Reference no: EM133070731

Course: International Finance

Answer question 1 to 7

1. A European firm with operations in the United States offsets its U.S. operating costs with its sales revenue in the same market. This is called a ________ hedge.

A) financial

B) natural

C) contractual

D) futures

2.Which of the following is NOT an example of diversifying operations?

A) diversifying sales

B) diversifying location of operations

C) raising capital in more than one country

D) sourcing raw materials in more than one country

3.In January the euro traded at €1.1058/$. The quote that is now provided is $0.9043/€. Based on those two quotes the euro ________ against the U.S. dollar.

A) is unchanged

B) strengthened

C) weakened

D) all of the above

4.Given the following information, determine the risk-free rate.

Cost of equity = 10.1%

Beta = 1.20

Market risk premium = 6.6%

A) 3.0%

B) 3.5%

C) 4.0%

D) 4.5%

5.With the correctly designed and implemented strategy a firm trapped within ________ or ________ domestic capital markets, can participate in international capital markets to achieve lower global cost and greater availability of capital.

A) liquid; segmented

B) large; illiquid

C) liquid; large

D) illiquid; segmented

6.Which of the following is NOT a form of Foreign Direct Investment?

A) wholly-owned affiliate

B) joint venture

C) exporting

D) greenfield investment

7.(I) Hedging transaction exposure with option contracts allows the firm to benefit if exchange rates are favorable but protects the firm if exchange rates turn unfavorable.

(II) Like a forward market hedge, a money market hedge also involves a contract and a source of funds to fulfill that contract.

A) Both (I) and (II) are true

B) Both (I) and (II) are false

C) (I) is true and (II) is false

D) (II) is true and (I) is false