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FIN 565 Week 8 Final Exam $15.49
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FIN 565 Week 8 Final Exam

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1. Question: (TCO A) A high home inflation rate relative to other countries would the homecountry'scurrentaccountbalance,otherthingsbeingequal.Ahighgrowthinthehome income level relative to other countries would the home country's current account balance, other things being equal. (Points :5) 2....

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  • 7 maart 2022
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Question 1 5 pts
(TCO A) A high home inflation rate relative to other countries would _____ the home country's
current account balance, other things being equal. A high growth in the home income level
relative to other countries would _____ the home country's current account balance, other
things being equal.
increase; increase
increase; decrease
decrease; decrease
decrease; increase

Question 2 5 pts
(TCO A) The U.S. dollar is not ever used as a medium of exchange in
any Latin American countries.
industrialized countries outside the United States.
Eastern European countries where foreign exchange restrictions exist.
None of the above

Question 3 5 pts
(TCO B) Assume that Swiss investors are benefiting from CIA due to a high U.S. interest rate.
Which force results from the act of this CIA?
Upward pressure on the Swiss franc's spot rate
Upward pressure on the U.S. interest rate
Downward pressure on the Swiss interest rate
Upward pressure on the Swiss franc's forward rate

Question 4 5 pts
(TCO C) A strong dollar is normally expected to cause
high unemployment and high inflation in the United States.
high unemployment and low inflation in the United States.
low unemployment and low inflation in the United States.
low unemployment and high inflation in the United States.

Question 5 5 pts
(TCO D) A firm sells a currency futures contract and then decides before the settlement date
that it no longer wants to maintain such a position. It can close out its position by
buying an identical futures contract.
selling an identical futures contract.
buying a futures contract with a different settlement date.
selling a futures contract for a different amount of currency.

Question 6 5 pts


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, (TCO H) The cost of capital for MNCs based in the United States has been generally _____ than
MNCs based in Germany and _____ than MNCs based in Japan.
lower; higher
lower; lower
higher; higher
higher; lower

Question 7 5 pts
(TCO E) Other things being equal, firms from a particular home country will engage in more
international acquisitions if they expect foreign currencies to _____ against their home currency
and if their cost of capital is relatively _____.
appreciate; low
appreciate; high
depreciate; high
depreciate; low

Question 8 5 pts
(TCO F) Which is not a way in which agency problems can be reduced through corporate
control?
Acquisition of a foreign subsidiary
Monitoring by large shareholders
Threat of hostile takeover
Executive compensation

Question 9 5 pts
(TCO I) If IRP exists and transaction costs are zero, foreign financing with a simultaneous forward
purchase of the currency borrowed will result in an effective financing rate that is
less than the domestic interest rate.
greater than the domestic interest rate.
equal to the domestic interest rate.
greater than the domestic interest rate if the forward rate exhibits a
premium and less than the domestic interest rate if the forward rate
exhibits a discount.

Question 10 5 pts
(TCO G) Which is an example of economic exposure but not an example of transaction
exposure?
An increase in the dollar's value hurts a U.S. firm's domestic sales,
because foreign competitors are able to increase their sales to U.S.
customers.
An increase in the pound's value increases the U.S. firm's cost of British



This study source was downloaded by 100000842308420 from CourseHero.com on 03-07-2022 13:00:52 GMT -06:00


https://www.coursehero.com/file/39731206/FIN-565-Final-Examdocx/

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