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  • MBF 2014-2 Keys

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    KEYs of multinational business finace exam

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    KEYs of multinational business finace exam

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    5 vues6 pages

    MBF 2014-2 Keys

    Transféré par

    김슬기
    KEYs of multinational business finace exam

    Droits d'auteur :

    © All Rights Reserved
    Téléchargez comme PDF ou lisez en ligne sur Scribd
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    sur 6
    \ 2014 Fall. Multinational Business Finance 5} © L lV Mid term Exam (prof, Kunwoo Kim) (COVER:Ch1.~10) Ita, Ke He Name( ), Student ID Number( ),Point( —_/70pts). Multiple choice, choose only one correct answer, mark circle or v. (2pts each) 1. According to the Big Mac Index, the implied PPP exchange rate is Mexican peso 9/81 but the actual exchange rate is 10/$1. Thus, at current exchange rates the peso appears to be by = A) overvalued; approximately 10.0% B) overvalued; approximately 11.1% undervalued; approximately 10.0% ipproximately 11.1% 2. With covered interest arbitrage, which is true? A) the market must be in equilibrium. B) The parties are involved both the money and foreign exchange market a "riskless” arbitrage opportunity exists. D) the arbitrageur trades in both the spot and currency future markets. 3. Alan juote in the United States would be foreign units per dollar, while a/an ——_4 gt Pp quote would be in dollars per foreign currency unit, A) direct; direct B) indirect; indirect indirect CO) dire indirect 4. Which of the following is not a part of the Current Account of BOP? W Net portfolio investment. B) wages to non-resident workers C) Dividend D) Royalty 5. Which of the following is NOT cited as a good reason for hedging currency exposures? W Currency risk management increases the expected cash flows to the firm B) Reduced risk of future cash flows is a good planning tool. C) Management is in a better position to assess firm currency risk than individual investors. D) Reduced risk of future cash flows reduces the probability that the firm may not meet required cash flows 6. A call option on yen is written with a strike price of ¥110.00/$. Which spot price ‘maximizes your profit if you choose to exercise the option before maturity? WW ¥100/8 B) ¥105/S, C)¥L0/S D) ¥L15/$ 7. A speculator that has a futures contract has taken a positi A) purchased; sold B) sold; long C) purchased; short BF sold; short 8. The grant provided to the African citizen by U.S would be recorded in the current account subcategory of A) goods trade B) income trade C) services trade ‘PF current transfers. 9, MR. Yang thinks that the euro will cost $1.3/€ in six months. A 6-month currency futures contract is available today at a rate of $1.2/€. If Yang was to speculate in the currency futures market, and his expectations are correct, which of the following strategies would earn him a profit? A) Sell euro today B) Sell euro in six months. C) Sell a euro currency futures contract. Buy a euro currency futures contract. 10. According to the international Fisher Effect, if an investor purchases a five-year U.S. bond that has an annual interest rate of 4% rather than a comparable British bond that has an annual interest rate of 2%, then the investor must be expecting the to at a rate of at least 2% per year over the next 5 years. A) British pound; devalue USS. dollar; depreciate ) British pound; depreciate D) U.S. dollar; appreciate 1, Which of the following would NOT be considered a typical BOP transaction? sf 4 Korea emigrant woman buys Swiss cheese imported from Swiss B) The U.S. subsidiary of European financial giant, Credit Suisse, pays dividends to its parent in Zurich. C) Toyota U.S.A. is a U.S. distributor of automobiles manufactured in Japan by its parent company. D) A U.S. tourist purchases fis at a museum in London. 12. Which of the following is NOT likely to occur in the quantity adjustment phase of the J- Cyrve adjustment path ? ‘The balance of financial account gets better B) Exports become relatively less expensive. C) The balance of trade gets better. D) Imports become relatively more expensive. 13. Peter Tao works for the currency trading unit of Loyd Bank in London. He speculates that in the coming months the dollar will drop sharply vs. the pound. What should Peter do to act on his speculation? Buy a call on the pound. B) Sell a call on the pound. C) Buy a put on the pound, D) Seil a put on the pound. 14, The U.S. dollar suddenly changes in value against the euro moving from an exchange rate of $2.30/euro to $2.40/€. Thus, the dollar has (appreciated, depreciated) by %. 