Finance Test Notes

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Tassinari
Finance 411
Exam 2 Actual Test
True/False
1. You expect to receive a cash flow denominated in a foreign currency in six months. You can hedge this exposure by buying the foreign currency in the forward market False 2. An open account is most often used to protect sellers in international trades False 3. Real assets are only exposed to currency risk if they are located within the corporation True 4. Multinational netting identifies offsetting currency exposures within the corporation True 5. Operating expenses refers to changes in contractual cash flows due to unexpected changes in foreign currency rates False 6. A benefit of leading and lagging is that it doesn’t distort the returns earned by various affiliates False Multiple Choice:

7. The majority of international payments are accomplished by way of : a. Cash in advance
b. Shippers export declaration
c. Bill of lading
d. The draft
e. The packing list
8. Exposures to currency risk that are periodic, long term and recurring in nature are usually best hedged with f. Currency compacts
g. Currency futures
h. Currency options
i. Currency straddles
j. Currency swaps
9. VS plans to sell $10 million accounts receivables due in one year to UBS who charges a fee of 2% for purchasing the receivables and is willing to buy receivables at a discount ?% compounded quarterly. What is the all in cost of the receivables k. 6.18%

10. The domestic currency value of a monetary foreign currency cash flow changes ____ with a change in foreign currency l. Disproportionately
m. The currency of all denomination
n. Not at all
o. One for one
p. None of the above
11. An importer’s financial market hedging alternatives include each of a) through d) except q. Buy the foreign currency with long dated forward contracts r. Invest in long dated foreign bonds

s. Use...
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