Changes in the dollar–foreign currency exchange rate

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Reference no: EM132068540

1. Consider a U.S. MNC who owns a foreign asset. If the foreign currency value of the asset is inversely related to changes in the dollar–foreign currency exchange rate,

A) the dollar value variability is independent of exchange rate movements.

B) the company has a built-in hedge.

C) the company has a built-in hedge and the dollar value variability that is independent of exchange rate movements.

D) none of the options

2. Consider a U.S. importer desiring to purchase merchandise from a Dutch exporter invoiced in euros, at a cost of €160,000. The U.S. importer will contact his U.S. bank (where, of course, he has an account denominated in U.S. dollars) and inquire about the exchange rate, which the bank quotes as €0.6250/$1.00. The importer accepts this price, so his bank will proceed to ________ the importer's account in the amount of ________.

A) credit; €512,100

B) credit; $500,000

C) debit; €100,000

D) debit; $256,000

3. The core of the international money market is

A) the futures forwards and options markets on foreign exchange.

B) the market for foreign exchange.

C) the Eurocurrency market.

D) none of the options

Reference no: EM132068540

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