Question 1

The CPA Canada Handbook recommends when a foreign operation is designated as integrated:

Accepted Answer

A)   it causes instability in the currencies in international money and foreign exchange markets.
B)   the market value of assets and liabilities denominated in foreign currencies is subject to change.
C)   it exploits local labour with low wages.
D)   its transactions be captured as if they had been performed by the parent company.E) B) and C)
F) A) and D)

Question 2

Suppose a Mexican Peso sells for $0.1625 and a British pound sells for $1.6523. What is the exchange rate (cross rate) of the Mexican Peso to the British pound? That is, how many Mexican Pesos are equal to a British pound?

Accepted Answer

One dollar is worth 6.154 Mexican Pesos ...

Question 3

In international finance, the chance of experiencing a drop in revenue or an increase in cost in international business transactions is called:

Accepted Answer

A)   credit risk.
B)   political risk.
C)   economic value exposure.
D)   transaction exposure.E) A) and B)
F) All of the above

Question 4

Since most foreign currency values fluctuate from time to time, the monetary value of an international transaction or investment, measured in either the seller's or the buyer's currency, is likely to change over time.

Accepted Answer

A) True 
 B)False

Question 5

Eurocurrency are:

Accepted Answer

A)   Canadian dollars deposited in foreign banks.
B)   foreign dollars deposited in Canadian banks.
C)   investments of common market countries.
D)   Euro's converted to US dollars.E) A) and D)
F) C) and D)

Question 6

Which of the following is commonly used to minimize transaction exposure in foreign exchange dealings?

Accepted Answer

A)   Hedging in the interest swap market
B)   Hedging in the money market
C)   Hedging in the stock market
D)   Hedging in the treasury bills marketE) All of the above
F) A) and D)

Question 7

In international finance, the term "Balance of Payments" refers to the balance owing from one government to another.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following statements is not true?

Accepted Answer

A)   The currency of Japan is described in yens.
B)   The currency of Mexico is described in pesos.
C)   The currency of Italy is described in euros.
D)   The currency of Denmark is described in rands.E) A) and D)
F) A) and C)

Question 9

Despite higher risks, what are 3 reasons foreign capital investments are undertaken?

Accepted Answer

• Higher potential r...

Question 10

The possibility of experiencing a drop in revenue or an increase in cost in an international transaction due to a change in foreign exchange rates is called:

Accepted Answer

A)   foreign exchange risk.
B)   political risk.
C)   credit risk.
D)   strategic risk.E) B) and D)
F) All of the above

Question 11

The eurobond market offers tax flexibility for borrowers and investors.

Accepted Answer

A) True 
 B)False

Question 12

A particular country's pattern of exporting more than is being imported is likely to:

Accepted Answer

A)   have no effect on that country's currency.
B)   depress other countries' currencies.
C)   decrease the value of that country's currency.
D)   stabilize the relative purchasing power between countries.E) A) and C)
F) B) and D)

Question 13

The lending rate for borrowers in the Eurocurrency market is based on the prime lending rate.

Accepted Answer

A) True 
 B)False

Question 14

The Daily Planet has a wholly owned foreign subsidiary in Brazil. The subsidiary earns 30 million reals per year before taxes in Brazil. The foreign income tax rate is 30%. The subsidiary repatriates the entire after-tax profits in the form of dividends to the Daily Planet. The U.S. corporate tax rate is 40% of foreign earnings before taxes.
a) Compute after-tax cash flow to the Daily Planet from this investment (in reals). Use the table below.
  b) If the exchange rate is.56 ($/reals), what is the after-tax cash flow in dollars?
c) Depreciation related cash flow is 2 million reals per year for five years for another Daily Planet investment in Brazil. The exchange rate is expected to be.59 ($/reals). The Daily Planet applies a 15% discount rate to foreign cash flows. What is the present value (in dollars) of the depreciation related cash flow?

Accepted Answer

a)

b)

c) 2,000,000 reals *...

Question 15

Which of the following hedging strategies involves a loan without a futures contract?

Accepted Answer

A)   Eurobond market
B)   Forward exchange market
C)   Money market
D)   IMM contractE) None of the above
F) A) and D)

Question 16

The Export Development Corporation (EDC) :

Accepted Answer

A)   loans money to multinational firms.
B)   does feasibility studies for multinational firms.
C)   sells insurance policies to qualified multinational firms.
D)   reduces risk by taking an ownership share of exporting companies.E) A) and D)
F) A) and C)

Question 17

As exchange rates change, they:

Accepted Answer

A)   reduce translation exposure for corporations with foreign investment.
B)   can not affect imports and exports between countries.
C)   will not affect the flow of funds between the countries.
D)   change the relative purchasing power between countries.E) A) and C)
F) C) and D)

Question 18

In a parallel loan arrangement:

Accepted Answer

A)   the Canadian parent firm lends dollars to the Canadian affiliate while the Dutch parent firm lends euros to the Dutch affiliate.
B)   the Canadian parent firm lends dollars to the Dutch affiliate while the Dutch parent lends euros to the Canadian affiliate.
C)   the Canadian parent lends euros to the Dutch affiliate while the Dutch parent lends dollars to the Canadian affiliate.
D)   the parent firms lend funds to each other while the affiliates lend funds to each other.E) A) and D)
F) C) and D)

Question 19

Which of the following statements about the International Finance Corporation is not true?

