietnam using subcontractors and sells theproducts in the U.S. and foreign markets. The company has no production facilities in the United States.In each of those Asian countries where Nike has production facilities the rates of unemployment andunderemployment are quite high. The wage rate is very low in those countries by the U.S. standardhourly wage rate in the manufacturing sector is less than one dollar in each of those countries which iscompared with about 18 in the U.S. In addition workers in those countries often are operating in poorand unhealthy environments and their rights are not well protected. Understandably Asian host countriesare eager to attract foreign investments like Nike‟s to develop their economies and raise the livingstandards of th eir citizens. Recently however Nike came under a world-wide criticism for its practice ofhiring workers for such a low pay “next to nothing” in the words of critics and condoning poor workingconditions in host countries. Evaluate and discuss various …ethical‟ as well as economic ramifications of Nike‟s decision toinvest in those Asian countries.Suggested Solution to Nike‟s Decision Obviously Nike‟s investments in such Asian countries as China Indonesia and Vietnam weremotivated to take advantage of low labor costs in those countries. While Nike was criticized for the poorworking conditions for its workers the company has recognized the problem and has substantiallyimproved the working environments recently. Although Nike‟s workers get paid very low wages by theWestern standard they probably are making substantially more than their local compatriots who are eitherunder- or unemployed. While Nike‟s detractors may have valid points one should not ignore the fact thatthe company is making contributions to the economic welfare of those Asian countries by creating jobopportunities. CHAPTER 1A THEORY OF COMPARATIVE ADVANTAGE SUGGESTED SOLUTIONS TO APPENDIX PROBLEMSPROBLEMS1. Country C can produce seven pounds of food or four yards of textiles per unit of input. Compute theopportunity cost of producing food instead of textiles. Similarly compute the opportunity cost ofproducing textiles instead of food.Solution: The opportunity cost of producing food instead of textiles is one yard of textiles per 7/4 1.75pounds of food. A pound of food has an opportunity cost of4/7 .57 yards of textiles.2. Consider the no-trade input/output situation presented in the following table for Countries X and Y.Assuming that free trade is allowed develop a scenario that will benefit the citizens of both countries.INPUT/OUTPUT WITHOUT TRADE_________________________________________________________________ ______ Country X YTotal___________________________________________________________________ _____I. Units of Input000000_____________________________________________________Food 70 60Textiles 4030______________________________________________________________________ __II. Output per Unit of Inputlbs or yards____________________________________________________Food 17 5Textiles 52_______________________________________________________________________ _III. Total Outputlbs or yards000000____________________________________________________Food 1190 300 1490Textiles 200 60260_____________________________________________________________________ ___IV. Consumptionlbs or yards000000___________________________________________________Food 1190 300 1490Textiles 200 60260_____________________________________________________________________ ___Solution: Examination of the no-trade input/output table indicates that Country X has an absoluteadvantage in the production of food and textiles. Country X can “trade off” one unit of productionneeded to produce 17 pounds of food for five yards of textiles. Thus a yard of textiles has an opportunitycost of 17/5 3.40 pounds of food or a pound of food has an opportunity cost of 5/17 .29 yards oftextiles. Analogously Country Y has an opportunity cost of 5/2 2.50 pounds of food per yard oftextiles or 2/5 .40 yards of textiles per pound of food. In terms of opportunity cost it is clear thatCountry X is relatively more efficient in producing food and Country Y is relatively more efficient inproducing textiles. Thus Country X Y has a comparative advantage in producing food textile iscomparison to Country Y X. When there are no restrictions or impediments to free trade the economic-well being of thecitizens of both countries is enhanced through trade. Suppose that Country X shifts 20000000 unitsfrom the production of textiles to the production of food where it has a comparative advantage and thatCountry Y shifts 60000000 units from the production of food to the production of textiles where it has acomparative advantage. Total output will now be 90000000 x 17 1530000000 pounds of food and20000000 x 5 100000000 90000000 x 2 180000000 280000000 yards of textiles.Further suppose that Country X and Country Y agree on a price of 3.00 pounds of food for one yard oftextiles and that Country X sells Country Y 330000000 pounds of food for 110000000 yards of textiles.Under free trade the following table shows that the citizens of Country X Y have increased theirconsumption of food by 10000000 30000000 pounds and textiles by 10000000 10000000 yards.INPUT/OUTPUT WITH FREE TRADE_________________________________________________________________ _________ Country X YTotal___________________________________________________________________ _______I. Units of Input 000000_______________________________________________________Food 90 0Textiles 2090______________________________________________________________________ ____II. Output per Unit of Input lbs or yards______________________________________________________Food 17 5Textiles 52_______________________________________________________________________ ___III. Total Output lbs or yards 000000_____________________________________________________Food 1530 0 1530Textiles 100 180280_____________________________________________________________________ _____IV. Consumption lbs or yards 000000_____________________________________________________Food 1200 330 1530Textiles 210 70280_____________________________________________________________________ _____ CHAPTER 3 BALANCE OF PAYMENTS SUGGESTED ANSWERS AND SOLUTIONS TO END-OF-CHAPTER QUESTIONS AND PROBLEMSQUESTIONS1. Define the balance of payments.Answer: The balance of payments BOP can be defined as the statistical record of a country‟sinternational transactions over a certain period of time presented in the form of double-entry bookkeeping.2. Why would it be useful.。

国际财务管理课后习题答案chapter3***** 3 ***** OF *****S*****ED ***** AND *****NS TO END-OF-**********NS AND *****S*****NS1. Define the balance of payments.Answer: The balance of payments (BOP) can be defined as the statistical record of a country?s international transactions over a certain period of time presented in the form of double-entry bookkeeping.2. Why would it be useful to examine a country?s balance of payments data?Answer: It would be useful to examine a country?s BOP for at least two reasons. First, BOP provides detailed information about the supply and demand of the country?s currency. Second, BOP data can be used to evaluate the performance of the country in international economic competition. For example, if a country is experiencing perennial BOP deficits, it may signal that the country?s industries lack competitiveness.3. The United States has experienced continuous current account deficits since the early 1980s. What do you think are the main causes for the deficits? What would be the consequences of continuous U.S. current account deficits?Answer: The current account deficits of U.S. may have reflected a few reasons such as (I) a historically high real interest rate in the U.S., which is due to ballooning federal budget deficits, that kept the dollar strong, and (ii) weak competitiveness of the U.S. industries.4. In contrast to the U.S., Japan has realized continuous current account surpluses. What could be the main causes for these surpluses? Is it desirable to have continuous current account surpluses?Answer: Japan?s continuous current account surpluses may have reflected a weak yen and high competitiveness of Japanese industries. Massive capital exports by Japan prevented yen from appreciating more than it did. At the same time, foreigners? exports to Japan were hampered by closed nature of Japanese markets. Continuous current account surpluses disrupt free trade by promoting protectionist IM-1sentiment in the deficit country. It is not desirable especially when it is brought about by the mercantilist policies.5. Comment on the following statement: “Since the U.S. imports more than it exports, it is necessary for the U.S. to import capital from foreign countries to finance its current account deficits.”Answer: The statement presupposes that the U.S. current account deficit causes its capital account surplus. In reality, the causality may be running in the opposite direction: U.S. capital account surplus may cause the country?s current account deficit. Suppose foreigners find the U.S. a great place to invest and send their capital to the U.S., resulting in U.S. capital account surplus. This capital inflow will strengthen the dollar, hurting the U.S. export and encouraging imports from foreign countries, causing current account deficits.6. Explain how a country can run an overall balance of payments deficit or surplus.Answer: A country can run an overall BOP deficit or surplus by engaging in the official reserve transactions. For example, an overall BOP deficit can be supported by drawing down the central bank?s reserve holdings. Likewise, an overall BOP surplus can be absorbed byadding to the central bank?s reserve holdings.7. Explain official reserve assets and its major components.Answer: Official reserve assets are those financial assets that can be used as international means of payments. Currently, official reserve assets comprise: (I) gold, (ii) foreign exchanges, (iii) special drawing rights (SDRs), and (iv) reserve positions with the IMF. Foreign exchanges are by far the most important official reserves.8. Explain how to compute the overall balance and discuss its significance.Answer: The overall BOP is determined by computing the cumulative balance of payments including the current account, capital account, and the statistical discrepancies. The overall BOP is significant because it indicates a country?s international payment gap that must be financed by the government?s official reserve transactions.IM-29. Since the early 1980s, foreign portfolio investors have purchased a significant portion of U.S. treasury bond issues. Discuss the short-term and long-term effects of foreigners? portfolio investment on the U.S. balance of payments.Answer: As foreigners purchase U.S. Treasury bonds, U.S. BOP will improve in the short run. But in the long run, U.S. BOP may deteriorate because the U.S. should pay interests and principals to foreigners. If foreign funds are used productively and contributes to the competitiveness of U.S. industries, however, U.S. BOP may improve in the long run.10. Describe the balance of payments identity and discuss its implications under the fixed and flexible exchange rate regimes.Answer: The balance of payments identity holds that the combined balance on the current and capital accounts should beequal in size, but opposite in sign, to the change in the official reserves: BCA + BKA = -BRA. Under the pure flexible exchange rate regime, central banks do not engage in official reserve transactions. Thus, the overall balance must balance, i.e., BCA = -BKA. Under the fixed exchange rate regime, however, a country can have an overall BOP surplus or deficit as the central bank will accommodate it via official reserve transactions.11. Exhibit 3.3 indicates that in 1991, the U.S. had a current account deficit and at the same time a capital account deficit. Explain how this can happen?Answer: In 1991, the U.S. experienced an overall BOP deficit, which must have been accommodated by the Federal Reserve?s official reserve action, i.e., drawing down its reserve holdings.12. Explain how each of the following transactions will be classified and recorded in the debit and credit of the U.S. balance of payments:(1) A Japanese insurance company purchases U.S. Treasury bonds and pays out of its bank account kept in New York City.(2) A U.S. citizen consumes a meal at a restaurant in Paris and pays with her American Express card. (3) A Indian immigrant living in Los Angeles sends a check drawn on his L.A. bank account as a gift to his parents living in Bombay.IM-3(4) A U.S. computer programmer is hired by a British company for consulting and gets paid from the U.S. bank account maintained by the British company. Answer:_________________________________________________________________ TransactionsJapanese purchase of U.S. T bonds? ? ? ???? ?Credit Debit_________________________________________________________________ Japanese payment using NYC accountU.S. citizen having a meal in Paris Paying the meal with American ExpressGift to parents in Bombay Receipts of the check by parents (goodwill)Export of programming serviceBritish payment out its account in U.S._________________________________________________________________13. Construct the balance of payment table for Japan for the year of 1998 which is comparable in format to Exhibit 3.1, and interpret the numerical data. You may consult International Financial Statistics published by IMF or research for useful websites for the data yourself.IM-4Answer:A summary of the Japanese Balance of Payments for 1998 (in $ billion)Current Account (1) Exports(2) Imports(3) Unilateral transferCapital Account (4) Direct investment (5) Portfolio investmentBalance on financial account [(4) + (5) + (6)]Overall balance (5.1) Equity securities (5.2) Debt securities Balance on current account [(1) + (2) + (3)] (2.1) Merchandise (2.2) Services(3.3) Factor income (1.1) Merchandise (1.2) Services (1.3) Factor incomeCredits646.03 374.04 62.41 209.585.53 120.693.27 73.70 16.11 57.59 39.514.36 6.17Debits-516.50 -251.66 -111.83 -153.01-14.37 -24.62 -113.73 -14.00 -99.73 -109.35-131.22-6.17(6) Other investment(7) Statistical discrepancies Official Reserve AccountSource: IMF, International Financial Statistics Yearbook, 1999.Note: Capital account in the above table corresponds with the ?Financial account? in IMF?s balance of payment statistics. IMF?s Capital account? is included in ?Other investment? in the above table.IM-5。

1.若美元对人民币的即期汇率为￥7.9/$，6个月的远期汇率为￥7.8/$，已知中国6个月存款利率为2.9%，美元6个月存款利率为4.2%。

如果投资者有一笔美元（假定100万美元），你认为应该到哪投资？为什么？答：我认为应该投资中国。

如果100万美元直接存在美国银行中：6个月到期值＝$100×（1＋4.2%×6/12）＝$102.1（万元）如果100万美元按即期汇率换成人民币，存入中国银行，按远期汇率将人民币到期值换成美元：6个月到期值＝$100×7.9×（1＋2.9%×6/12）÷7.8＝$102.75（万元）$102.75－102.1＝$0.65（万元）在中国投资比在美国投资增加收入$6500。

2.论述交易风险管理的范围和策略，并选择某一方法展开论述。

3.国内某企业按9%的利率取得一笔期限为1年的100万港币。

企业收到该比款项后将其兑换为人民币并向供应商支付货款，此时汇率为￥1.02/HK$，一年后偿还时汇率为￥0.96/HK$，该企业所负担的所得税税率为40%。

要求：（1）计算港元的汇率变动率；（2）分别计算该企业考虑和不考虑所得税下的借款实际融资成本。

解：（1）汇率变动率＝（0.96－1.02）/1.02＝-5.88％（2）不考虑所得税，实际融资成本＝（1＋9％）×（1－5.88％）－1＝2.59％考虑所得税，实际融资成本=[（1＋9％）×（1－5.88％）－1]×（1－40％）=1.55％4.为什么国际直接投资决策时大多数公司以母公司为评价主体？答：（1）流向母公司现金流量受到税收差异、外汇管制、收费过量和汇率变动等的影响，与子公司现金流量不同。

