Test bank International Finance MCQ wordChap 9.docx

1、Test bank International Finance MCQ wordChap 9Fundamentals of Multinational Finance, 3e (Moffett) Chapter 9 Transaction Exposure9.1 Multiple Choice and True/False Questions1) _ exposure deals with cash flows that result from existing contractual obligations. A) Operating B) Transaction C) Translatio

2、n D) Economic Answer: B Topic: Transaction Exposure Skill: Recognition2) _ exposure measures the change in the present value of the firm resulting from unexpected changes in exchange rates. A) Operating B) Transaction C) Translation D) Accounting Answer: A Topic: Operating Exposure Skill: Recognitio

3、n3) Each of the following is another name for operating exposure EXCEPT _. A) economic exposure B) strategic exposure C) accounting exposure D) competitive exposure Answer: C Topic: Accounting Exposure Skill: Recognition4) Transaction exposure and operating exposure exist because of unexpected chang

4、es in future cash flows. The difference between the two is that _ exposure deals with cash flows already contracted for, while _ exposure deals with future cash flows that might change because of changes in exchange rates. A) transaction; operating B) operating; transaction C) operating; accounting

5、D) none of the above Answer: A Topic: Transaction and Operating Exposure Skill: Recognition 5) _ exposure is the potential for accounting-derived changes in owners equity to occur because of the need to translate foreign currency financial statements into a single reporting currency. A) Transaction

6、B) Operating C) Economic D) Accounting Answer: D Topic: Accounting Exposure Skill: Recognition6) Losses from _ exposure generally reduce taxable income in the year they are realized. _ exposure losses may reduce taxes over a series of years. A) accounting; Operating B) operating; Transaction C) tran

7、saction; Operating D) transaction; Accounting Answer: C Topic: Transaction and Accounting Exposure Skill: Recognition7) Losses from _ exposure generally reduce taxable income in the year they are realized. _ exposure losses are not cash losses and therefore, are not tax deductible. A) transaction; O

8、perating B) accounting; Operating C) accounting; Transaction D) transaction; Translation Answer: D Topic: Transaction and Accounting Exposure Skill: Recognition8) MNE cash flows may be sensitive to changes in which of the following? A) exchange rates B) interest rates C) commodity prices D) all of t

9、he above Answer: D Topic: MNE Cash Flow Risk Skill: Recognition9) _ is a technique used by MNEs to deal with currency exposure. A) Do nothing B) Speculation C) Hedging D) All are techniques MNEs could use. Answer: D Topic: MNE Cash Flow Risk Skill: Recognition 10) Hedging, or reducing risk, is the s

10、ame as adding value or return to the firm. Answer: FALSE Topic: MNE Cash Flow Risk Skill: Conceptual11) Assuming no transaction costs (i.e., hedging is free), hedging currency exposures should _ the variability of expected cash flows to a firm and at the same time, the expected value of the cash flo

11、ws should _. A) increase; not change B) decrease; not change C) not change; increase D) not change; not change Answer: B Topic: Hedging Skill: Conceptual12) Which of the following is NOT cited as a good reason for hedging currency exposures? A) Reduced risk of future cash flows is a good planning to

12、ol. B) Reduced risk of future cash flows reduces the probability that the firm may not meet required cash flows. C) Currency risk management increases the expected cash flows to the firm. D) Management is in a better position to assess firm currency risk than individual investors. Answer: C Topic: H

13、edging Skill: Recognition13) There is considerable question among investors and managers about whether hedging is a good and necessary tool. Answer: TRUE Topic: Hedging Skill: Recognition14) Which of the following is cited as a good reason for NOT hedging currency exposures? A) Shareholders are more

14、 capable of diversifying risk than management. B) Currency risk management through hedging does not increase expected cash flows. C) Hedging activities are often of greater benefit to management than to shareholders. D) All of the above are cited as reasons NOT to hedge. Answer: D Topic: Hedging Ski

15、ll: Recognition15) The key arguments in opposition to currency hedging such as market efficiency, agency theory, and diversification do not have financial theory at their core. Answer: FALSE Topic: Hedging Skill: Conceptual 16) _ exposure may result from a firm having a payable in a foreign currency

16、. A) Transaction B) Accounting C) Operating D) None of the above Answer: A Topic: Hedging Skill: Conceptual17) The stages in the life of a transaction exposure can be broken into three distinct time periods. The first time period is the time between quoting a price and reaching an actual sale agreem

17、ent or contract. The next time period is the time lag between taking an order and actually filling or delivering it. Finally, the time it takes to get paid after delivering the product. In order, these stages of transaction exposure may be identified as, A) backlog, quotation, and billing exposure.

