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Exam 20: International Business Finance

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Question 51

Multiple Choice

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Buying and selling in more than one market to make a riskless profit is called [blank].

A) profit maximization
B) arbitrage
C) international trading
D) cannot be determined from the above information.

E) A) and D)
F) C) and D)

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Question 52

Multiple Choice

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Use the following information to answer the following question(s) . -The number of pounds you can purchase per US dollar is [blank].

A) 1.6304
B) 6.895
C) 0.6895
D) 19.51

E) B) and D)
F) A) and C)

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Question 53

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The difference between the ask price and the bid price is known as the spread.

What is the difference between forward rates and spot rates? What is the purpose of forward contracts?

Direct quote = 1/Indirect quote

The one year interest rate in the United States is 2%.The spot exchange rate for yen is 113.25 to the dollar.The six months forward rate is 112.96 to the dollar.These prices indicate that the six-month risk-free rate in Japan is [blank].

[blank] is the rate that a bank wants the customer to pay in the terms currency for one unit of the base currency, when the bank is selling and the customer is buying.

The spot exchange rate for the Thai bhat is 30.000 bhat to the dollar or .00333 dollar to the bhat.For capital-budgeting purposes, Ramo Corp needs to estimate the exchange rate five years from now.The US interest rate is 2%; the interest rate in Thailand is 6%.The estimated five-year forward rate is

Use the following information to answer the following question(s) . -To buy one Indian rupee you would need [blank].

The foreign exchange market provides a physical entity that transfers the purchasing-power from one currency to another.

Briefly discuss the factors that multinational firms consider in arriving at capital structure decisions.

When banks transact in foreign currencies, the direct bid quote is greater than the direct asked quote.

Trading in foreign exchange markets is dominated by

An investor purchased Canadian dollars at an exchange rate of US $0.756 to the Canadian dollar.The Canadian dollars cost her $1,000,000 (US dollars) .How many Canadian dollars did she buy?

According to the domestic Fisher effect, if the inflation rate is 5%, and the nominal rate of interest is 7%, the real rate of interest is [blank].

After the US dollar, the most widely traded currency is [blank].

One reason for international investment is that

The spot exchange rate for the Thai bhat is 33.135 bhat to the dollar.The Host Hotel Company will be able to repatriate profits from its luxury resort hotel in Phuket in five years.It has estimated the five-year forward rate at 38 bhat to the dollar.The risk-free rate in the United States is 4% and Host uses an 11% risk premium for investments of this type.If the expected accumulated profits after five years are 100 million bhat, what is their present value in US dollars?

Use the following information to answer the following question(s) . -The following are the prices in the foreign exchange market between the US dollar and a foreign currency (fc) .Spot 0.6335US$/fc; three-month forward 0.6375US$/fc.What was the discount or premium on three-month forward for the foreign currency?

[blank] is the price of one currency stated in terms of another currency.