税收差异——子公司所取得的收益要汇回母公司，而母公司与子公司面临的税率可能存在差异。

当母公司所在国对汇回的收益课以高税，子公司的可行项目在母公司看来该是不可行的。

Chapter 3International Financial Markets Lecture OutlineMotives for Using International Financial Markets Motives for Investing in Foreign MarketsMotives for Providing Credit in Foreign MarketsMotives for Borrowing in Foreign MarketsForeign Exchange MarketHistory of Foreign ExchangeForeign Exchange TransactionsExchange QuotationsForeignInterpretingCurrency Futures and Options MarketsInternational Money MarketOrigins and DevelopmentStandardizing Global Bank RegulationsInternational Credit MarketSyndicated LoansInternational Bond MarketEurobond MarketDevelopment of Other Bond MarketsComparing Interest Rates Among CurrenciesInternational Stock MarketsIssuance of Foreign Stock in the U.S.Issuance of Stock in Foreign MarketsComparison of International Financial MarketsHow Financial Markets Affect an MNC’s ValueChapter ThemeThis chapter identifies and discusses the various international financial markets used by MNCs. These markets facilitate day-to-day operations of MNCs, including foreign exchange transactions, investing in foreign markets, and borrowing in foreign markets.Topics to Stimulate Class Discussion1. Why do international financial markets exist?2. How do banks serve international financial markets?3. Which international financial markets are most important to a firm that consistently needsshort-term funds? What about a firm that needs long-term funds?Critical debateShould firms that go public engage in international offerings?Proposition Yes. When a firm issues shares to the public for the first time in an initial public offering (IPO), it is naturally concerned about whether it can place all of its shares at a reasonable price. It will be able to issue its shares at a higher price by attracting more investors. It will increase its demand by spreading the shares across countries. The higher the price at which it can issue shares, the lower is its cost of using equity capital. It can also establish a global name by spreading shares across countries.Opposing view No. If a firm spreads its shares across different countries at the time of the IPO, there will be less publicly traded shares in the home country. Thus, it will not have as much liquidity in the secondary market. Investors desire shares that they can easily sell in the secondary market, which means that they require that the shares have liquidity. To the extent that a firm reduces its liquidity in the home country by spreading its share across countries, it may not attract sufficient home demand for the shares. Thus, its efforts to create global name recognition may reduce its name recognition in the home country.With whom do you agree? State your reasons. Use InfoTrac or some other search engine to learn more about this issue. Which argument do you support? Offer your own opinion on this issue.ANSWER: The key is that students recognize the tradeoff involved. A firm that engages in a relatively small IPO will have limited liquidity even when all of the stock is issued in the home country. Thus, it should not consider issuing stock internationally. However, firms with larger stock offerings may be in a position to issue a portion of their shares outside the home country. They should not spread the stocks across several countries, but perhaps should target one or two countries where they conduct substantial business. They want to ensure sufficient liquidity in each of the foreign countries where they sell shares.Stock Markets are inefficientPropositionI cannot believe that if the value of the euro in terms of, say, the British pound increases three days in a row, on the fourth day there is still a 50:50 chance that it will go up or down in value. I think that most investors will see a trend and will buy, therefore the price is morelikely to go up. Also, if the forward market predicts a rise in value, on average, surely it is going to rise in value. In other words, currency prices are predictable. And finally, if it were so unpredictable and therefore unprofitable to the speculator, how is it that there is such a vast sum of money being traded every day for speculative purposes – there is no smoke without fire.The simple answer is that if that is what you believe, buy currencies that have viewOpposingincreased three days in a row and on average you should make a profit, buy currencies where the forward market shows an increase in value. The fact is that there are a lot of investors with just your sort of views. The market traders know all about such beliefs and will price the currency so that such easy profit (their loss) cannot be made. Look at past currency rates for yourself, check all fourth day changes after three days of rises, any difference is going to be not enough to cover transaction costs or trading expenses and the slight inaccuracy in your figures which are likely to be closing day mid point of the bid/ask spread. No, all currency movements are related to information and no-one knows if tomorrows news will be better or worse than expected.With whom do you agree? Could there be undiscovered patterns? Could some movements not be related to information? Could some private news be leaking out?ANSWER: Clearly there are no obvious patterns. Discussion on the impossibility of obvious patterns is worth emphasizing. However, does market inefficiency necessarily involve patterns, could market manipulation be occasional. There is worrying evidence from share price movements that there is unusual movement before announcements on many occasions, so the ideathat traders do not occasionally collude and move the price without supporting economic evidence is not an unreasonable view. Proof is however difficult as we have to separate anticipation from prior knowledge, the lucky speculator from the speculator who was in the know.Answers to End of Chapter Questions1. Motives for Investing in Foreign Money Markets. Explain why an MNC may invest fundsin a financial market outside its own country.ANSWER: The MNC may be able to earn a higher interest rate on funds invested in a financial market outside of its own country. In addition, the exchange rate of the currency involved may be expected to appreciate.2. Motives for Providing Credit in Foreign Markets. Explain why some financial institutionsprefer to provide credit in financial markets outside their own country.ANSWER: Financial institutions may believe that they can earn a higher return by providing credit in foreign financial markets if interest rate levels are higher and if the economic conditions are strong so that the risk of default on credit provided is low. The institutions may also want to diversity their credit so that they are not too exposed to the economic conditions in any single country.3. Exchange Rate Effects on Investing. Explain how the appreciation of the Australian dollaragainst the euro would affect the return to a French firm that invested in an Australian money market security.ANSWER: If the Australian dollar appreciates over the investment period, this implies that the French firm purchased the Australian dollars to make its investment at a lower exchange rate than the rate at which it will convert A$ to euros when the investment period is over.Thus, it benefits from the appreciation. Its return will be higher as a result of this appreciation.4. Exchange Rate Effects on Borrowing. Explain how the appreciation of the Japanese yenagainst the UK pound would affect the return to a UK firm that borrowed Japanese yen and used the proceeds for a UK project.ANSWER: If the Japanese yen appreciates over the borrowing period, this implies that the UK firm converted yen to pounds at a lower exchange rate than the rate at which it paid for yen at the time it would repay the loan. Thus, it is adversely affected by the appreciation. Its cost of borrowing will be higher as a result of this appreciation.5. Bank Services. List some of the important characteristics of bank foreign exchange servicesthat MNCs should consider.ANSWER: The important characteristics are (1) competitiveness of the quote, (2) the firm’s relationship with the bank, (3) speed of execution, (4) advice about current market conditions, and (5) forecasting advice.6. Bid/ask Spread. Delay Bank’s bid price for US dollars is £0.53 and its ask price is £0.55.What is the bid/ask percentage spread?ANSWER: (£0.55– £0.53)/£0.55 = .036 or 3.6%7. Bid/ask Spread. Compute the bid/ask percentage spread for Mexican peso in which the askrate is 20.6 New peso to the dollar and the bid rate is 21.5 New peso to the dollar.ANSWER: direct rates are 1/20.6 = $0.485:1 peso as the ask rate and 1/21.5 = $0.465:1 peso as the bid rate so the spread is[($0.485 – $0.465)/$0.485] = .041, or 4.1%. Note that the spread is fro the Mexiccan peso not the dollar.8. Forward Contract. The Wolfpack ltd is a UK exporter that invoices its exports to the UnitedStates in dollars. If it expects that the dollar will appreciate against the pound in the future, should it hedge its exports with a forward contract? Explain..ANSWER: The forward contract can hedge future receivables or payables in foreign currencies to insulate the firm against exchange rate risk. Yet, in this case, the Wolfpack Corporation should not hedge because it would benefit from appreciation of the dollar when it converts the dollars to pounds.9. Euro. Explain the foreign exchange situation for countries that use the euro when theyengage in international trade among themselves.ANSWER: There is no foreign exchange. Euros are used as the medium of exchange.10. Indirect Exchange Rate. If the direct exchange rate of the euro is worth £0.685, what is theindirect rate of the euro? That is, what is the value of a pound in euros?ANSWER: 1/0.685 = 1.46 euros.11. Cross Exchange Rate. Assume Poland’s currency (the zloty) is worth £0.17 and theJapanese yen is worth £0.005. What is the cross (implied) rate of the zloty with respect to yen?ANSWER: £0.17/£0.005 = 34 zloty:1 yen12. Syndicated Loans. Explain how syndicated loans are used in international markets.ANSWER: A large MNC may want to obtain a large loan that no single bank wants to accommodate by itself. Thus, a bank may create a syndicate whereby several other banks also participate in the loan.13. Loan Rates. Explain the process used by banks in the Eurocredit market to determine the rateto charge on loans.ANSWER: Banks set the loan rate based on the prevailing LIBOR, and allow the loan rate to float (change every 6 months) in accordance with changes in LIBOR.14. International Markets. What is the function of the international money market? Brieflydescribe the reasons for the development and growth of the European money market. Explain how the international money, credit, and bond markets differ from one another.ANSWER: The function of the international money market is to efficiently facilitate the flow of international funds from firms or governments with excess funds to those in need of funds.Growth of the European money market was largely due to (1) regulations in the U.S. that limited foreign lending by U.S. banks; and (2) regulated ceilings placed on interest rates of dollar deposits in the U.S. that encouraged deposits to be placed in the Eurocurrency market where ceilings were nonexistent.The international money market focuses on short-term deposits and loans, while the international credit market is used to tap medium-term loans, and the international bond market is used to obtain long-term funds (by issuing long-term bonds).15. Evolution of Floating Rates. Briefly describe the historical developments that led to floatingexchange rates as of 1973.ANSWER: Country governments had difficulty in maintaining fixed exchange rates. In 1971, the bands were widened. Yet, the difficulty of controlling exchange rates even within these wider bands continued. As of 1973, the bands were eliminated so that rates could respond to market forces without limits (although governments still did intervene periodically).16. International Diversification. Explain how the Asian crisis would have affected the returnsto a UK. firm investing in the Asian stock markets as a means of international diversification.[See the chapter appendix.]ANSWER: The returns to the UK firm would have been reduced substantially as a result of the Asian crisis because of both declines in the Asian stock markets and because of currency depreciation. For example, the Indonesian stock market declined by about 27% from June 1997 to June 1998. Furthermore, the Indonesian rupiah declined against the U.S. dollar by 84%.17.Eurocredit Loans.a.With regard to Eurocredit loans, who are the borrowers?b. Why would a bank desire to participate in syndicated Eurocredit loans?c. What is LIBOR and how is it used in the Eurocredit market?ANSWER:a. Large corporations and some government agencies commonly request Eurocredit loans.b. With a Eurocredit loan, no single bank would be totally exposed to the risk that theborrower may fail to repay the loan. The risk is spread among all lending banks within the syndicate.c. LIBOR (London interbank offer rate) is the rate of interest at which banks in Europe lendto each other. It is used as a base from which loan rates on other loans are determined in the Eurocredit market.18. Foreign Exchange. You just came back from Canada, where the Canadian dollar was worth£0.43. You still have C$200 from your trip and could exchange them for pounds at the airport, but the airport foreign exchange desk will only buy them for £0.40. Next week, you will be going to Mexico and will need pesos. The airport foreign exchange desk will sell you pesos for £0.055 per peso. You met a tourist at the airport who is from Mexico and is on his way to Canada. He is willing to buy your C$200 for 1500 New Pesos. Should you accept the offer or cash the Canadian dollars in at the airport? Explain.ANSWER: Exchange with the tourist. If you exchange the C$ for pesos at the foreign exchange desk, the C$200 is multiplied by £0.40 and then divided by £0.055 ie a ratio of £0.40/0.055 = 7.27 pesos to the C$. The total pesos would be 200 x 7.27 = 1454 pesos, a little less than is being offered by the tourist.19. Foreign Stock Markets. Explain why firms may issue stock in foreign markets. Why mightMNCs issue more stock in Europe since the conversion to a single currency in 1999?ANSWER: Firms may issue stock in foreign markets when they are concerned that their home market may be unable to absorb the entire issue. In addition, these firms may have foreign currency inflows in the foreign country that can be used to pay dividends on foreign-issued stock. They may also desire to enhance their global image. Since the euro can be used in several countries, firms may need a large amount of euros if they are expanding across Europe.20. Stock Market Integration. Bullet plc a UK firm, is planning to issue new shares on theLondon Stock Exchange this month. The only decision still to be made is the specific day on which the shares will be issued. Why do you think Bullet monitors results of the Tokyo stock market every morning?ANSWER: The UK stock market prices sometimes follow Japanese market prices. Thus, the firm would possibly be able to issue its stock at a higher price in the UK if it can use the Japanese market as an indicator of what will happen in the UK market. However, this indicator will not always be accurate.Advanced Questions21. Effects of September 11. Why do you think the terrorist attack on the U.S. was expected tocause a decline in U.S. interest rates? Given the expectations for a potential decline in U.S.interest rates and stock prices, how were capital flows between the U.S. and other countries likely affected?ANSWER: The attack was expected to cause a weaker economy, which would result in lower U.S. interest rates. Given the lower interest rates, and the weak stock prices, the amount of funds invested by foreign investors in U.S. securities would be reduced.22. International Financial Markets. Carrefour the French Supermarket chain has established retail outlets worldwide. These outlets are massive and contain products purchased locally as well as imports. As Carrefour generates earnings beyond what it needs abroad, it may remit those earnings back to France. Carrefour is likely to build additional outlets especially in China.a. Explain how the Carrefour outlets in China would use the spot market in foreign exchange.ANSWER:The Carrefour stores in China need other currencies to buy products from other countries, and must convert the Chinese currency (yuan) into the other currencies in the spot market to purchase these products. They also could use the spot market to convert excess earnings denominated in yuan into euros, which would be remitted to the French parent.b. Explain how Carrefour might utilize the international money markets when it isestablishing other Carrefour stores in Asia.ANSWER: Carrefour may need to maintain some deposits in the Eurocurrency market that can be used (when needed) to support the growth of Carrefour stores in various foreign markets. When some Carrefour stores in foreign markets need funds, they borrow from banks in the Eurocurrency market. Thus, the Eurocurrency market serves as a deposit or lending source for Carrefour and other MNCs on a short-term basis. (Eurocurrency refers to international currencies, most likely the dollar, not just the euro!)c. Explain how Carrefour could use the international bond market to finance theestablishment of new outlets in foreign markets.ANSWER: Carrefour could issue bonds in the Eurobond market to generate funds needed to establish new outlets. The bonds may be denominated in the currency that is needed; then, once the stores are established, some of the cash flows generated by those stores could be used to pay interest on the bonds.23.Interest Rates. Why do interest rates vary among countries? Why are interest rates normallysimilar for those European countries that use the euro as their currency? Offer a reason why the government interest rate of one country could be slightly higher than that of the government interest rate of another country, even though the euro is the currency used in both countries.ANSWER: Interest rates in each country are based on the supply of funds and demand for funds for a given currency. However, the supply and demand conditions for the euro are dictated by all participating countries in aggregate, and do not vary among participating countries. Yet, the government interest rate in one country that uses the euro could be slightly higher than others that use the euro if it is subject to default risk. The higher interest rate would reflect a risk premium.Blades plc Case Study。

