Question 1

If one U.S. dollar buys 1.64 Canadian dollars, how many U.S. dollars can you purchase for one Canadian dollar?

Accepted Answer

A)   0.37
B)   0.61
C)   1.00
D)   1.64
E)   3.28F) C) and E)
G) None of the above

Question 2

LIBOR is an acronym for London Interbank Offer Rate, which is an average of interest rates offered by London banks to smaller U.S. corporations.

Accepted Answer

A) True 
 B)False

Question 3

Suppose one year ago, Hein Company had inventory in Britain valued at 240,000 pounds. The exchange rate for dollars to pounds was 1£ = 2 U.S. dollars. This year the exchange rate is 1£ = 1.82 U.S. dollars. The inventory in Britain is still valued at 240,000 pounds. What is the gain or loss in inventory value in U.S. dollars as a result of the change in exchange rates?

Accepted Answer

A)   -$240,000
B)   -$43,200
C)   $0
D)   $43,200
E)   $47,473F) A) and B)
G) C) and D)

Question 4

Chen Transport, a U.S. based company, is considering expanding its operations into a foreign country. The required investment at Time = 0 is $10 million. The firm forecasts total cash inflows of $4 million per year for 2 years, $6 million for the next 2 years, and then a possible terminal value of $8 million. In addition, due to political risk factors, Chen believes that there is a 50% chance that the gross terminal value will be only $2 million and a 50% chance that it will be $8 million. However, the government of the host country will block 20% of all cash flows. Thus, cash flows that can be repatriated are 80% of those projected. Chen's cost of capital is 15%, but it adds one percentage point to all foreign projects to account for exchange rate risk. Under these conditions, what is the project's NPV?

Accepted Answer

A)   $1.01 million
B)   $2.77 million
C)   $3.09 million
D)   $5.96 million
E)   $7.39 millionF) A) and E)
G) A) and D)

Question 5

Multinational financial management requires that financial analysts consider the effects of changing currency values.

Accepted Answer

A) True 
 B)False

Question 6

Exchange rate risk is the risk that the cash flows from a foreign project, when converted to the parent company's currency, will be worth less than was originally projected because of exchange rate changes.

Accepted Answer

A) True 
 B)False

Question 7

Exchange rate quotations consist solely of direct quotations.

Accepted Answer

A) True 
 B)False

Exam 17: Multinational Financial Management

LIBOR is an acronym for London Interbank Offer Rate, which is an average of interest rates offered by London banks to smaller U.S. corporations.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Exchange rate quotations consist solely of direct quotations.

Correct Answer
verified

Exchange rate risk is the risk that the cash flows from a foreign project, when converted to the parent company's currency, will be worth less than was originally projected because of exchange rate changes.

Correct Answer
verified

If one U.S. dollar buys 1.64 Canadian dollars, how many U.S. dollars can you purchase for one Canadian dollar?

Correct Answer
verified

Multinational financial management requires that financial analysts consider the effects of changing currency values.

Correct Answer
verified

Exam 17: Multinational Financial Management

LIBOR is an acronym for London Interbank Offer Rate, which is an average of interest rates offered by London banks to smaller U.S. corporations.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Exchange rate quotations consist solely of direct quotations.

Correct AnswerverifiedShow Answer

Exchange rate risk is the risk that the cash flows from a foreign project, when converted to the parent company's currency, will be worth less than was originally projected because of exchange rate changes.

Correct AnswerverifiedShow Answer

If one U.S. dollar buys 1.64 Canadian dollars, how many U.S. dollars can you purchase for one Canadian dollar?

Correct AnswerverifiedShow Answer

Multinational financial management requires that financial analysts consider the effects of changing currency values.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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