239-240 = 041667 = — 4, 1667% 2 or toe 15. A speculator that has a futures contract has taken a position, A) sold; long purchasedslong, ) sold; sold D) purchased; sold 16. A U.S. firm sells merchandise today to a British company for £100,000. The current exchange rate is $1.55/E , the account is payable in three months, and the firm chooses to any hedging techniques designed to reduce or eliminate the risk of changes in the exchange rate. Which is not proper choice’? A) Make forward contract B) Borrow pound in advance C) Buy currency put option Buy currency call option 17. The Brazilian reais’s (RS) value was RS1.4/S on Monday January 11, 1999. Its value fell to R$1.2/$ on Friday January 15, 1999. What was the percentage change in its values? (2pts) 14-2 a8 0.1667 - (6.69 y, 18. The Argentine peso was fixed through a currency board at Ps1.00/$ throughout the 1990s. In January 2002 the Argentine peso was floated. On January 29, 2003 it was trading at Ps3.00/S. During that one year period Argentina's inflation rate was 15% on an annualized basis, Inflation in the United States during that same period was 3% annualized. ‘a, What should have been the exchange rate in January 2003 if PPP held? (3pts) 6 ) AIG 0 xt! 4oox eT; 1M65 5 b. By what percentage was the Argentine peso undervalued? (3pts) LUGE = mee cpetane =0,F09k = = 12,998 ¥ 3) ae ol 3 19, Akira Numata, a foreign exchange trader at Credit Suisse (Tokyo), is exploring covered interest arbitrage possibilities. He wants to invest $1,000 or its yen equivalent, in a covered interest arbitrage between U.S. dollars and Japanese yen. He faced the following exchange rate and interest rate quotes: _ Spot exchange rate ¥110/8 90-day forward exchange rate ¥107/8 90-day dollar interest rate 4% per year te 2% per year | The bank does not calculate transaction costs on any individual transaction because these costs ure part of the overall operating budget of the arbitrage department. Explain and diagram the specific steps Akira must take to make a covered interest arbitrage profit. What is the rate of return on an annual basis on this investment? (Spts) ' $ Lovo Profit i 4,010) p $36) f z rtepeset_ yey * The rate of return ou an Yion sg annual basis , West Fhe & oueg ¥le/s 23 36° —x* ¥ Ho,e00 _______»¥ AG, fo. 1000 Go 20. Calculate the forward (premium or discount) on the yen (the dollar is the home currency) if the spot rate is ¥ 100/$ and the foo 9b ° ce eee 2.337 Ts 109 — + eon) 21. Apex is a U.S.-based multinational manufacturing firm, with wholly owned subsidiaries in Brazil, Germany, and China, in addition to domestic operations in the United States. Apex is traded on the NADSAQ. Smith ‘currently has 650 shares outstanding, The basic operating, characteristics of the various business units are as follows: _ Local currency USA(dollars, 8) Germany(eu Earnings before tax(EBT) $500 €4,500 Corporate income tax rate 35% 40% Average exchange rate for period S13/€ The ‘dollar has experienced significant swings in value agains most of the world’s currencies in recent years. What would be the impact on Apex’s EPS if all Euro currencies were to deprecaté 5% agunst the US, dollar? (6s) Usa Geemany ERLT 6 yoo €4500 $3 €29°0 | the v WE 22. Wang company, Beijing, China has exported sports socks to Bellsports, NY, USA. The export ‘amount is 1 million US dollars (US$ 1,000,000) receivable in cash in 3 months. ‘Wang company believes the US dollar will either remain stable or decline a little over the next 3 months. At the present spot rate of Yuan6.5/S. Spot rate (Yuan/$) 3-month forward rate (Yuan/$) 3-month China interest rate ‘ 3-month dollar interest rate in US 6%] 5/ 3-month call and put option (Yuan/$) not available ‘Analyze the costs and risks of each alternative, and then make a recommendation as to which alternative Wang company should choose.(8pts) 1 Do nethiny bones ah yo sierrea s bor ENS) Maney Market Hed Be a SP center to Cuan at Spot rate ei = Sapa » (Caution 7 use (alt US. Lartaren, hs ee $98) 22) x 65 Yan (Luo 740.29. i) agp Flaca lowing exeREnGe rates are avalable to you. You can buy or sell at the stated rates) Fuji Bank ¥120/$, y ¥20 Mu i Bank of China Yuan6/s. ‘sy meptoat Singapote Bank ¥18/Yuan — ‘Assume you have an initial U.S$1,000,000. Can you make a profit via triangular arbitrage? If so, show the steps and calculate the amount of profit in US dollar(Spts) Start wth ¢lenws | Change Glow jd —> te Yn ok Page Bank g hemor & Tiss = Yon [0 89, 00° > Yen > Yuan o Sunppes_ P Yaaro = 19 = aan 6666609 Ls fan 4 at Bane ~f Chime Yuan 6 666,067 76 = 1M ew pote $1 ML —$) gers

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