C214 FINANCIAL MANAGEMENT (End of
Section) QUIZBANK COMPLETE LATEST
UPDATED WESTERN GOVERNORS
UNIVERSITY.
(T/f) True or False: Country risk and political risk are the same thing?
16.8.2
Correct Answer -False
Think of the example of Venezuela. Before Hugo Chavez, the country had
a vibrant economy due to its oil. After Hugo Chavez, the country still had
the same natural resources, but his political stance has made the country
economically weak.
Found in the following section(s) of the text:
16.8: Country / Political Risk
Why would a country have incentives to devalue its currency? A weaker
currency ______________.
makes exports relatively cheaper for foreign consumers.
makes imports relatively more expensive for domestic consumers.
in general a weaker currency can help a domestic economy.
all of the above are true.
none of the above are true. 16.11.1
Correct Answer -all of the above are true.
,Found in the following section(s) of the text:
16.3: Exchange Rate Risk
If a currency (Swiss Franc) appreciates relative to a second currency
(Chinese Yuan), then the exchange rate measured as SF/Yuan goes:
Stays the same
Down
Up 16.11.2
Correct Answer -Down
As in the example in the text with the Mexican Peso to the US dollar, when
the Peso appreciates the FX rate measured as MXN/USD goes down from
20 to 17. Conceptually it now takes fewer pesos to buy a US dollar
because the Peso is stronger.
Found in the following section(s) of the text:
16.3: Exchange Rate Risk
If Ford manufactures a vehicle in the US paying dollars and sells it in
Mexico collecting pesos, if the price in Mexico for the vehicle stays
constant, but the value of the Peso depreciates against the dollar, then
Ford will make ____________ profit measured in US dollars.
the same
greater
,less 16.11.3
Correct Answer -less
Let's say Ford sells a truck in Mexico for 990,000 pesos (roughly $49,500
at MXN/USD FX rate of 20.) If the peso depreciates to say 21 FX rate, the
truck still sells for 990,000 pesos, the equivalent in dollars to ford is
$47,142.86. To arrive at the $47,142.86 figure, divide 990,000 by 19
instead of the original 20. If we were using an indirect quote for the dollar
of USD/MXN the original FX rate is 0.05. The peso then depreciates to
0.47619 (1/21). When we use an indirect quote for the USD (it is in the
numerator) then it is more intuitive to see the peso depreciate from 0.05 to
0.47619.
Found in the following section(s) of the text:
16.3: Exchange Rate Risk
What is a common abbreviation for foreign exchange risk?
FER
CER
FEXCHR
FX risk
CX risk 16.11.4
Correct Answer -FX risk
Found in the following section(s) of the text:
16.3: Exchange Rate Risk
, Match the currency with its country.
Yen, JPY or ¥
Peso or MXN
Krone, kr, or NOK
Euro or €
Pound, GBP, or £
Mexico, European Union ,Japan ,England ,Norway
16.11.5
Correct Answer -Pound, GBP, or £: England
Yen, JPY or ¥: Japan
Euro or €: European Union
Peso or MXN: Mexico
Krone, kr, or NOK: Norway
Found in the following section(s) of the text:
16.3: Exchange Rate Risk
What does it mean if the US dollar/Canadian dollar exchange rate is 1.1?
It takes 1.1 Canadian dollars to buy 1 US dollar
It takes 1.1 US dollars to buy 1 Canadian dollar
It takes 11 Canadian dollars to buy 1 US dollar
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