国际财务管理课后习题答案c h a p t e rLast updated on the afternoon of January 3, 2021C H A P T E R8M A N A G E M E N T O F T R A N S A C T I O N E X P O S U R ESUGGESTED ANSWERS AND SOLUTIONS TO END-OF-CHAPTER QUESTIONS ANDPROBLEMSQUESTIONS1. How would you define transaction exposure How is it different from economic exposureAnswer: Transaction exposure is the sensitivity of realized domestic currency values of the firm’s contractual cash flows denominated in foreign currencies to unexpected changes in exchange rates. Unlike economic exposure, transaction exposure is well-defined and short-term.2. Discuss and compare hedging transaction exposure using the forward contract vs. money market instruments. When do the alternative hedging approaches produce the same result?Answer: Hedging transaction exposure by a forward contract is achieved by selling or buying foreign currency receivables or payables forward. On the other hand, money market hedge is achieved by borrowing or lending the present value of foreign currency receivables or payables, thereby creating offsetting foreign currency positions. If the interest rate parity is holding, the two hedging methods are equivalent.3. Discuss and compare the costs of hedging via the forward contract and the options contract. Answer: There is no up-front cost of hedging by forward contracts. In the case of options hedging, however, hedgers should pay the premiums for the contracts up-front. The cost of forward hedging, however, may be realized ex post when the hedger regrets his/her hedging decision.4. What are the advantages of a currency options contract as a hedging tool compared with the forward contract?Answer: The main advantage of using options contracts for hedging is that the hedger can decide whether to exercise options upon observing the realized future exchange rate. Options thus provide a hedge against ex post regret that forward hedger might have to suffer. Hedgers can only eliminate the downside risk while retaining the upside potential.5. Suppose your company has purchased a put option on the German mark to manage exchange exposure associated with an account receivable denominated in that currency. In this case, your company can be said to have an ‘insurance’ policy on its re ceivable. Explain in what sense this is so. Answer: Your company in this case knows in advance that it will receive a certain minimum dollar amount no matter what might happen to the $/€exchange rate. Furthermore, if the German mark appreciates, your company will benefit from the rising euro.6. Recent surveys of corporate exchange risk management practices indicate that many U.S. firms simply do not hedge. How would you explain this result?Answer: There can be many possible reasons for this. First, many firms may feel that they are not really exposed to exchange risk due to product diversification, diversified markets for their products, etc. Second, firms may be using self-insurance against exchange risk. Third, firms may feel that shareholders can diversify exchange risk themselves, rendering corporate risk management unnecessary.7. Should a firm hedge Why or why notAnswer: In a perfect capital market, firms may not need to hedge exchange risk. But firms can add to their value by hedging if markets are imperfect. First, if management knows about the firm’s exposure better than shareholders, the firm, not its shareholders, should hedge. Second, firms may be able to hedge at a lower cost. Third, if default costs are significant, corporate hedging can be justifiable because it reduces the probability of default. Fourth, if the firm faces progressive taxes, it can reduce tax obligations by hedging which stabilizes corporate earnings.8. Us ing an example, discuss the possible effect of hedging on a firm’s tax obligations.Answer: One can use an example similar to the one presented in the chapter.9. Explain contingent exposure and discuss the advantages of using currency options to manage this type of currency exposure.Answer: Companies may encounter a situation where they may or may not face currency exposure. In this situation, companies need options, not obligations, to buy or sell a given amount of foreign exchange they may or may not receive or have to pay. If companies either hedge using forward contracts or do not hedge at all, they may face definite currency exposure.10. Explain cross-hedging and discuss the factors determining its effectiveness.Answer: Cross-hedging involves hedging a position in one asset by taking a position in another asset. The effectiveness of cross-hedging would depend on the strength and stability of the relationship between the two assets.PROBLEMS1. Cray Research sold a super computer to the Max Planck Institute in Germany on credit and invoiced €10 million payable in six months. Currently, the six-month forward exchange rate is $€ and the foreign exchange advisor for Cray Research predicts that th e spot rate is likely to be $€ in six months.(a) What is the expected gain/loss from the forward hedging?(b) If you were the financial manager of Cray Research, would you recommend hedging this euro receivable Why or why not(c) Suppose the foreign exchange advisor predicts that the future spot rate will be the same as the forward exchange rate quoted today. Would you recommend hedging in this case Why or why notSolution: (a) Expected gain($) = 10,000,000 –= 10,000,000(.05)= $500,000.(b) I would recommend hedging because Cray Research can increase the expected dollar receipt by $500,000 and also eliminate the exchange risk.(c) Since I eliminate risk without sacrificing dollar receipt, I still would recommend hedging.2. IBM purchased computer chips from NEC, a Japanese electronics concern, and was billed ￥250 million payable in three months. Currently, the spot exchange rate is ￥105/$ and the three-month forward rate is ￥100/$. The three-month money market interest rate is 8 percent per annum in the U.S. and 7 percent per annum in Japan. The management of IBM decided to use the money market hedge to deal with this yen account payable.(a) Explain the process of a money market hedge and compute the dollar cost of meeting the yen obligation.(b) Conduct the cash flow analysis of the money market hedge.Solution: (a). Let’s first compute the PV of ￥250 million, .,250m/ = ￥245,700,So if the above yen amount is invested today at the Japanese interest rate for three months, the maturity value will be exactly equal to ￥25 million which is the amount of payable.To buy the above yen amount today, it will cost:$2,340, = ￥250,000,000/105.The dollar cost of meeting this yen obligation is $2,340, as of today.(b)___________________________________________________________________Transaction CF0 CF1____________________________________________________________________1. Buy yens spot -$2,340,with dollars ￥245,700,2. Invest in Japan - ￥245,700, ￥250,000,0003. Pay yens - ￥250,000,000Net cash flow - $2,340,____________________________________________________________________3. You plan to visit Geneva, Switzerland in three months to attend an international business conference. You expect to incur the total cost of SF 5,000 for lodging, meals and transportation during your stay. As of today, the spot exchange rate is $SF and the three-month forward rate is $SF. You can buy the three-month call option on SF with the exercise rate of $SF for the premium of $ per SF. Assume that your expected future spot exchange rate is the same as the forward rate. The three-month interest rate is 6 percent per annum in the United States and 4 percent per annum in Switzerland.(a) Calculate your expected dollar cost of buying SF5,000 if you choose to hedge via call option on SF.(b) Calculate the future dollar cost of meeting this SF obligation if you decide to hedge using a forward contract.(c) At what future spot exchange rate will you be indifferent between the forward and option market hedges?(d) Illustrate the future dollar costs of meeting the SF payable against the future spot exchange rate under both the options and forward market hedges.Solution: (a) Total option premium = (.05)(5000) = $250. In three months, $250 is worth $ = $250. At the expected future spot rate of $SF, which is less than the exercise price, you don’t expect to exercise options. Rather, you expect to buy Swiss franc at $SF. Since you are going to buy SF5,000, you expect to spend $3,150 (=.63x5,000). Thus, the total expected cost of buying SF5,000 will be the sum of $3,150 and $, ., $3,.(b) $3,150 = (.63)(5,000).(c) $3,150 = 5,000x + , where x represents the break-even future spot rate. Solving for x, we obtain x = $SF. Note that at the break-even future spot rate, options will not be exercised.(d) If the Swiss franc appreciates beyond $SF, which is the exercise price of call option, you will exercise the option and buy SF5,000 for $3,200. The total cost of buying SF5,000 will be $3, = $3,200 + $.This is the maximum you will pay. 4. Boeing just signed a contract to sell a Boeing 737 aircraft to Air France. Air France will be billed€20 million which is payable in one year. The current spot exchange rate is $€ and the one -year forward rate is $€. The annual interest rate is % in the U.S. and % in France. Boeing is concerned with the volatile exchange rate between the dollar and the euro and would like to hedge exchange exposure. (a) It is considering two hedging alternatives: sell the euro proceeds from the sale forward or borroweuros from theCredit Lyonnaise against the euro receivable. Which alternative would you recommend Why(b) Other things being equal, at what forward exchange rate would Boeing be indifferent between the two hedging methods?Solution: (a) In the case of forward hedge, the future dollar proceeds will be (20,000,000) = $22,000,000. In the case of money market hedge (MMH), the firm has to first borrow the PV of its euro receivable, ., 20,000,000/ =€19,047,619. Then the firm should exchange this euro amount into dollars at the current spot rate to receive: (€19,047,619)($€) = $20,000,000, which can be invested at the dollar interest rate for one year to yield:$20,000,000 = $21,200,000.Clearly, the firm can receive $800,000 more by using forward hedging.(b) According to IRP, F = S(1+i $)/(1+i F ). Thus the “indifferent” forward rate will be:F = / = $€.5. Suppose that Baltimore Machinery sold a drilling machine to a Swiss firm and gave the Swiss client a choice of paying either $10,000 or SF 15,000 in three months.(a) In the above example, Baltimore Machinery effectively gave the Swiss client a free option to buy up to $10,000 dollars using Swiss franc. What is the ‘implied’ exercise exchange rate?(b) If the spot exchange rate turns out to be $SF, which currency do you think the Swiss client will choose to use for payment What is the value of this free option for the Swiss client(c) What is the best way for Baltimore Machinery to deal with the exchange exposure?Solution: (a) The implied exercise (price) rate is: 10,000/15,000 = $SF .(b) If the Swiss client chooses to pay $10,000, it will cost SF16,129 (=10,000/.62). Since the Swiss client has an option to pay SF15,000, it will choose to do so. The value of this option is obviously SF1,129 (=SF16,129-SF15,000).(c) Baltimore Machinery faces a contingent exposure in the sense that it may or may not receive $ Cost Options hedge Forward hedge$3, $3,150 0 (strike price) $/SF $SF15,000 in the future. The firm thus can hedge this exposure by buying a put option on SF15,000.6. Princess Cruise Company (PCC) purchased a ship from Mitsubishi Heavy Industry. PCC owes Mitsubishi Heavy Industry 500 million yen in one year. The current spot rate is 124 yen per dollar and the one-year forward rate is 110 yen per dollar. The annual interest rate is 5% in Japan and 8% in the . PCC can also buy a one-year call option on yen at the strike price of $.0081 per yen for a premium of .014 cents per yen.(a) Compute the future dollar costs of meeting this obligation using the money market hedge and the forward hedges.(b) Assuming that the forward exchange rate is the best predictor of the future spot rate, compute the expected future dollar cost of meeting this obligation when the option hedge is used.(c) At what future spot rate do you think PCC may be indifferent between the option and forward hedge?Solution: (a) In the case of forward hedge, the dollar cost will be 500,000,000/110 = $4,545,455. In the case of money market hedge, the future dollar cost will be: 500,000,000/(124)= $4,147,465.(b) The option premium is: (.014/100)(500,000,000) = $70,000. Its future value will be $70,000 = $75,600.At the expected future spot rate of $.0091(=1/110), which is higher than the exercise of $.0081, PCC will exercise its call option and buy ￥500,000,000 for $4,050,000 (=500,000,.The total expected cost will thus be $4,125,600, which is the sum of $75,600 and $4,050,000.(c) When the option hedge is used, PCC will spend “at most” $4,125,000. On the other hand, when the forward hedging is used, PCC will have to spend $4,545,455 regardless of the future spot rate. This means that the options hedge dominates the forward hedge. At no future spot rate, PCC will be indifferent between forward and options hedges.7. Airbus sold an aircraft, A400, to Delta Airlines, a U.S. company, and billed $30 million payable in six months. Airbus is concerned with the euro proceeds from international sales and would like to control exchange risk. The current spot exchange rate is $€ and six-month forward exchange rate is $€ at the moment. Airbus can buy a six-month put option on . dollars with a strike price of €$ f or a premium of € per . dollar. Currently, six-month interest rate is % in the euro zone and % in the U.S.pute the guaranteed euro proceeds from the American sale if Airbus decides to hedge usinga forward contract.b.If Airbus decides to hedge using money market instruments, what action does Airbus need totake What would be the guaranteed euro proceeds from the American sale in this casec.d.If Airbus decides to hedge using put options on . dollars, what would be the ‘expected’ europroceeds from the American salee.Assume that Airbus regards the current forward exchange rate as an unbiased predictor of thefuture spot exchange rate.f.g.At what future spot exchange rate do you think Airbus will be indifferent between the option andmoney market hedge?Solution:a. Airbus will sell $30 million forward for €27,272,727 = ($30,000,000) / ($€).b. Airbus will borrow the present value of the dollar receivable, ., $29,126,214 = $30,000,000/, and then sell the dollar proceeds spot for euros: €27,739,251. This is the euro amount that Airbus is going to keep.c. Since the expected future spot rate is less than the strike price of the put option, ., €< €, Airbus expects to exercise the option and receive €28,500,000 = ($30,000,000)(€$). This is gross proceeds. Airbus spent €600,000 (=,000,000) upfront for the option and its future cost is equal to €615,000 = €600,000 x . Thus the net euro proceeds from the American sale is €27,885,000, which is the difference between the gross proceeds and the option costs.d. At the indifferent future spot rate, the following will hold:€28,432,732 = S T (30,000,000) - €615,000.Solving for S T, we obtain the “indifference” future spot exchange rate, ., €$, or $€. Note that €28,432,732 is the future value of the proceeds under money market hedging:€28,432,732 = (€27,739,251) .Suggested solution for Mini Case: Chase Options, Inc.[See Chapter 13 for the case text]Chase Options, Inc.Hedging Foreign Currency Exposure Through Currency OptionsHarvey A. PoniachekI. Case SummaryThis case reviews the foreign exchange options market and hedging. It presents various international transactions that require currency options hedging strategies by the corporations involved. Seven transactions under a variety of circumstances are introduced that require hedging by currency options. The transactions involve hedging of dividend remittances, portfolio investment exposure, and strategic economic competitiveness. Market quotations are provided for options (and options hedging ratios), forwards, and interest rates for various maturities.II. Case Objective.The case introduces the student to the principles of currency options market and hedging strategies. The transactions are of various types that often confront companies that are involved in extensive international business or multinational corporations. The case induces students to acquire hands-on experience in addressing specific exposure and hedging concerns, including how to apply various market quotations, which hedging strategy is most suitable, and how to address exposure in foreign currency through cross hedging policies.III. Proposed Assignment Solution1. The company expects DM100 million in repatriated profits, and does not want the DM/$ exchange rate at which they convert those profits to rise above . They can hedge this exposure using DM put options with a strike price of . If the spot rate rises above , they can exercise the option, while if that rate falls they can enjoy additional profits from favorable exchange rate movements.To purchase the options would require an up-front premium of:DM 100,000,000 x = DM 1,640,000.With a strike price of DM/$, this would assure the U.S. company of receiving at least:DM 100,000,000 – DM 1,640,000 x (1 + x 272/360)= DM 98,254,544/ DM/$ = $57,796,791by exercising the option if the DM depreciated. Note that the proceeds from the repatriated profits are reduced by the premium paid, which is further adjusted by the interest foregone on this amount. However, if the DM were to appreciate relative to the dollar, the company would allow the option to expire, and enjoy greater dollar proceeds from this increase.Should forward contracts be used to hedge this exposure, the proceeds received would be:DM100,000,000/ DM/$ = $59,790,732,regardless of the movement of the DM/$ exchange rate. While this amount is almost $2 million more than that realized using option hedges above, there is no flexibility regarding the exercise date; if this date differs from that at which the repatriate profits are available, the company may be exposed to additional further current exposure. Further, there is no opportunity to enjoy any appreciation in the DM.If the company were to buy DM puts as above, and sell an equivalent amount in calls with strike price , the premium paid would be exactly offset by the premium received. This would assure that the exchange rate realized would fall between and . If the rate rises above , the company will exercise its put option, and if it fell below , the other party would use its call; for any rate in between, both options would expire worthless. The proceeds realized would then fall between:DM 100,00,000/ DM/$ = $60,716,454andDM 100,000,000/ DM/$ = $58,823,529.This would allow the company some upside potential, while guaranteeing proceeds at least $1 million greater than the minimum for simply buying a put as above.Buy/Sell OptionsDM/$Spot Put Payoff “Put”Profits Call Payoff“Call”Profits Net Profit(1,742,846) 0 1,742,846 60,716,454 60,716,454 (1,742,846) 0 1,742,846 60,716,454 60,716,454 (1,742,846) 0 1,742,846 60,716,454 60,716,454 (1,742,846) 0 1,742,846 60,716,454 60,716,454 (1,742,846) 0 1,742,846 60,716,454 60,716,454 (1,742,846) 60,606,061 1,742,846 0 60,606,061 (1,742,846) 60,240,964 1,742,846 0 60,240,964 (1,742,846) 59,880,240 1,742,846 0 59,880,240 (1,742,846) 59,523,810 1,742,846 0 59,523,810 (1,742,846) 59,171,598 1,742,846 0 59,171,598 (1,742,846) 58,823,529 1,742,846 0 58,823,529 (1,742,846) 58,823,529 1,742,846 0 58,823,529 (1,742,846) 58,823,529 1,742,846 0 58,823,529 (1,742,846) 58,823,529 1,742,846 0 58,823,529 (1,742,846) 58,823,529 1,742,846 0 58,823,529 (1,742,846) 58,823,529 1,742,846 0 58,823,529 (1,742,846) 58,823,529 1,742,846 0 58,823,529 (1,742,846) 58,823,529 1,742,846 0 58,823,529 (1,742,846) 58,823,529 1,742,846 0 58,823,529 (1,742,846) 58,823,529 1,742,846 0 58,823,529 (1,742,846) 58,823,529 1,742,846 0 58,823,529 (1,742,846) 58,823,529 1,742,846 0 58,823,529 (1,742,846) 58,823,529 1,742,846 0 58,823,529 (1,742,846) 58,823,529 1,742,846 0 58,823,529 (1,742,846) 58,823,529 1,742,846 0 58,823,529 (1,742,846) 58,823,529 1,742,846 0 58,823,529Since the firm believes that there is a good chance that the pound sterling will weaken, locking them into a forward contract would not be appropriate, because they would lose the opportunity to profit from this weakening. Their hedge strategy should follow for an upside potential to match their viewpoint. Therefore, they should purchase sterling call options, paying a premium of:5,000,000 STG x = 88,000 STG.If the dollar strengthens against the pound, the firm allows the option to expire, and buys sterling in the spot market at a cheaper price than they would have paid for a forward contract; otherwise, the sterling calls protect against unfavorable depreciation of the dollar.Because the fund manager is uncertain when he will sell the bonds, he requires a hedge which will allow flexibility as to the exercise date. Thus, options are the best instrument for him to use. He can buy A$ puts to lock in a floor of A$/$. Since he is willing to forego any further currency appreciation, he can sell A$ calls with a strike price of A$/$ to defray the cost of his hedge (in fact he earns a net premium of A$ 100,000,000 x –= A$ 2,300), while knowing that he can’t receive less than A$/$ when redeeming his investment, and can benefit from a small appreciation of the A$. Example #3:Problem: Hedge principal denominated in A$ into US$. Forgo upside potential to buy floor protection.I. Hedge by writing calls and buying puts1) Write calls for $/A$ @Buy puts for $/A$ @# contracts needed = Principal in A$/Contract size100,000,000A$/100,000 A$ = 1002) Revenue from sale of calls = (# contracts)(size of contract)(premium)$75,573 = (100)(100,000 A$)(.007234 $/A$)(1 + .0825 195/360)3) Total cost of puts = (# contracts)(size of contract)(premium)$75,332 = (100)(100,000 A$)(.007211 $/A$)(1 + .0825 195/360)4) Put payoffIf spot falls below , fund manager will exercise putIf spot rises above , fund manager will let put expire5) Call payoffIf spot rises above .8025, call will be exercised If spot falls below .8025, call will expire6) Net payoffSee following Table for net payoff Australian Dollar Bond HedgeStrikePrice Put Payoff “Put”Principal Call Payoff“Call”Principal Net Profit(75,332) 72,000,000 75,573 0 72,000,241(75,332) 72,000,000 75,573 0 72,000,241(75,332) 72,000,000 75,573 0 72,000,241(75,332) 72,000,000 75,573 0 72,000,241(75,332) 72,000,000 75,573 0 72,000,241(75,332) 72,000,000 75,573 0 72,000,241(75,332) 72,000,000 75,573 0 72,000,241(75,332) 72,000,000 75,573 0 72,000,241(75,332) 72,000,000 75,573 0 72,000,241(75,332) 72,000,000 75,573 0 72,000,241(75,332) 72,000,000 75,573 0 72,000,241(75,332) 72,000,000 75,573 0 72,000,241(75,332) 72,000,000 75,573 0 72,000,241(75,332) 73,000,000 75,573 0 73,000,241(75,332) 74,000,000 75,573 0 74,000,241(75,332) 75,000,000 75,573 0 75,000,241(75,332) 76,000,000 75,573 0 76,000,241(75,332) 77,000,000 75,573 0 77,000,241(75,332) 78,000,000 75,573 0 78,000,241(75,332) 79,000,000 75,573 0 79,000,241(75,332) 80,000,000 75,573 0 80,000,241(75,332) 0 75,573 80,250,000 80,250,241(75,332) 0 75,573 80,250,000 80,250,241(75,332) 0 75,573 80,250,000 80,250,241(75,332) 0 75,573 80,250,000 80,250,241(75,332) 0 75,573 80,250,000 80,250,241 4. The German company is bidding on a contract which they cannot be certain of winning. Thus, the need to execute a currency transaction is similarly uncertain, and using a forward or futures as a hedge is inappropriate, because it would force them to perform even if they do not win the contract. Using a sterling put option as a hedge for this transaction makes the most sense. For a premium of: 12 million STG x = 193,200 STG,they can assure themselves that adverse movements in the pound sterling exchange rate will notdiminish the profitability of the project (and hence the feasibility of their bid), while at the same time allowing the potential for gains from sterling appreciation.5. Since AMC in concerned about the adverse effects that a strengthening of the dollar would have on its business, we need to create a situation in which it will profit from such an appreciation. Purchasing a yen put or a dollar call will achieve this objective. The data in Exhibit 1, row 7 represent a 10 percent appreciation of the dollar strike vs. forward rate) and can be used to hedge against a similar appreciation of the dollar.For every million yen of hedging, the cost would be:Yen 100,000,000 x = 127 Yen.To determine the breakeven point, we need to compute the value of this option if the dollar appreciated 10 percent (spot rose to , and subtract from it the premium we paid. This profit would be compared with the profit earned on five to 10 percent of AMC’s sales (which would be lost as a result of the dollar appreciation). The number of options to be purchased which would equalize these two quantities would represent the breakeven point.Example #5:Hedge the economic cost of the depreciating Yen to AMC.If we assume that AMC sales fall in direct proportion to depreciation in the yen ., a 10 percent decline in yen and 10 percent decline in sales), then we can hedge the full value of AMC’s sales. I have assumed $100 million in sales.1) Buy yen puts# contracts needed = Expected Sales *Current ￥/$ Rate / Contract size9600 = ($100,000,000)(120￥/$) / ￥1,250,0002) Total Cost = (# contracts)(contract size)(premium)$1,524,000 = (9600)( ￥1,250,000)($￥)3) Floor rate = Exercise – Premium￥/$ = ￥/$ - $1,524,000/12,000,000,000￥4) The payoff changes depending on the level of the ￥/$ rate. The following table summarizes thepayoffs. An equilibrium is reached when the spot rate equals the floor rate.AMC ProfitabilityYen/$ Spot Put Payoff Sales Net Profit120 (1,524,990) 100,000,000 98,475,010121 (1,524,990) 99,173,664 97,648,564122 (1,524,990) 98,360,656 96,835,666123 (1,524,990) 97,560,976 86,035,986124 (1,524,990) 96,774,194 95,249,204125 (1,524,990) 96,000,000 94,475,010126 (1,524,990) 95,238,095 93,713,105127 (847,829) 94,488,189 93,640,360128 (109,640) 93,750,000 93,640,360129 617,104 93,023,256 93,640,360130 1,332,668 92,307,692 93,640,360131 2,037,307 91,603,053 93,640,360132 2,731,269 90,909,091 93,640,360133 3,414,796 90,225,664 93,640,360134 4,088,122 89,552,239 93,640,360135 4,751,431 88,888,889 93,640,360136 5,405,066 88,235,294 93,640,360137 6,049,118 87,591,241 93,640,360138 6,683,839 86,966,522 93,640,360139 7,308,425 86,330,936 93,640,360140 7,926,075 85,714,286 93,640,360141 8,533,977 85,106,383 93,640,360142 9,133,318 84,507,042 93,640,360143 9,724,276 83,916,084 93,640,360144 10,307,027 83,333,333 93,640,360145 10,881,740 82,758,621 93,640,360146 11,448,579 82,191,781 93,640,360147 12,007,707 81,632,653 93,640,360148 12,569,279 81,081,081 93,640,360149 13,103,448 80,536,913 93,640,360150 13,640,360 80,000,000 93,640,360The parent has a DM payable, and Lira receivable. It has several ways to cover its exposure; forwards,。

