Reference no: EM133058118
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. Arbitrage
b. Cross-hedging
c. Hedging
d. Risk shifting
e. Arbitrage
2. Which of the following is a basic hedging technique for translation exposure during a depreciation of the foreign (local) currency?
a. buy local currency forward
b. buy a local currency call options
c. reduce levels of local currency cash and marketable securities
d. loosing credit (increase local currency receivables)
e. reduce the level of operation in the foreign country
3. A company producing a differentiated product and competing with internationally diversified competitors will face a relatively _________ price elasticity of demand for its products and possess a relatively ____________ degree of pricing flexibility.
a. high, low
b. low, low
c. low, high
d. high, high
e. moderate, low
4. Why are privately placed bonds more difficult to sell than publicly issued bonds?
a. they are usually commercial bank loans
b. the presence of customized covenants
c. funds come from private investors
d. underwriting is required
e. investors are highly risk averse
5. The dominant currency of the Eurocurrency markets is the _______________
a. U.S. dollar
b. Euro
c. Yen
d. Pound
e. Swiss Franc
6. The reference interbank market interest rate for THB that will replace BIBOR and THBFIX is known as _______________
a. Minimum Loan Rate
b. New York Interbank Offer Rate
c. Prime Rate
d. Secured Overnight Financing Rate
e. Thailand Overnight Repurchase Rate
7. If the current 180-day inter-bank Eurodollar rate is 15% (all rates are stated on an annualized basis) and next period's LIBOR is 13%, then a Eurocurrency loan priced at LIBOR plus 1% will cost
a. 16% this period and 16% next period
b. 15% this period and 14% next period
c. 16% this period and 14% next period
d. 15% this period and 15% next period
e. 14% this period and 14% next period
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