FIN 4604 FINAL EXAM. ALL EXAM REVISION QUESTIONS AND CORRECT ANSWERS (ALREADY GRADED A+) (2024 UPDATE)
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Course
FINC - Finance
Institution
FINC - Finance
FIN 4604 FINAL EXAM. ALL EXAM REVISION QUESTIONS AND CORRECT
ANSWERS (ALREADY GRADED A+) (2024 UPDATE).
Method for assessing exposure
Measures the maximum possible (one-day) loss on the value of positions held by an mnc that is
exposed to exchange rate movements
Scenario: we sell products in...
FIN 4604 FINAL EXAM. ALL EXAM REVISION QUESTIONS AND CORRECT
ANSWERS (ALREADY GRADED A+) (2024 UPDATE)
Method for assessing exposure
Measures the maximum possible (one-day) loss on the value of positions held by an mnc that is
exposed to exchange rate movements
Scenario: we sell products in the usa to our local customers, and our competitor is in poland. The
euro depreciates. Our currency exposure (if any) is: - answer- economic
T/f: the guidelines for accounting translations are set by fasb 52. Aqn mnc's degree of exposure is
strongly affected by accounting procedures used to translate accounting information from overseas
operations when consolidated financial statements are presented. - answer- true
The practice that some mnc's frequently employ in which hedging is considered for each
transaction individually is called... - answer- selective hedging
Options for hedging exposure to a single payable includes all of the following except...
international money market hedge
forward hedge
currency option hedge
strategic hedging
futures hedge - answer- strategic hedging
A forward contract will specify all of the following except...
date of delivery
,denomination of currency given
denomination of currency received
forward rate
spot rate - answer- spot rate
T/f: if we assume that irp holds and there are no transaction costs, then a money market hedge will
perform better generally than a forward hedge. - answer- false
T/f: a money market hedge on payables involves taking a money market position to cover a future
payables position. ***if a firm has excess cash,*** then it can create a simple money market hedge
by (i) converting just enough cash ($us) at the current spot rate to the currency payable, and then
(ii) put that foreign currency to work in the international spot market at a known interest rate such
that the total principal and accrued interest equals the payable amount on the payable due date. -
answer- true
T/f: if the firm does not have excess cash in the prior example, then it cannot due a money market
hedge - answer- false
An effective graphical means by which the textbook consistently evaluates hedging analysis
outcomes side-by-side is: - answer- bar charts
A situation in which an mnc creates a hedge for a larger number of transaction units (i.e., sales or
purchases) than it really needs is called.... - answer- overhedging
Alternative methods of hedging that prof. Wiendl wants you to be aware of include all of the
following except:
, cross-hedging
currency diversification
leading
lagging
indifference - answer- indifference
Any us-based mnc could require that all internatioThe main goal of an mnc is to: - answer-
maximize shareholder wealth
Agency costs are normally larger for mnc's. Large mnc agency costs can be increased by / include:
- answer- a high number of distant subsidiaries
The notion that specialization by countries can increase production efficiency is supported by
which theory of international business? - answer- ??? Imperfect markets theory
??? Theory of competitive advantage
Correct answer should be comparative advantage
What is a method of international business in which an mnc can quickly gain control over foreign
operations and quickly acquire a share of the foreign market ? - answer- acquisitions of existing
operations
Comparative advantage - answer- theory suggesting that specialization by countries can
increase worldwide production
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