Chapter 03 Financial Statements Analysis and Long-Term Planning Answer Key Multiple Choice Questions1. One key reason a long-term financial plan is developed is because: A. the plan determines your financial policy.B. the plan determines your investment policy.C. there are direct connections between achievable corporate growth and the financial policy.D. there is unlimited growth possible in a well-developed financial plan.E. None of the above.Difficulty level: EasyTopic: LONG-TERM PLANNINGType: DEFINITIONS c2. Projected future financial statements are called: A. plug statements.B. pro forma statements.C. reconciled statements.D. aggregated statements.E. none of the above.Difficulty level: EasyTopic: PRO FORMA STATEMENTSType: DEFINITIONS B3. The percentage of sales method: A. requires that all accounts grow at the same rate.B. separates accounts that vary with sales and those that do not vary with sales.C. allows the analyst to calculate how much financing the firm will need to support the predicted sales level.D. Both A and B.E. Both B and C.Difficulty level: MediumTopic: PERCENTAGE OF SALESType: DEFINITIONS E4. A _____ standardizes items on the income statement and balance sheet as a percentage of total sales and total assets, respectively. A. tax reconciliation statementB. statement of standardizationC. statement of cash flowsD. common-base year statementE. common-size statementDifficulty level: EasyTopic: COMMON-SIZE STATEMENTSType: DEFINITIONS E5. Relationships determined from a firm's financial information and used for comparison purposes are known as: A. financial ratios.B. comparison statements.C. dimensional analysis.D. scenario analysis.E. solvency analysis.ADifficulty level: EasyTopic: FINANCIAL RATIOSType: DEFINITIONS6. Financial ratios that measure a firm's ability to pay its bills over the short run without undue stress are known as _____ ratios. A. asset managementB. long-term solvencyC. short-term solvencyD. profitabilityE. market valueDifficulty level: EasyTopic: SHORT-TERM SOLVENCY RATIOSType: DEFINITIONS C7. The current ratio is measured as: A. current assets minus current liabilities.B. current assets divided by current liabilities.C. current liabilities minus inventory, divided by current assets.D. cash on hand divided by current liabilities.E. current liabilities divided by current assets.Difficulty level: EasyTopic: CURRENT RATIOType: DEFINITIONS B8. The quick ratio is measured as: A. current assets divided by current liabilities.B. cash on hand plus current liabilities, divided by current assets.C. current liabilities divided by current assets, plus inventory.D. current assets minus inventory, divided by current liabilities.E. current assets minus inventory minus current liabilities.Difficulty level: EasyTopic: QUICK RATIOType: DEFINITIONS D9. The cash ratio is measured as: A. current assets divided by current liabilities.B. current assets minus cash on hand, divided by current liabilities.C. current liabilities plus current assets, divided by cash on hand.D. cash on hand plus inventory, divided by current liabilities.E. cash on hand divided by current liabilities.Difficulty level: MediumTopic: CASH RATIOType: DEFINITIONS E 10. Ratios that measure a firm's financial leverage are known as _____ ratios. A. asset managementB. long-term solvencyC. short-term solvencyD. profitabilityE. market valueDifficulty level: EasyTopic: LONG-TERM SOLVENCY RATIOSType: DEFINITIONS B11. The financial ratio measured as total assets minus total equity, divided by total assets, is the: A. total debt ratio.B. equity multiplier.C. debt-equity ratio.D. current ratio.E. times interest earned ratio.Difficulty level: EasyTopic: TOTAL DEBT RATIOType: DEFINITIONSA12. The debt-equity ratio is measured as total: A. equity minus total debt.B. equity divided by total debt.C. debt divided by total equity.D. debt plus total equity.E. debt minus total assets, divided by total equity.Difficulty level: EasyTopic: DEBT-EQUITY RATIOType: DEFINITIONS C13. The equity multiplier ratio is measured as total: A. equity divided by total assets.B. equity plus total debt.C. assets minus total equity, divided by total assets.D. assets plus total equity, divided by total debt.E. assets divided by total equity.Difficulty level: MediumTopic: EQUITY MULTIPLIERType: DEFINITIONS 14. The financial ratio measured as earnings before interest and taxes, divided by interest expense is the: A. cash coverage ratio.B. debt-equity ratio.C. times interest earned ratio.D. gross margin.E. total debt ratio.Difficulty level: MediumTopic: TIMES INTEREST EARNED RATIOType: DEFINITIONS15. The financial ratio measured as earnings before interest and taxes, plus depreciation, divided by interest expense, is the: A. cash coverage ratio.B. debt-equity ratio.C. times interest earned ratio.D. gross margin.E. total debt ratio.Difficulty level: MediumTopic: CASH COVERAGE RATIOType: DEFINITIONS 16. Ratios that measure how efficiently a firm uses its assets to generate sales are known as _____ ratios. A. asset managementB. long-term solvencyC. short-term solvencyD. profitabilityE. market valueDifficulty level: EasyTopic: ASSET MANAGEMENT RATIOSType: DEFINITIONS 17. The inventory turnover ratio is measured as: A. total sales minus inventory.B. inventory times total sales.C. cost of goods sold divided by inventory.D. inventory times cost of goods sold.E. inventory plus cost of goods sold.D ifficulty level: MediumTopic: INVENTORY TURNOVERType: DEFINITIONS18. The financial ratio days' sales in inventory is measured as: A. inventory turnover plus 365 days.B. inventory times 365 days.C. inventory plus cost of goods sold, divided by 365 days.D. 365 days divided by the inventory.E. 365 days divided by the inventory turnover.Difficulty level: MediumTopic: DAYS' SALES IN INVENTORYType: DEFINITIONS 19. The receivables turnover ratio is measured as: A. sales plus accounts receivable.B. sales divided by accounts receivable.C. sales minus accounts receivable, divided by sales.D. accounts receivable times sales.E. accounts receivable divided by sales.Difficulty level: MediumTopic: RECEIVABLES TURNOVERType: DEFINITIONS 20. The financial ratio days' sales in receivables is measured as: A. receivables turnover plus 365 days.B. accounts receivable times 365 days.C. accounts receivable plus sales, divided by 365 days.D. 365 days divided by the receivables turnover.E. 365 days divided by the accounts receivable. Difficulty level: MediumTopic: DAYS' SALES IN RECEIVABLESType: DEFINITIONS21. The total asset turnover ratio is measured as: A. sales minus total assets.B. sales divided by total assets.C. sales times total assets.D. total assets divided by sales.E. total assets plus sales. Difficulty level: EasyTopic: TOTAL ASSET TURNOVERType: DEFINITIONS 22. Ratios that measure how efficiently a firm's management uses its assets and equity to generate bottom line net income are known as _____ ratios. A. asset managementB. long-term solvencyC. short-term solvencyD. profitabilityE. market valueDifficulty level: EasyTopic: PROFITABILITY RATIOSType: DEFINITIONS 23. The financial ratio measured as net income divided by sales is known as the firm's: A. profit margin.B. return on assets.C. return on equity.D. asset turnover.E. earnings before interest and taxes.Difficulty level: EasyTopic: PROFIT MARGINType: DEFINITIONS24. The financial ratio measured as net income divided by total assets is known as the firm's: A. profit margin.B. return on assets.C. return on equity.D. asset turnover.E. earnings before interest and taxes.Difficulty level: EasyTopic: RETURN ON ASSETSType: DEFINITIONS 25. The financial ratio measured as net income divided by total equity is known as the firm's: A. profit margin.B. return on assets.C. return on equity.D. asset turnover.E. earnings before interest and taxes.Difficulty level: EasyTopic: RETURN ON EQUITYType: DEFINITIONS 26. The financial ratio measured as the price per share of stock divided by earnings per share is known as the: A. return on assets.B. return on equity.C. debt-equity ratio.D. price-earnings ratio.E. Du Pont identity.Difficulty level: EasyTopic: PRICE-EARNINGS RATIOType: DEFINITIONS27. The market-to-book ratio is measured as: A. total equity divided by total assets.B. net income times market price per share of stock.C. net income divided by market price per share of stock.D. market price per share of stock divided by earnings per share.E. market value of equity per share divided by book value of equity per share.Difficulty level: MediumTopic: MARKET-TO-BOOK RATIOType: DEFINITIONS 28. The _____ breaks down return on equity into three component parts. A. Du Pont identityB. return on assetsC. statement of cash flowsD. asset turnover ratioE. equity multiplierDifficulty level: MediumTopic: DU PONT IDENTITYType: DEFINITIONS 29. The External Funds Needed (EFN) equation does not measure the: A. additional asset requirements given a change in sales.B. additional total liabilities raised given the change in sales.C. rate of return to shareholders given the change in sales.D. net income expected to be earned given the change in sales.E. None of the above.Difficulty level: MediumTopic: EXTERNAL FUNDS NEEDEDType: DEFINITIONS30. To calculate sustainable growth rate without using return on equity, the analyst needs the: A. profit margin.B. payout ratio.C. debt-to-equity ratio.D. total asset turnover.E. All of the above.Difficulty level: MediumTopic: SUSTAINABLE GROWTH RATEType: DEFINITIONS 31. Growth can be reconciled with the goal of maximizing firm value: A. because greater growth always adds to value.B. because growth must be an outcome of decisions that maximize NPV.C. because growth and wealth maximization are the same.D. because growth of any type cannot decrease value.E. None of the above.Difficulty level: MediumTopic: GROWTHType: DEFINITIONS 32. Sustainable growth can be determined by the: A. profit margin, total asset turnover and the price to earnings ratio.B. profit margin, the payout ratio, the debt-to-equity ratio, and the asset requirement or asset turnover ratio.C. Total growth less capital gains growth.D. Either A or B.E. None of the above.Difficulty level: MediumTopic: SUSTAINABLE GROWTHType: DEFINITIONS33. Which of the following will increase sustainable growth? A. Buy back existing stockB. Decrease debtC. Increase profit marginD. Increase asset requirement or asset turnover ratioE. Increase dividend payout ratioDifficulty level: MediumTopic: SUSTAINABLE GROWTHType: DEFINITIONS 34. The main objective of long-term financial planning models is to: A. determine the asset requirements given the investment activities of the firm.B. plan for contingencies or uncertain events.C. determine the external financing needs.D. All of the above.E. None of the above. Difficulty level: MediumTopic: LONG-TERM PLANNINGType: DEFINITIONS 35. On a common-size balance sheet, all _____ accounts are shown as a percentage of _____. A. income; total assetsB. liability; net incomeC. asset; salesD. liability; total assetsE. equity; salesDifficulty level: MediumTopic: COMMON-SIZE BALANCE SHEETType: DEFINITIONS36. Which one of the following statements is correct concerning ratio analysis? A. A single ratio is often computed differently by different individuals.B. Ratios do not address the problem of size differences among firms.C. Only a very limited number of ratios can be used for analytical purposes.D. Each ratio has a specific formula that is used consistently by all analysts.E. Ratios can not be used for comparison purposes over periods of time. Difficulty level: MediumTopic: RATIO ANALYSISType: DEFINITIONS 37. Which of the following are liquidity ratios?I. cash coverage ratioII. current ratioIII. quick ratioIV. inventory turnover A. II and III onlyB. I and II onlyC. II, III, and IV onlyD. I, III, and IV onlyE. I, II, III, and IVDifficulty level: MediumTopic: LIQUIDITY RATIOSType: DEFINITIONS 38. An increase in which one of the following accounts increases a firm's current ratio without affecting its quick ratio? A. accounts payableB. cashC. inventoryD. accounts receivableE. fixed assetsDifficulty level: MediumTopic: LIQUIDITY RATIOSType: DEFINITIONS39. A supplier, who requires payment within ten days, is most concerned with which one of the following ratios when granting credit? A. currentB. cashC. debt-equityD. quickE. total debt Difficulty level: MediumTopic: LIQUIDITY RATIOSType: DEFINITIONS 40. A firm has a total debt ratio of .47. This means that that firm has 47 cents in debt for every: A. $1 in equity.B. $1 in total sales.C. $1 in current assets.D. $.53 in equity.E. $.53 in total assets.Difficulty level: MediumTopic: LONG-TERM SOLVENCY RATIOSType: DEFINITIONS 41. The long-term debt ratio is probably of most interest to a firm's: A. credit customers.B. employees.C. suppliers.D. mortgageholder.E. shareholders.Difficulty level: MediumTopic: LONG-TERM SOLVENCY RATIOSType: DEFINITIONS42. A banker considering loaning a firm money for ten years would most likely prefer the firm have a debt ratio of _____ and a times interest earned ratio of _____. A. .75; .75B. .50; 1.00C. .45;1.75D. .40;2.50E. .35;3.00Difficulty level: MediumTopic: LONG-TERM SOLVENCY RATIOSType: DEFINITIONS 43. From a cash flow position, which one of the following ratios best measures a firm's ability to pay the interest on its debts? A. times interest earned ratioB. cash coverage ratioC. cash ratioD. quick ratioE. Interval measureDifficulty level: MediumTopic: LONG-TERM SOLVENCY RATIOSType: DEFINITIONS 44. The higher the inventory turnover measure, the: A. faster a firm sells its inventory.B. faster a firm collects payment on its sales.C. longer it takes a firm to sell its inventory.D. greater the amount of inventory held by a firm.E. lesser the amount of inventory held by a firm.Difficulty level: MediumTopic: ASSET MANAGEMENT RATIOSType: DEFINITIONS45. Which one of the following statements is correct if a firm hasa receivables turnover measure of 10? A. It takes a firm 10 days to collect payment from its customers.B. It takes a firm 36.5 days to sell its inventory and collect the payment from the sale.C. It takes a firm 36.5 days to pay its creditors.D. The firm has an average collection period of 36.5 days.E. The firm has ten times more in accounts receivable than it does in cash.Difficulty level: MediumTopic: ASSET MANAGEMENT RATIOSType: DEFINITIONS 46. A total asset turnover measure of 1.03 means that a firm has $1.03 in: A. total assets for every $1 in cash.B. total assets for every $1 in total debt.C. total assets for every $1 in equity.D. sales for every $1 in total assets.E. long-term assets for every $1 in short-term assets.Difficulty level: MediumTopic: ASSET MANAGEMENT RATIOSType: DEFINITIONS 47. Puffy's Pastries generates five cents of net income for every $1 in sales. Thus, Puffy's has a _____ of 5%. A. return on assetsB. return on equityC. profit marginD. Du Pont measureE. total asset turnoverDifficulty level: MediumTopic: PROFITABILITY RATIOSType: DEFINITIONS48. If a firm produces a 10% return on assets and also a 10% return on equity, then the firm: A. has no debt of any kind.B. is using its assets as efficiently as possible.C. has no net working capital.D. also has a current ratio of 10.E. has an equity multiplier of 2.Difficulty level: MediumTopic: PROFITABILITY RATIOSType: DEFINITIONS 49. If shareholders want to know how much profit a firm is making on their entire investment in the firm, the shareholders should look at the: A. profit margin.B. return on assets.C. return on equity.D. equity multiplier.E. earnings per share.Difficulty level: MediumTopic: PROFITABILITY RATIOSType: DEFINITIONS 50. BGL Enterprises increases its operating efficiency such that costs decrease while sales remain constant. As a result, given all else constant, the: A. return on equity will increase.B. return on assets will decrease.C. profit margin will decline.D. equity multiplier will decrease.E. price-earnings ratio will increase.Difficulty level: MediumTopic: PROFITABILITY RATIOSType: DEFINITIONS51. The only difference between Joe's and Moe's is that Joe's has old, fully depreciated equipment. Moe's just purchased all new equipment which will be depreciated over eight years. Assuming all else equal: A. Joe's will have a lower profit margin.B. Joe's will have a lower return on equity.C. Moe's will have a higher net income.D. Moe's will have a lower profit margin.E. Moe's will have a higher return on assets.Difficulty level: MediumTopic: PROFITABILITY RATIOSType: DEFINITIONS 52. Last year, Alfred's Automotive had a price-earnings ratio of 15. This year, the price earnings ratio is 18. Based on this information, it can be stated with certainty that: A. the price per share increased.B. the earnings per share decreased.C. investors are paying a higher price for each share of stock purchased.D. investors are receiving a higher rate of return this year.E. either the price per share, the earnings per share, or both changed.Difficulty level: MediumTopic: MARKET VALUE RATIOSType: DEFINITIONS 53. Turner's Inc. has a price-earnings ratio of 16. Alfred's Co. has a price-earnings ratio of 19. Thus, you can state with certainty that one share of stock in Alfred's: A. has a higher market price than one share of stock in Turner's.B. has a higher market price per dollar of earnings than does one share of Turner's.C. sells at a lower price per share than one share of Turner's.D. represents a larger percentage of firm ownership than does one share of Turner's stock.E. earns a greater profit per share than does one share of Turner's stock.Difficulty level: MediumTopic: MARKET VALUE RATIOType: DEFINITIONS54. Which two of the following are most apt to cause a firm to have a higher price-earnings ratio?I. slow industry outlookII. high prospect of firm growthIII. very low current earningsIV. investors with a low opinion of the firm A. I and II onlyB. II and III onlyC. II and IV onlyD. I and III onlyE. III and IV onlyDifficulty level: MediumTopic: MARKET VALUE RATIOSType: DEFINITIONS 55. Vinnie's Motors has a market-to-book ratio of 3. The book value per share is $4.00. Holding market-to-book constant, a $1 increase in the book value per share will: A. cause the accountants to increase the equity of the firm by an additional $2.B. increase the market price per share by $1.C. increase the market price per share by $12.D. tend to cause the market price per share to rise.E. only affect book values but not market values.Difficulty level: MediumTopic: MARKET VALUE RATIOSType: DEFINITIONS 56. Which one of the following sets of ratios applies most directly to shareholders? A. return on assets and profit marginB. quick ratio and times interest earnedC. price-earnings ratio and debt-equity ratioD. market-to-book ratio and price-earnings ratioE. cash coverage ratio and times equity multiplierDifficulty level: MediumTopic: MARKET VALUE RATIOSType: DEFINITIONS57. The three parts of the Du Pont identity can be generally described as:I. operating efficiency, asset use efficiency and firm profitability.II. financial leverage, operating efficiency and asset use efficiency.III. the equity multiplier, the profit margin and the total asset turnover.IV. the debt-equity ratio, the capital intensity ratio and the profit margin. A. I and II onlyB. II and III onlyC. I and IV onlyD. I and III onlyE. III and IV onlyDifficulty level: MediumTopic: DU PONT IDENTITYType: DEFINITIONS 58. If a firm decreases its operating costs, all else constant, then: A. the profit margin increases while the equity multiplier decreases.B. the return on assets increases while the return on equity decreases.C. the total asset turnover rate decreases while the profit margin increases.D. both the profit margin and the equity multiplier increase.E. both the return on assets and the return on equity increase.Difficulty level: MediumTopic: DU PONT IDENTITYType: DEFINITIONS 59. Which one of the following statements is correct? A. Book values should always be given precedence over market values.B. Financial statements are frequently the basis used for performance evaluations.C. Historical information has no value when predicting the future.D. Potential lenders place little value on financial statement information.E. Reviewing financial information over time has very limited value.Difficulty level: MediumTopic: EVALUATING FINANCIAL STATEMENTSType: DEFINITIONS60. It is easier to evaluate a firm using its financial statements when the firm: A. is a conglomerate.B. is global in nature.C. uses the same accounting procedures as other firms in its industry.D. has a different fiscal year than other firms in its industry.E. tends to have one-time events such as asset sales and property acquisitions.Difficulty level: MediumTopic: EVALUATING FINANCIAL STATEMENTSType: DEFINITIONS 61. Which two of the following represent the most effective methods of directly evaluating the financial performance of a firm?I. comparing the current financial ratios to those of the same firm from prior time periodsII. comparing a firm's financial ratios to those of other firms in the firm's peer group who have similar operationsIII. comparing the financial statements of the firm to the financial statements of similar firms operating in other countriesIV. comparing the financial ratios of the firm to the average ratios of all firms located in the same geographic area A. I and II onlyB. II and III onlyC. III and IV onlyD. I and IV onlyE. I and III onlyDifficulty level: MediumTopic: EVALUATING FINANCIAL STATEMENTSType: DEFINITIONS 62. In the financial planning model, external funds needed (EFN) is equal to changes in A. assets - (liabilities - equity).B. assets - (liabilities + equity).C. (assets + liabilities - equity).D. (assets + equity - liabilities).E. assets - equity.Difficulty level: MediumTopic: EXTERNAL FUNDS NEEDEDType: DEFINITIONS63. Which of the following represent problems encountered when comparing the financial statements of one firm with those of another firm?I. Either one, or both, of the firms may be conglomerates and thus have unrelated lines of business.II. The operations of the two firms may vary geographically.III. The firms may use differing accounting methods for inventory purposes.IV. The two firms may be seasonal in nature and have different fiscal year ends. A. I and II onlyB. II and III onlyC. I, III, and IV onlyD. I, II, and III onlyE. I, II, III, and IVDifficulty level: MediumTopic: EVALUATING FINANCIAL STATEMENTSType: DEFINITIONS 64. A firm's sustainable growth rate in sales directly depends on its: A. debt to equity ratio.B. profit margin.C. dividend policy.D. asset efficiency.E. All of the above.Difficulty level: MediumTopic: SUSTAINABLE GROWTH RATEType: DEFINITIONS 65. The sustainable growth rate will be equivalent to the internal growth rate when: A. a firm has no debt.B. the growth rate is positive.C. the plowback ratio is positive but less than 1.D. a firm has a debt-equity ratio exactly equal to 1.E. net income is greater than zero.Difficulty level: MediumTopic: SUSTAINABLE GROWTH RATEType: DEFINITIONS66. The sustainable growth rate: A. assumes there is no external financing of any kind.B. is normally higher than the internal growth rate.C. assumes the debt-equity ratio is variable.D. is based on receiving additional external debt and equity financing.E. assumes that 100% of all income is retained by the firm.Difficulty level: MediumTopic: SUSTAINABLE GROWTH RATEType: DEFINITIONS 67. If a firm bases its growth projection on the rate of sustainable growth, and shows positive net income, then the: A. fixed assets will have to increase at the same rate, regardless of the current capacity level.B. number of common shares outstanding will increase at the same rate of growth.C. debt-equity ratio will have to increase.D. debt-equity ratio will remain constant while retained earnings increase.E. fixed assets, debt-equity ratio, and number of common shares outstanding will all increase.Difficulty level: MediumTopic: SUSTAINABLE GROWTH RATEType: DEFINITIONS 68. Marcie's Mercantile wants to maintain its current dividend policy, which is a payout ratio of 40%. The firm does not want to increase its equity financing but is willing to maintain its current debt-equity ratio. Given these requirements, the maximum rate at which Marcie's can grow is equal to: A. 40% of the internal rate of growth.B. 60% of the internal rate of growth.C. the internal rate of growth.D. the sustainable rate of growth.E. 60% of the sustainable rate of growth.Difficulty level: MediumTopic: SUSTAINABLE GROWTH RATEType: DEFINITIONS69. One of the primary weaknesses of many financial planning models is that they: A. rely too much on financial relationships and too little on accounting relationships.B. are iterative in nature.C. ignore the goals and objectives of senior management.D. are based solely on best case assumptions.E. ignore the size, risk, and timing of cash flows. Difficulty level: MediumTopic: FINANCIAL PLANNING MODELSType: DEFINITIONS 70. Financial planning, when properly executed: A. ignores the normal restraints encountered by a firm.B. ensures that the primary goals of senior management are fully achieved.C. reduces the necessity of daily management oversight of the business operations.D. helps ensure that proper financing is in place to support the desired level of growth.E. eliminates the need to plan more than one year in advance.Difficulty level: MediumTopic: FINANCIAL PLANNINGType: DEFINITIONS 71. When examining the EBITDA ratio, lower numbers are: A. considered good.B. considered mediocre.C. considered poor.D. indifferent to higher numbers.E. it is impossible to garner information from this ratio. Difficulty level: MediumTopic: EBITDA RATIOType: DEFINITIONS72. A firm's market capitalization is equal to: A. total book value of assets less book value of debt.B. par value of common equity.C. firm's stock price multiplied by number of shares outstanding.D. firm's stock price multiplied by the number of shares authorized.E. the maximum value an acquirer would pay for a firm in an acquisition.Difficulty level: MediumTopic: MARKET CAPITALIZATIONType: DEFINITIONS 73. Enterprise value focused on: A. market values of debt and equity.B. book values of debt and assets.C. market value of equity and book value of debt.D. book value if debt and market value of equity.E. book values of debt and equity. Difficulty level: MediumTopic: ENTERPRISE VALUEType: DEFINITIONS 74. A firm has sales of $1,200, net income of $200, net fixed assets of $500, and current assets of $300. The firm has $100 in inventory. What is the common-size statement value of inventory? A. 8.3%B. 12.5%C. 20.0%D. 33.3%E. 50.0%Common-size inventory = $100 ($500 + $300) = .125 = 12.5%Difficulty level: MediumTopic: COMMON-SIZE STATEMENTSType: PROBLEMS75. A firm has sales of $1,500, net income of $100, total assets of $1,000, and total equity of $700. Interest expense is $50. What is the common-size statement value of the interest expense? A. 3.3%B. 5.0%C. 7.1%D. 16.7%E. 50.0%Common-size interest = $50 $1,500 = .033 = 3.3%Difficulty level: MediumTopic: COMMON-SIZE STATEMENTSType: PROBLEMS 76. Jessica's Boutique has cash of $50, accounts receivable of $60, accounts payable of $200, and inventory of $150. What is the value of the quick ratio? A. .30B. .55C. .77D. 1.30E. 1.82Quick ratio = ($50 + $60) $200 = .55Difficulty level: MediumTopic: LIQUIDITY RATIOSType: PROBLEMS。