Accepted Answer

A)   The decision to assist a venture depends on both profitability of the project and potential benefit to the host country's economy
B)   IFC assumes no managerial responsibility and exercises no voting rights
C)   IFC may either buy equity shares or provide long-term loans
D)   The IFC is owned by the member countries of the United NationsE) None of the above
F) A) and C)

Question 20

The surplus which appreciates the value of the currency is known as:

Accepted Answer

A)   Purchasing Power Parity.
B)   Balance of Payments.
C)   Current Capital.
D)   Interest Rate Parity.E) All of the above
F) None of the above

Exam 21: International Financial Management

Eurocurrency are:

Correct Answer
verified

In international finance, the term "Balance of Payments" refers to the balance owing from one government to another.

Correct Answer
verified

Which of the following is commonly used to minimize transaction exposure in foreign exchange dealings?

Correct Answer
verified

The Export Development Corporation (EDC) :

Correct Answer
verified

The CPA Canada Handbook recommends when a foreign operation is designated as integrated:

Correct Answer
verified

Since most foreign currency values fluctuate from time to time, the monetary value of an international transaction or investment, measured in either the seller's or the buyer's currency, is likely to change over time.

Correct Answer
verified

Which of the following statements is not true?

Correct Answer
verified

A particular country's pattern of exporting more than is being imported is likely to:

Correct Answer
verified

Despite higher risks, what are 3 reasons foreign capital investments are undertaken?

Correct Answer
verified
• Higher potential r...
View Answer

In a parallel loan arrangement:

Correct Answer
verified

The surplus which appreciates the value of the currency is known as:

Correct Answer
verified

Suppose a Mexican Peso sells for $0.1625 and a British pound sells for $1.6523. What is the exchange rate (cross rate) of the Mexican Peso to the British pound? That is, how many Mexican Pesos are equal to a British pound?

Correct Answer
verified
One dollar is worth 6.154 Mexican Pesos ...
View Answer

The possibility of experiencing a drop in revenue or an increase in cost in an international transaction due to a change in foreign exchange rates is called:

Correct Answer
verified

In international finance, the chance of experiencing a drop in revenue or an increase in cost in international business transactions is called:

Correct Answer
verified

Which of the following hedging strategies involves a loan without a futures contract?

Correct Answer
verified

Correct Answer
verified
a)
b)
c) 2,000,000 reals *...
View Answer

The eurobond market offers tax flexibility for borrowers and investors.

Correct Answer
verified

Which of the following statements about the International Finance Corporation is not true?

Correct Answer
verified

The lending rate for borrowers in the Eurocurrency market is based on the prime lending rate.

Correct Answer
verified

As exchange rates change, they:

Correct Answer
verified

Exam 21: International Financial Management

Eurocurrency are:

Correct AnswerverifiedShow Answer

In international finance, the term "Balance of Payments" refers to the balance owing from one government to another.

Correct AnswerverifiedShow Answer

Which of the following is commonly used to minimize transaction exposure in foreign exchange dealings?

Correct AnswerverifiedShow Answer

The Export Development Corporation (EDC) :

Correct AnswerverifiedShow Answer

The CPA Canada Handbook recommends when a foreign operation is designated as integrated:

Correct AnswerverifiedShow Answer

Since most foreign currency values fluctuate from time to time, the monetary value of an international transaction or investment, measured in either the seller's or the buyer's currency, is likely to change over time.

Correct AnswerverifiedShow Answer

Which of the following statements is not true?

Correct AnswerverifiedShow Answer

A particular country's pattern of exporting more than is being imported is likely to:

Correct AnswerverifiedShow Answer

Despite higher risks, what are 3 reasons foreign capital investments are undertaken?

Correct Answerverified• Higher potential r...View AnswerShow Answer

In a parallel loan arrangement:

Correct AnswerverifiedShow Answer

The surplus which appreciates the value of the currency is known as:

Correct AnswerverifiedShow Answer

Suppose a Mexican Peso sells for $0.1625 and a British pound sells for $1.6523. What is the exchange rate (cross rate) of the Mexican Peso to the British pound? That is, how many Mexican Pesos are equal to a British pound?

Correct AnswerverifiedOne dollar is worth 6.154 Mexican Pesos ...View AnswerShow Answer

The possibility of experiencing a drop in revenue or an increase in cost in an international transaction due to a change in foreign exchange rates is called:

Correct AnswerverifiedShow Answer

In international finance, the chance of experiencing a drop in revenue or an increase in cost in international business transactions is called:

Correct AnswerverifiedShow Answer

Which of the following hedging strategies involves a loan without a futures contract?

Correct AnswerverifiedShow Answer

Correct Answerverifieda) b) c) 2,000,000 reals *...View AnswerShow Answer

The eurobond market offers tax flexibility for borrowers and investors.

Correct AnswerverifiedShow Answer

Which of the following statements about the International Finance Corporation is not true?

Correct AnswerverifiedShow Answer

The lending rate for borrowers in the Eurocurrency market is based on the prime lending rate.

Correct AnswerverifiedShow Answer

As exchange rates change, they:

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
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Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
• Higher potential r...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
One dollar is worth 6.154 Mexican Pesos ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
a)
b)
c) 2,000,000 reals *...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified