Top 250+ Solved International Financial Management MCQ Questions Answer

From 136 to 150 of 203

Q. Assume zero transaction costs. If the 90-day forward rate of the euro is an accurate estimateof the spot rate 90 days from now, then the real cost of hedging payables will be:

a. positive.

b. negative.

c. positive if the forward rate exhibits a premium, and negative if the forward rate exhibits a discount.

d. zero.

  • d. zero.

Q. Foghat Co. has 1,000,000 euros as receivables due in 30 days, and is certain that the euro will epreciate substantially over time. Assuming that the firm is correct, the ideal strategy is to:

a. sell euros forward.

b. write euro currency put options.

c. purchase euro currency call options.

d. purchase euros forwar

  • a. sell euros forward.

Q. A _______ involves an exchange of currencies between two parties, with a promise to re- exchange currencies at a specified exchange rate and future date.

a. long-term forward contract

b. parallel loan

c. currency swap

d. money market hedge

  • c. currency swap

Q. Which of the following is the least effective way of hedging transaction exposure in the long run?

a. long-term forward contract.

b. currency swap.

c. Parallel Loan

d. Money Market Hedge

  • d. Money Market Hedge

Q. With regard to hedging translation exposure, translation losses _______; and gains on forward contracts used to hedge translation exposure _______.

a. are not tax deductible; are taxed

b. are not tax deductible; are not taxed

c. are tax deductible; are taxed

d. are tax deductible; are not taxed

  • a. are not tax deductible; are taxed

Q. An effective way for an MNC to assess its economic exposure is to look at the firm's:

a. income statement.

b. retained earnings.

c. liquidity.

d. level of stockholder's equity.

  • a. income statement.

Q. As opposed to transaction exposure, managing economic exposure involves developing a________ solution.

a. short-term

b. immediate

c. long-term

d. none of the above

  • c. long-term

Q. When the dollar strengthens, the reported consolidated earnings of U.S. based MNCs are _______ affected by translation exposure. When the dollar weakens, the reported consolidated earnings are __________ affected.

a. favorably; favorably affected but by a smaller degree

b. favorably; favorably affected by a higher degree

c. unfavorably; favorably affected

d. favorably; unfavorably affected

  • c. unfavorably; favorably affected
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