第三章二、1．€3 000 000/€125 000/份=24份购买11月份欧元期货合约；扎平欧元期货头寸，以$1.0950/€的价格卖出24份欧元合约,再在即期市场以 $1.0900/€汇率买进欧元:11月份期货合约买入价: $1.0650/€为扎平头寸合约卖出价: $1.0950/€每欧元交易带来的收益: $1.0300/€24份欧元期货合约总利润:24×125 000×0.03=$90 0002.（1）合约份数: $2 000 000÷$1.2580/£÷£62 500=25(份)3月份期货合约卖出价: $1.2580/£;为扎平头寸合约买入价: $1.3500/£;每英镑交易带来的损失: $0.0920/£25份合约总损失:25×62 500×0.0920=$143 750在即期市场购入美元2 143 750,需要英镑:$2 143 750/$1.36/£=£1 576 287（2）3月份期货合约卖出价：$1.2580/£为扎平头寸合约买入价：$1.1100/£每英镑交易带来的收益：$0.1480/£25份合约总利润：25×62 500×0.1480=$231 250在即期市场购入美元汇率：$1.1210/£需要购入的美元：$2 000 000-$231 250=$1 768 750支付英镑：$1768 750/$1.12/£=$1.2664/£3．合约金额£31250/份×10份=£312 500盈亏平衡点价格：4838.1312500120048.1312500=+⨯（$/£）当即期外汇市场价格≤$1.4800/£时,放弃期权,损失$1200;当$1.4800/£<即期外汇市场价格<$1.4838/£时,行使期权,有损失,但小于$1200; 当即期外汇市场价格>$1.4838/£时,行使期权,有收益,无损失.当考虑期权费的利息成本时，其总成本为：$1200（1+8%*3/12）=$1224盈亏平衡点价格：4839.1312500122448.1312500=+⨯（$/£）4．英国出口商买进看涨期权合约，协定价格$1.50/£，期权费$0.98/£；卖出看跌期权合约，协定价格$1.40/£，期权费$1.028/£。

