STRAYER ITB400 QUIZ 5

Question 1

0 out of 3 points

Incorrect

In what year were U.S. MNCs mandated to implement FASB 52?

Question 2

3 out of 3 points

Correct

According to the monetary/nonmonetary method, monetary balance sheet accounts include

Question 3

0 out of 3 points

Incorrect

FASB 52 requires

Question 4

0 out of 3 points

Incorrect

Translation exposure, also frequently called accounting exposure, refers to the effect that an unanticipated change in exchange rates will have on the

Question 5

3 out of 3 points

Correct

The management of translation exposure is best described as

Question 6

3 out of 3 points

Correct

FASB 8 is essentially the

Question 7

3 out of 3 points

Correct

The underlying principle of the current rate method is

Question 8

3 out of 3 points

Correct

The authoritative body in the United States that specifies accounting policy for U.S. business firms and certified public accounting firms.

Question 9

3 out of 3 points

Correct

The recognized methods for consolidating the financial reports of an MNC are

Question 10

0 out of 3 points

Incorrect

Using the temporal method, monetary accounts such as cash

Question 11

3 out of 3 points

Correct

The extent to which the value of the firm would be affected by unexpected changes in the exchange rate is

Question 12

0 out of 3 points

Incorrect

The simplest of all translation methods to apply is

Question 13

0 out of 3 points

Incorrect

The underlying principle of the monetary/nonmonetary method is

Question 14

3 out of 3 points

Correct

The difference between accounting exposure and translation exposure

Question 15

3 out of 3 points

Correct

The underlying principle of the current/noncurrent method is

Answer

Question 16

0 out of 3 points

Incorrect

Banks that both perform traditional commercial banking functions and engage in investment banking activities are often called

Question 17

3 out of 3 points

Correct

Eurodollars refers to dollar deposits when the depository bank is located in

Question 18

0 out of 3 points

Incorrect

Currently, the biggest bank in the world is

Question 19

0 out of 3 points

Incorrect

A bank may establish a multinational operation for the reason of prestige. The underlying rationale being that

Question 20

0 out of 3 points

Incorrect

A bank bought a “three against six” $5,000,000 FRA for a three-month period beginning three months from today and ending six months from today. The reason that the bank bought the FRA was to hedge: the bank accepted a 3-month deposit and made a six-month loan. The agreement rate with the seller is 5.0%. Assume that three months from today the settlement rate is 5.25%. Who pays whom? How much? When? The actual number of days in the FRA is 90.

Question 21

0 out of 3 points

Incorrect

A bank may establish a multinational operation for the reason of wholesale defensive strategy. The underlying rationale being that

Question 22

3 out of 3 points

Correct

A bank may establish a multinational operation for the reason of regulatory advantage. The underlying rationale being that

Question 23

0 out of 3 points

Incorrect

The current exchange rate is €1.00 = $1.50. Compute the correct balances in Bank A’s correspondent account(s) with Bank B if a currency trader employed at Bank A buys €100,000 from a currency trader at Bank B for $150,000 using its correspondent relationship with Bank B.

Question 24

3 out of 3 points

Correct

A bank may establish a multinational operation for the reason of growth. The rationale being that

Question 25

0 out of 3 points

Incorrect

A “three against nine” forward rate agreement

Question 26

0 out of 3 points

Incorrect

The current exchange rate is £1.00 = $2.00. Compute the correct balances in Bank A’s correspondent account(s) with Bank B if a currency trader employed at Bank A buys £45,000 from a currency trader at Bank B for $90,000 using its correspondent relationship with Bank B.

Bank A’s pound-denominated account at B will rise by £45,000.

Question 27

3 out of 3 points

Correct

A bank may establish a multinational operation for the reason of low marginal costs. The underlying rationale being that

Question 28

0 out of 3 points

Incorrect

On September 10, 1990 the published prices (cents on the dollar) on Latin American bank debt was quoted as follows:

Assume that the central banks of Mexico, Venezuela, and Chile redeemed their debts at 50 percent, 85 percent, and 76 percent, respectively, of face value in a debt-for-equity swap. If the three countries had equal political risk, based purely on financial considerations, the cost of a $40,000,000 assembly plant investment in local currency would be ranked (lowest to highest) in dollar cost as follows:

Question 29

0 out of 3 points

Incorrect

You entered in to a 3×6 forward rate agreement that obliged you to borrow $10,000,000 at 3%. Suppose at the maturity of the FRA, the correct interest rate is 3½%. Clearly you are better off since you have the ability to borrow $10,000,000 for 3 months at 3% instead of 3½%. What is the payoff at the maturity of the FRA?

Question 30

0 out of 3 points

Incorrect

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 ____________.