ANS: C PTS: 1
35. When the foreign exchange market opens in the U.S. each morning, the opening
exchange rate quotations will be based on the: aclosing prices in the U.S. during the previous day. . bclosing prices in Canada during the previous day. . cprevailing prices in locations where the foreign exchange markets have . been open. dofficially set by central banks before the U.S. market opens. .
ANS: C PTS: 1
36. The U.S. dollar is not ever used as a medium of exchange in: aindustrialized countries outside the U.S. . bin any Latin American countries. . cin Eastern European countries where foreign exchange restrictions exist. . dnone of the above .
ANS: D PTS: 1
37. Which of the following is not true regarding the Bretton Woods Agreement? aIt called for fixed exchange rates between currencies. . bGovernments intervened to prevent exchange rates from moving more than . 1 percent above or below their initially established levels. cThe agreement lasted from 1944 until 1971. . dEach country used gold to back its currency. . eAll of the above are true regarding the Bretton Woods Agreement. .
ANS: D PTS: 1
38. A Japanese yen is worth $.0080, and a Fijian dollar (F$) is worth $.5900. What is the
value of the yen in Fijian dollars (i.e., how many Fijian dollars do you need to buy a yen)? a73.75. . b125. . c1.69. . d0.014 . enone of the above .
ANS: D ($.008/$.59) = F$.014/￥ SOLUTION:
PTS: 1
51. A share of the ADR of a Dutch firm represents one share of that firm's stock that is traded
on a Dutch stock exchange. The share price of the firm was 15 euros when the Dutch market closed. As the U.S. market opens, the euro is worth $1.10. Thus, the price of the ADR should be ____. a$13.64 . b$15.00 . c$16.50 . d16.50 euros . enone of the above .
ANS: C SOLUTIO15 ? $1.10 = $16.50 N:
PTS: 1
52. The ADR of a British firm is convertible into 3 shares of stock. The share price of the
firm was 30 pounds when the British market closed. When the U.S. market opens, the pound is worth $1.63. The price of this ADR should be $____. a48.90 . b146.70 . c55.21 . dnone of the above .
ANS: B SOLUTIO3 ? 30 ? $1.63 = $146.70 N:
PTS: 1
69. In general, stock markets allow for more price efficiency and attract more investors when
they have all of the following except: amore voting rights for shareholders. . bmore legal protection. . cmore enforcement of the laws. . dless stringent accounting requirements. .
ANS: D PTS: 1
71. If companies can rely on stock markets to obtain funds, they will have to rely more
heavily on the ____ market to raise long-term funds. aderivative . blong-term credit . cmoney . dforeign exchange .
ANS: B PTS: 1
73. Assume that the bank's bid quote of Mexican peso is $.126 and ask price is $.129. If you
have Mexican pesos, what is the amount of pesos that you need to purchase $100,000? a12,600 . b775,194 . c793,651 . d12,900 .
ANS: C PTS: 1
75. An obligation to purchase a specific amount of currency at a future point in time is called
a: acall option . bspot contract . cput option . dforward contract . eboth B and D .
ANS: D PTS: 1
76. Which of the following is not a method that can be used to invest internationally? aInvestment in MNC stocks . bAmerican depository receipts (ADRs) . cWorld Equity benchmark Shares (WEBS) 77.
78. 79. 80. . dInternational mutual funds . eAll of the above are methods that can be used to invest internationally. .
ANS: E PTS: 1
The interest rate in developing countries is usually very low. a. True b. False
ANS: F PTS: 1
Assume that $1 is equal to .85 Euros and 98 yen. The value of yen in euros is a.01 . b118 . c1.18 . d.0087 .
ANS: D PTS: 1
When obtaining a loan, the risk premium paid above LIBOR depends on the: arisk-free interest rate of the borrower. . bcredit risk of the borrower. . cborrower's stock price. . dlender's stock price. .
ANS: B PTS: 1
The largest global exchange is: aNASDAQ .