Chapter 3 International Financial MarketsI. Learning objectives （教学目的）After studying this chapter, students should be able to describe the background and corporate use of the following international financial markets:1)foreign exchange market,2)international money market,3)international credit market,4)international bond market, and5)international stock marketsII.The arrangement of this chapter (教学安排) （3 课时）III.Important and difficult points (教学重、难点)Important points:1)foreign exchange marketDifficult points:1)cross exchange rate2)interpreting foreign exchange quotationsIV. The content of this chapter(教学内容)Motives for Using International Financial Markets1. Investors invest in foreign markets:Economic condition: to take advantage of favorable economic conditions;Exchange rate expectations: when they expect foreign currencies to appreciate against their own;International diversification: to reap the benefits of international diversification2.Creditors provide credit in foreign markets:High foreign interest rates: to capitalize on higher foreign interest rates;Exchange rate expectations: when they expect foreign currencies to appreciate against their own; International diversification: to reap the benefits of diversification.3.Borrowers borrow in foreign markets:Low interest rates: to capitalize on lower foreign interest rates; and exchange rate expectations: when they expect foreign currencies to depreciate against their own.Foreign Exchange MarketThe foreign exchange market allows currencies to be exchanged in order to facilitate international trade or financial transactions.The system for exchanging foreign currencies has evolved from the gold standard, to agreements on fixed exchange rates, to a floating rate system.Foreign Exchange Transactions (spot market and forward market)The market for immediate exchange is known as the spot market.The forward market enables an MNC to lock in the exchange rate at which it will buy or sell a certain quantity of currency on a specified future date.Bid/Ask Spread of BanksA bank’s bid (buy) quote for a foreign currency will be less than its ask (sell) quote.bid/ask spread = (ask rate –bid rate)÷ask rateExample: Suppose bid price for £ = $1.52, ask price = $1.60.Spread = (1.60 –1.52) ÷1.60= .05 or 5%Interpreting Foreign Exchange QuotationsThe exchange rate quotations published in newspapers normally reflect the ask prices for large transactions.1) Direct quotations represent the value of a foreign currency in dollars, while indirect quotations represent the number of units of a foreign currency per dollar.Indirect quotation = 1/Direct quotation2) A cross exchange rate reflects the amount of one foreign currency per unit of another foreign currency.Example: Direct quote: $1.50/£, $.125/¥Value of £ in ¥ = value of £ in $÷value of ¥ in $ = $1.50/£÷$.125/¥ = 12¥/£International Money Market1) The Eurocurrency market (market for Eurodollars) developed during the 1960s and 1970s, and the growing importance of OPEC.2) The growing standardization of global banking regulations has contributed towards the globalization of the industry.The Single European Act opened up the European banking industry and increased its efficiency.The Basel Accord results in a higher required capital ration for riskier assets.The proposed Basel II Accord attempts to account for operational risk.International Credit MarketEurocredit loans refer to loans of one year or longer extended by banks in Europe to foreign MNCs or government agencies.Floating rate loans, such as London Inter-bank Offer RateSyndicated LoansInternational Bond Market1) There are two types of international bonds:❶Bonds denominated in the currency of the country where they are placed but issued by borrowers foreign to the country are called foreign bonds or parallel bonds.❷Bonds that are sold in countries other than the country of the currency denominating the bonds are called Eurobonds.2) The emergence of the Eurobond market was partly due to the 1963 U.S. Interest Equalization Tax (IET). It discourages U.S. investors from investing in foreign securities.3) Features of Eurobonds: Eurobonds are issued in bearer form, pay annual coupons. Some also carry convertibility clauses, or have variable rate.International Stock MarketsStock issued in the U.S. by non-U.S. firms or governments are called Yankee stock offerings.Many of such recent stock offerings resulted from privatization programs in Latin America and Europe.Non-U.S. firms may also issue American depository receipts (ADRs), which are certificates representing bundles of stock.Comparison of International Financial MarketsThe foreign cash flow movements of a typical MNC can be classified into: ★Foreign trade –exports and imports★Direct foreign investment (DFI) –acquisition of foreign real assets★Short-term investment or financing in foreign securities★Longer-term financing in the international bond or stock markets。