18、B) billing, backlog, and quotation exposure. C) quotation, backlog, and billing exposure. D) quotation, billing, and backlog exposure. Answer: C Topic: Transaction Exposure Skill: Recognition18) A U.S. firm sells merchandise today to a British company for 100,000. The current exchange rate is $2.03/

19、 , the account is payable in three months, and the firm chooses to avoid any hedging techniques designed to reduce or eliminate the risk of changes in the exchange rate. The U.S. firm is at risk today of a loss if A) the exchange rate changes to $2.00/. B) the exchange rate changes to $2.05/. C) the

20、 exchange rate doesnt change. D) all of the above. Answer: D Topic: Transaction Exposure Skill: Analytical19) A U.S. firm sells merchandise today to a British company for 100,000. The current exchange rate is $2.03/ , the account is payable in three months, and the firm chooses to avoid any heding t

21、echniques designed to reduce or eliminate the risk of changes in the exchange rate. If the exchange rate changes to $2.05/ the U.S. firm will realize a _ of _. A) loss; $2000 B) gain; $2000 C) loss; 2000 D) gain; 2000 Answer: B Topic: Transaction Exposure Skill: Analytical 20) A U.S. firm sells merc

22、handise today to a British company for 100,000. The current exchange rate is $2.03/ , the account is payable in three months, and the firm chooses to avoid any heding techniques designed to reduce or eliminate the risk of changes in the exchange rate. If the exchange rate changes to $2.01/ the U.S.

23、firm will realize a _ of _. A) loss; $2,000 B) gain; $2,000 C) loss; 2000 D) gain; 2000 Answer: A Topic: Transaction Exposure Skill: Analytical21) _ is NOT a popular contractual hedge against foreign exchange transaction exposure. A) Forward market hedge B) Money market hedge C) Options market hedge

24、 D) All of the above are contractual hedges. Answer: D Topic: Contractual Hedges Skill: Recognition22) A _ hedge refers to an offsetting operating cash flow such as a payable arising from the conduct of business. A) financial B) natural C) contractual D) futures Answer: B Topic: Natural Hedge Skill:

25、 Recognition Instruction 9.1: Use the information for following problem(s).Plains States Manufacturing has just signed a contract to sell agricultural equipment to Boschin, a German firm, for euro 1,250,000. The sale was made in June with payment due six months later in December. Because this is a s

26、izable contract for the firm and because the contract is in euros rather than dollars, Plains States is considering several hedging alternatives to reduce the exchange rate risk arising from the sale. To help the firm make a hedging decision you have gathered the following information. The spot exch

27、ange rate is $1.40/euro The six month forward rate is $1.38/euro Plains States cost of capital is 11% The Euro zone 6-month borrowing rate is 9% (or 4.5% for 6 months) The Euro zone 6-month lending rate is 7% (or 3.5% for 6 months) The U.S. 6-month borrowing rate is 8% (or 4% for 6 months) The U.S.

28、6-month lending rate is 6% (or 3% for 6 months) December put options for euro 625,000; strike price $1.42, premium price is 1.5% Plains States forecast for 6-month spot rates is $1.43/euro The budget rate, or the lowest acceptable sales price for this project, is $1,075,000 or $1.35/euro 23) Refer t

29、o Instruction 9.1. If Plains States chooses not to hedge their euro receivable, the amount they receive in six months will be _. A) $1,750,000 B) $1,250,000 C) $892,857 D) undeterminable today Answer: D Topic: Forward Hedge Computation Skill: Analytical24) Refer to Instruction 9.1. If Plains States chooses to hedge its transaction exposure in the fo