Multinational Financial Management by Alan Shapiro: Measuring and Managing Translation and Transaction Exposure
CHAPTER 10
Measuring and Managing Translation and Transaction Exposure
EASY (definitional)
10.1 ___________ a certain currency exposure means establishing an offsetting currency position so that the gain or loss from the exposure on the original currency is exactly offset buy the gain or loss from the currency hedge.
a) Arbitraging
b) Cross-hedging
c) Hedging
d) Risk shifting
Ans: c
Section: Alternative measures of foreign exchange exposure
Level: Easy
10.2 Hedging cannot provide protection against ________ exchange rate changes.
a) expected
b) nominal
c) real
d) pegged
Ans: a
Section: Designing a hedging strategy
Level: Easy
10.3 The basic hedging strategy involves
a) reducing hard currency assets and soft currency liabilities
b) increasing hard currency liabilities and soft currency assets
c) reducing soft currency assets and hard currency liabilities
d) converting soft currencies to hard currencies and lending hard currencies
Ans: c
Section: Designing a hedging strategy
Level: Easy
10.4 Translation exposure reflects the exposure of a company's
a) foreign operations to currency movements
b) foreign sales to currency movements
c) financial statements to currency movements
d) cash flows to currency movements
Ans: c
Section: Alternative currency translation methods
Level: Easy
10.5 The current standard for measuring translation exposure is
a) the current/noncurrent method
b) the monetary/nonmonetary method
c) FASB 8
d) FASB 52
Ans: d
Section: Statement of financial accounting standards No. 52
Level: Easy
10.6 Under FASB 52, most financial statements must be translated using the
a) monetary/nonmonetary method
b) current/noncurrent method
c) current rate method
d) temporal method
Ans: c
Section: Statement of financial accounting standards No. 52
Level: Easy
10.7 Firms that attempt to reduce risk and beat the market simultaneously may end up with
a) more risk, not less
b) less risk
c) a profit as
Measuring and Managing Translation and Transaction Exposure
EASY (definitional)
10.1 ___________ a certain currency exposure means establishing an offsetting currency position so that the gain or loss from the exposure on the original currency is exactly offset buy the gain or loss from the currency hedge.
a) Arbitraging
b) Cross-hedging
c) Hedging
d) Risk shifting
Ans: c
Section: Alternative measures of foreign exchange exposure
Level: Easy
10.2 Hedging cannot provide protection against ________ exchange rate changes.
a) expected
b) nominal
c) real
d) pegged
Ans: a
Section: Designing a hedging strategy
Level: Easy
10.3 The basic hedging strategy involves
a) reducing hard currency assets and soft currency liabilities
b) increasing hard currency liabilities and soft currency assets
c) reducing soft currency assets and hard currency liabilities
d) converting soft currencies to hard currencies and lending hard currencies
Ans: c
Section: Designing a hedging strategy
Level: Easy
10.4 Translation exposure reflects the exposure of a company's
a) foreign operations to currency movements
b) foreign sales to currency movements
c) financial statements to currency movements
d) cash flows to currency movements
Ans: c
Section: Alternative currency translation methods
Level: Easy
10.5 The current standard for measuring translation exposure is
a) the current/noncurrent method
b) the monetary/nonmonetary method
c) FASB 8
d) FASB 52
Ans: d
Section: Statement of financial accounting standards No. 52
Level: Easy
10.6 Under FASB 52, most financial statements must be translated using the
a) monetary/nonmonetary method
b) current/noncurrent method
c) current rate method
d) temporal method
Ans: c
Section: Statement of financial accounting standards No. 52
Level: Easy
10.7 Firms that attempt to reduce risk and beat the market simultaneously may end up with
a) more risk, not less
b) less risk
c) a profit as