国际财务管理作业答案书31页习题4、美元与日元的汇率是$1=￥200.01，日元与欧元的汇率是 Euro=￥189.12，那么欧元与美元的兑换比率是多少？日元=1/200.01 美元日元=1/189.12 欧元所以欧元和美元的比率是189.12/200.01=0.94555、假设在纽约，直接标价法下英镑与美元的汇率是1.1110-5.那么在纽约500000 英镑价值多少美元？在伦敦，直接标价法下的美元汇率是多少？英镑与美元的汇率是1/1.1110-5，那么在纽约英镑值555500-555750 在伦敦直接标价法下美元汇率是 1/0.9 1/0.896、一个投资者想以0.9080 美元的价格购买欧元现货，然后以0.9086 美元的价格卖出一个 180 天的欧元远期。

请问欧元掉期率是多少？180 天欧元升水是多少?(0.9086-0.9080)/0.9080*360/180=0.0013 升水是0.000669页习题2、一家英国公司向美国某公司出售引擎并从其购买零件。

假设有一笔15 亿美元的应收账款和一笔7.4 亿美元的应付账款。

他还有6 亿美元的借款，现汇汇率是$1.5128/£。

这家英国公司用美元和英镑表示的美元交易风险各是多少？假设英镑升值到$1.7642/£，这家英国公司用英镑表示的美元交易风险损益是多少？用美元表示的美元交易风险15 亿美元-7.4 亿美元-6 亿美元=14.8660 亿美元用英镑表示的美元交易风险（15 亿美元-7.4 亿美元-6 亿美元）/1.5128=9.8268 亿英镑用英镑表示的美元交易风险损益=9.8268 亿英镑-14.8660 亿美元/1.7642=1.4003 亿英镑。

3、假设美国贝尔公司的英国分公司在年初和年末的流动资产是 100 万英镑，固定资产 200 万英镑，流动负债是100 万英镑，它没有长期负债。

在流动/非流动着算法、货币/非货币折算法、时态法和现行汇率法下的英国贝尔分公司的会计风险是多少？流动/非流动性折算法下英国贝尔分公司的会计风险为：流动资产100 万英镑+流动负债100 万英镑货币/非货币则算法下英国贝尔分公司的会计风险为：货币性资产100 万英镑+货币性负债 100 万英镑。

Chapter 3—International Financial Markets1. Assume that a bank's bid rate on Swiss francs is $.45 and its ask rate is $.47. Its bid-ask percentagespread is:a. about 4.44%.b. about 4.26%.c. about 4.03%.d. about 4.17%.ANS: BSOLUTION: Bid-ask percentage spread = ($.47 − $.45)/$.47 = 4.26%PTS: 12. Assume that a bank's bid rate on Japanese yen is $.0041 and its ask rate is $.0043. Its bid-askpercentage spread is:a. about 4.99%.b. about 4.88%.c. about 4.65%.d. about 4.43%.ANS: CSOLUTION: Bid-ask percentage spread = ($.0043 − $.0041)/$.0043 = 4.65%PTS: 13. The bid/ask spread for small retail transactions is commonly in the range of ____ percent.a. 3 to 7b. .01 to .03c. 10 to 15d. .5 to 1ANS: A PTS: 14. ____ is not a factor that affects the bid/ask spread.a. Order costsb. Inventory costsc. Volumed. All of the above factors affect the bid/ask spreadANS: D PTS: 15. The forward rate is the exchange rate used for immediate exchange of currencies.a. Trueb. FalseANS: F PTS: 16. The ask quote is the price for which a bank offers to sell a currency.a. Trueb. FalseANS: T PTS: 17. According to the text, the forward rate is commonly used for:a. hedging.b. immediate transactions.c. previous transactions.d. bond transactions.ANS: A PTS: 18. If a U.S. firm desires to avoid the risk from exchange rate fluctuations, and it is receiving 100,000 in90 days, it could:a. obtain a 90-day forward purchase contract on euros.b. obtain a 90-day forward sale contract on euros.c. purchase euros 90 days from now at the spot rate.d. sell euros 90 days from now at the spot rate.ANS: B PTS: 19. If a U.S. firm desires to avoid the risk from exchange rate fluctuations, and it will need C$200,000 in90 days to make payment on imports from Canada, it could:a. obtain a 90-day forward purchase contract on Canadian dollars.b. obtain a 90-day forward sale contract on Canadian dollars.c. purchase Canadian dollars 90 days from now at the spot rate.d. sell Canadian dollars 90 days from now at the spot rate.ANS: A PTS: 110. Assume the Canadian dollar is equal to $.88 and the Peruvian Sol is equal to $.35. The value of thePeruvian Sol in Canadian dollars is:a. about .3621 Canadian dollars.b. about .3977 Canadian dollars.c. about 2.36 Canadian dollars.d. about 2.51 Canadian dollars.ANS: BSOLUTION: $.35/$.88 = .3977PTS: 111. Which of the following is not true with respect to spot market liquidity?a. The more willing buyers and sellers there are, the more liquid a market is.b. The spot markets for heavily traded currencies such as the Japanese yen are very liquid.c. A currency's liquidity affects the ease with which an MNC can obtain or sell that currency.d. If a currency is illiquid, an MNC is typically able to quickly purchase that currency at areasonable exchange rate.ANS: D PTS: 112. Forward markets for currencies of developing countries are:a. prohibited.b. less liquid than markets for developed countries.c. more liquid than markets for developed countries.d. only available for use by government agencies.ANS: B PTS: 113. A forward contract can be used to lock in the ____ of a specified currency for a future point in time.a. purchase priceb. sale pricec. A or Bd. none of the aboveANS: C PTS: 114. The forward market:a. for euros is very illiquid.b. for Eastern European countries is very liquid.c. does not exist for some currencies.d. none of the aboveANS: C PTS: 115. ____ is not a bank characteristic important to customers in need of foreign exchange.a. Quote competitivenessb. Speed of executionc. Forecasting adviced. Advice about current market conditionse. All of the above are important bank characteristics to customers in need of foreignexchange.ANS: E PTS: 116. The Basel II accord is focused on eliminating inconsistencies in ____ across countries.a. capital requirementsb. deposit ratesc. deposit insuranced. bank failure policiesANS: A PTS: 117. The international money market primarily concentrates on:a. short-term lending (one year or less).b. medium-term lending.c. long-term lending.d. placing bonds with investors.e. placing newly issued stock in foreign markets.ANS: A PTS: 118. The international credit market primarily concentrates on:a. short-term lending (less than one year).b. medium-term lending.c. long-term lending.d. providing an exchange of foreign currencies for firms who need them.e. placing newly issued stock in foreign markets.ANS: B PTS: 119. The main participants in the international money market are:a. consumers.b. small firms.c. large corporations.d. small European firms needing European currencies for international trade.ANS: C PTS: 120. LIBOR is:a. the interest rate commonly charged for loans between banks.b. the average inflation rate in European countries.c. the maximum loan rate ceiling on loans in the international money market.d. the maximum deposit rate ceiling on deposits in the international money market.e. the maximum interest rate offered on bonds that are issued in London.ANS: A PTS: 121. A syndicated loan:a. represents a loan by a single bank to a syndicate of corporations.b. represents a loan by a single bank to a syndicate of country governments.c. represents a direct loan by a syndicate of oil-producing exporters to a less developedcountry.d. represents a loan by a group of banks to a borrower.e. A and BANS: D PTS: 122. The international money market is primarily served by:a. the governments of European countries, which directly intervene in foreign currencymarkets.b. government agencies such as the International Monetary Fund that enhance developmentof countries.c. several large banks that accept deposits and provide loans in various currencies.d. small banks that convert foreign currency for tourists and business visitors.ANS: C PTS: 123. International money market transactions normally represent:a. the equivalent of $1 million or more.b. the equivalent of $1,000 to $10,000.c. the equivalent of between $10,000 and $100,000.d. the equivalent of between $100,000 and $200,000.ANS: A PTS: 124. A put option is the amount or percentage by which the existing spot rate exceeds the forward rate.a. Trueb. FalseANS: F PTS: 125. From 1944 to 1971, the exchange rate between any two currencies was typically:a. fixed within narrow boundaries.b. floating, but subject to central bank intervention.c. floating, and not subject to central bank intervention.d. nonexistent; that is currencies were not exchanged, but gold was used to pay for all foreigntransactions.ANS: A PTS: 126. As a result of the Smithsonian Agreement, the U.S. dollar was:a. the currency to be used by all countries as a medium of exchange for international trade.b. forced to be freely floating relative to all currencies without any boundaries.c. devalued relative to major currencies.d. revalued (upward) relative to major currencies.ANS: C PTS: 127. According to the text, the average foreign exchange trading around the world ____ per day.a. equals about $200 billionb. equals about $400 billionc. equals about $700 billiond. exceeds $1 trillionANS: D PTS: 128. Assume a Japanese firm invoices exports to the U.S. in U.S. dollars. Assume that the forward rate andspot rate of the Japanese yen are equal. If the Japanese firm expects the U.S. dollar to ____ against the yen, it would likely wish to hedge. It could hedge by ____ dollars forward.a. depreciate; buyingb. depreciate; sellingc. appreciate; sellingd. appreciate; buyingANS: B PTS: 129. The bid-ask spread on an exchange rate can be used to directly determine:a. how an exchange rate will change.b. the transaction cost of foreign exchange.c. the forward premium.d. the currency option premium.ANS: B PTS: 130. Futures contracts are typically ____; forward contracts are typically ____.a. sold on an exchange; sold on an exchangeb. offered by commercial banks; sold on an exchangec. sold on an exchange; offered by commercial banksd. offered by commercial banks; offered by commercial banksANS: C PTS: 131. Eurobonds:a. are usually issued in bearer form.b. typically carry several protective covenants.c. cannot contain call provisions.d. A and BANS: A PTS: 132. Which of the following is true?a. Non-U.S. firms may desire to issue bonds in the U.S. due to less regulations in the U.S.b. U.S. firms may desire to issue bonds in the U.S. due to less regulations in the U.S.c. U.S. firms may desire to issue bonds in the non-U.S. markets due to less regulations innon-U.S. countries.d. A and BANS: C PTS: 133. Eurobonds:a. can be issued only by European firms.b. can be sold only to European investors.c. A and Bd. none of the aboveANS: D PTS: 134. Which currency is used the most to denominate Eurobonds?a. the British pound.b. the Japanese yen.c. the U.S. dollar.d. the Swiss franc.ANS: C PTS: 135. When the foreign exchange market opens in the U.S. each morning, the opening exchange ratequotations will be based on the:a. closing prices in the U.S. during the previous day.b. closing prices in Canada during the previous day.c. prevailing prices in locations where the foreign exchange markets have been open.d. officially set by central banks before the U.S. market opens.ANS: C PTS: 136. The U.S. dollar is not ever used as a medium of exchange in:a. industrialized countries outside the U.S.b. in any Latin American countries.c. in Eastern European countries where foreign exchange restrictions exist.d. none of the aboveANS: D PTS: 137. Which of the following is not true regarding the Bretton Woods Agreement?a. It called for fixed exchange rates between currencies.b. Governments intervened to prevent exchange rates from moving more than 1 percentabove or below their initially established levels.c. The agreement lasted from 1944 until 1971.d. Each country used gold to back its currency.e. All of the above are true regarding the Bretton Woods Agreement.ANS: D PTS: 138. A Japanese yen is worth $.0080, and a Fijian dollar (F$) is worth $.5900. What is the value of the yenin Fijian dollars (i.e., how many Fijian dollars do you need to buy a yen)?a. 73.75.b. 125.c. 1.69.d. 0.014.e. none of the aboveANS: DSOLUTION: ($.008/$.59) = F$.014/¥PTS: 139. The existence of imperfect markets has prevented the internationalization of financial markets.a. Trueb. FalseANS: F PTS: 140. Under the gold standard, each currency was convertible into gold at a specified rate, and the exchangerate between two currencies was determined by their relative convertibility rates per ounce of gold.a. Trueb. FalseANS: T PTS: 141. An investor engaging in a transaction whereby he or she contracts to purchase British pounds one yearfrom now is an example of a spot market transaction.a. Trueb. FalseANS: F PTS: 142. The Single European Act prevented a trend toward increased globalization in the banking industry.a. Trueb. FalseANS: F PTS: 143. A cross exchange rate expresses the amount of one foreign currency per unit of another foreigncurrency.a. Trueb. FalseANS: T PTS: 144. A currency put option provides the right, but not the obligation, to buy a specific currency at a specificprice within a specific period of time.a. Trueb. FalseANS: F PTS: 145. The strike price is also known as the premium price.a. Trueb. FalseANS: F PTS: 146. The interest rate commonly charged for loans between banks is called the cross rate.a. Trueb. FalseANS: F PTS: 147. The Bretton Woods Agreement is an agreement to standardize banks' capital requirements acrosscountries; the resulting capital ratios are computed using risk-weighted assets.a. Trueb. FalseANS: F PTS: 148. The Basel Accord is an agreement among the major European countries to make regulations moreuniform across European countries and to reduce taxes on goods traded between these countries.a. Trueb. FalseANS: F PTS: 149. A futures contract is a contract specifying a standard volume of a particular currency to be exchangedon a specific settlement date.a. Trueb. FalseANS: T PTS: 150. Eurobonds are certificates representing bundles of stock.a. Trueb. FalseANS: F PTS: 151. A share of the ADR of a Dutch firm represents one share of that firm's stock that is traded on a Dutchstock exchange. The share price of the firm was 15 euros when the Dutch market closed. As the U.S.market opens, the euro is worth $1.10. Thus, the price of the ADR should be ____.a. $13.64b. $15.00c. $16.50d. 16.50 eurose. none of the aboveANS: CSOLUTION: 15 × $1.10 = $16.50PTS: 152. The ADR of a British firm is convertible into 3 shares of stock. The share price of the firm was 30pounds when the British market closed. When the U.S. market opens, the pound is worth $1.63. The price of this ADR should be $____.a. 48.90b. 146.70c. 55.21d. none of the aboveANS: BSOLUTION: 3 × 30 × $1.63 = $146.70PTS: 153. If there is a large supply of savings relative to the demand for short-term funds, the interest rate forthat country will be relatively low.a. Trueb. FalseANS: T PTS: 154. If there is a strong demand to borrow a currency, and a low supply of savings in that currency, theinterest rate will be relatively low.a. Trueb. FalseANS: F PTS: 155. The preferences of corporations and governments to borrow in foreign currencies and of investors tomake short-term investments in foreign currencies resulted in the creation of the international bond market.a. Trueb. FalseANS: F PTS: 156. Large commercial banks play a major role in the international money market by accepting short-termdeposits in large amounts (such as the equivalent of $1 million or more) and in various currencies, and channeling the money to corporations and government agencies that need to borrow those short-term funds in the desired currencies.a. Trueb. FalseANS: T PTS: 157. The term "eurobor" is widely used to reflect the interbank offer rate on euros.a. Trueb. FalseANS: T PTS: 158. The term "eurobor" is widely used to reflect the total amount of euros borrowed by the firms in Europeper month to finance their growth.a. Trueb. FalseANS: F PTS: 159. Institutional investors such as commercial banks, mutual funds, insurance companies, and pensionfunds from many countries are major participants in the international bond market.a. Trueb. FalseANS: T PTS: 160. In response to the Sarbanes-Oxley Act, the reporting costs were reduced, and many non-U.S. firms thatissued new shares of stock decided to place their stock in the United States.a. Trueb. FalseANS: F PTS: 161. Global regulations require that shareholders in all countries have the same rights wherever there arestock markets.a. Trueb. FalseANS: F PTS: 162. Shareholders have more voting power in some countries than others.a. Trueb. FalseANS: T PTS: 163. Shareholders can have influence on a wider variety of management issues in some countries.a. Trueb. FalseANS: T PTS: 164. The legal protection of shareholders is the same among countries.a. Trueb. FalseANS: F PTS: 165. Shareholders in some countries may have more power to effectively sue publicly-traded firms if theirexecutives or directors commit financial fraud.a. Trueb. FalseANS: T PTS: 166. In general, common law countries such as the U.S., Canada, and the United Kingdom allow for morelegal protection than French civil law countries such as France or Italy.a. Trueb. FalseANS: T PTS: 167. The government enforcement of securities laws varies among countries.a. Trueb. FalseANS: T PTS: 168. The degree of financial information that must be provided by public companies is the same amongcountries.a. Trueb. FalseANS: F PTS: 169. In general, stock markets allow for more price efficiency and attract more investors when they have allof the following except:a. more voting rights for shareholders.b. more legal protection.c. more enforcement of the laws.d. less stringent accounting requirements.ANS: D PTS: 170. In general, companies are attracted to the stock market in which there are very limited voting rights forshareholders.a. Trueb. FalseANS: F PTS: 171. If companies can rely on stock markets to obtain funds, they will have to rely more heavily on the____ market to raise long-term funds.a. derivativeb. long-term creditc. moneyd. foreign exchangeANS: B PTS: 172. The strike price on a currency option is also known as an exercise price.a. Trueb. FalseANS: T PTS: 173. Assume that the bank's bid quote of Mexican peso is $.126 and ask price is $.129. If you have Mexicanpesos, what is the amount of pesos that you need to purchase $100,000?a. 12,600b. 775,194c. 793,651d. 12,900ANS: C PTS: 174. When receiving quotations on a currency's exchange rate, the bank's bid quote is the rate at which thebank is willing to sell currency.a. Trueb. FalseANS: F PTS: 175. An obligation to purchase a specific amount of currency at a future point in time is called a:a. call optionb. spot contractc. put optiond. forward contracte. both B and D76. Which of the following is not a method that can be used to invest internationally?a. Investment in MNC stocksb. American depository receipts (ADRs)c. World Equity benchmark Shares (WEBS)d. International mutual fundse. All of the above are methods that can be used to invest internationally.ANS: E PTS: 177. The interest rate in developing countries is usually very low.a. Trueb. FalseANS: F PTS: 178. Assume that $1 is equal to .85 Euros and 98 yen. The value of yen in euros isa. .01b. 118c. 1.18d. .0087ANS: D PTS: 179. When obtaining a loan, the risk premium paid above LIBOR depends on the:a. risk-free interest rate of the borrower.b. credit risk of the borrower.c. borrower's stock price.d. lender's stock price.ANS: B PTS: 180. The largest global exchange is:a. NASDAQb. Tokyo Stock Exchangec. NYSE Euronextd. London Stock ExchangeANS: C PTS: 181. Which of the following is not true about syndicated loans?a. A borrower that receives a syndicated loan incurs various fees besides the interest rate.b. The loans are only denominated in U.S. dollars.c. The loans are provided by a group of banks to a borrower.d. The loans are usually formed in 6 weeks or less.ANS: B PTS: 182. The interest rate on the syndicated loan depends on the:a. currency denominating the loan.b. maturity of the loan.c. creditworthiness of the borrower.d. interbank lending rate.e. all of the above.83. Assume a U.S. firm has to pay for Korean imports in 60 days. It expects that Korean won willdepreciate, but it still wants to hedge its risk. What type of hedging is more appropriate in thissituation:a. Buy dollars forwardb. Sell dollars forwardc. Purchase call optiond. Purchase put optionANS: C PTS: 184. Certificates representing bundles of stock of non-U.S. firms are called:a. Eurobondsb. ADRsc. FRNsd. EuroborANS: B PTS: 185. Assume that the spot rate of the Singapore dollar is $.664. The ADR of a Singapore firm is convertibleinto 3 shares of stock. The price of an ADR is $20. What is the share price of the firm in Singapore dollars?a. 10b. 13.28c. 30.12d. 39.84ANS: A PTS: 186. Which of the following is not true regarding ADRs?a. ADRs are denominated in the currency of the stock's home country.b. ADRs enable U.S. investors to avoid cross-border transactionsc. ADRs allow non-U.S. firms to tap into U.S. market for funds.d. ADRs sometimes allow for arbitrage opportunities.ANS: A PTS: 187. The more intense the competition for the traded currency, the larger the bid/ask spread.a. Trueb. FalseANS: F PTS: 188. Banks charge larger bid/ask spreads than they would on less liquid, less traded currencies.a. Trueb. FalseANS: F PTS: 189. At any given point in time, a bank's bid quote will be greater than its ask quote.a. Trueb. FalseANS: F PTS: 190. An MNC with receivables in Japanese Yen purchases yen forward to hedge its exposure to exchangerate fluctuations.a. Trueb. FalseANS: F PTS: 191. A currency put option provides the right, but not the obligation, to buy a specific currency at a specificprice within a specific period of time.a. Trueb. FalseANS: F PTS: 192. The LIBOR varies among currencies because the market supply of and demand for funds vary amongcurrencies.a. Trueb. FalseANS: T PTS: 193. The international money market is frequently accessed by MNCs for short-term investment andfinancing decisions, while longer term financing decisions are made in the international credit market or the international bond market and in international stock markets.a. Trueb. FalseANS: T PTS: 194. Which of the following is not a possible bid/ask quotation for the Barbados dollar?a. $.50/$.51b. $.49/$.50c. $.52/$.51d. $.51/$.52e. All of the above are possible bid/ask quotations.ANS: C PTS: 195. Your company expects to receive 5,000,000 Japanese yen 60 days from now. You decide to hedgeyour position by selling Japanese yen forward. The current spot rate of the yen is $.0089, while the forward rate is $.0095. You expect the spot rate in 60 days to be $.0090. How many dollars will you receive for the 5,000,000 yen 60 days from now if you sell yen forward?a. $44,500b. $45,000c. $526 milliond. $47,500e. $556 millionANS: D PTS: 196. Which of the following is probably not an example of the use of forward contracts by an MNC?a. Hedging pound payables by selling pounds forwardb. Hedging peso receivables by selling pesos forwardc. Hedging yen payables by purchasing yen forwardd. Hedging peso payables by purchasing pesos forwarde. All of the above are examples of using forward contracts.ANS: A PTS: 197. A quotation representing the value of a foreign currency in dollars is referred to as a(n) ____ quotation;a quotation representing the number of units of a foreign currency per dollar is referred to as a(n) ____quotation.a. direct; indirectb. indirect; directc. direct; directd. indirect; indirecte. cannot be answered without more informationANS: A PTS: 198. You observe a quotation of the Japanese yen (¥) of $0.007. You are, however, interested in the numberof yen per dollar. Thus, you calculate the ____ quotation of ____ ¥/$.a. direct; 142.86b. indirect; 142.86c. indirect; 150d. direct; 150e. indirect; 0ANS: B PTS: 199. Which of the following is not true regarding electronic communications networks (ECNs)?a. They have a visible trading floor.b. Trades are executed by a computer network.c. They have been created in many countries to match orders between buyers and sellers.d. They allow investors to place orders on their computers.e. All of the above are true.ANS: A PTS: 1100. Which of the following is probably not appropriate for an MNC wishing to reduce its exposure to British pound payables?a. Purchase pounds forwardb. Buy a pound futures contractc. Buy a pound put optiond. Buy a pound call optionANS: C PTS: 1101. Futures contracts are sold on exchanges and are consequently ____ than forward contracts, which can be ____ to satisfy an MNC's needs.a. more standardized; standardizedb. more standardized; custom-tailoredc. more custom-tailored; standardizedd. more custom-tailored; custom-tailorede. less standardized; custom-tailoredANS: B PTS: 1102. An MNC's short-term financing decisions are satisfied in the ____ market, while its medium debt financing decisions are satisfied in the ____ market.a. international money; international creditb. international money; international bondc. international credit; international moneyd. international bond; international credite. international money; international stockANS: A PTS: 1。