Quiz 7

Quiz 7

University

10 Qs

quiz-placeholder

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Quiz 7

Quiz 7

Assessment

Quiz

Business

University

Easy

Created by

Dien Dinh

Used 2+ times

FREE Resource

10 questions

Show all answers

1.

MULTIPLE CHOICE QUESTION

45 sec • 1 pt

If a firm is hedging payables with futures contracts, it may end up paying more for the payables than it would have had it remained unhedged if the foreign currency depreciates.

True

False

2.

MULTIPLE CHOICE QUESTION

45 sec • 1 pt

To hedge a receivables position with a currency option hedge, an MNC would buy a put option.

True

False

3.

MULTIPLE CHOICE QUESTION

45 sec • 1 pt

If interest rate parity exists and transaction costs are zero, the hedging of payables in euros with a forward hedge will:

have the same result as a call option hedge on payables.

have the same result as a put option hedge on payables.

have the same result as a money market hedge on payables.

require more dollars than a money market hedge.

have the same result as a call option hedge on payables AND require more dollars than a money market hedge.

4.

MULTIPLE CHOICE QUESTION

45 sec • 1 pt

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

positive.

negative.

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

zero.

5.

MULTIPLE CHOICE QUESTION

1 min • 1 pt

Samson Inc. needs €1,000,000 in 30 days. Samson can earn 5 percent annualized on a German security. The current spot rate for the euro is $1.00. Samson can borrow funds in the United States at an annualized interest rate of 6 percent. If Samson uses a money market hedge, how much should it borrow in the United States?​

​$952,381

​$995,851

​$943,396

​$995,025

6.

MULTIPLE CHOICE QUESTION

45 sec • 1 pt

If the Singapore dollar appreciates against the U.S. dollar over this year, the consolidated earnings of a U.S. company with a subsidiary in Singapore will be ____ as a result of the exchange rate movement.

negative

adversely affected

favorably affected

unaffected

7.

MULTIPLE CHOICE QUESTION

45 sec • 1 pt

____ is (are) not a limitation of hedging translation exposure.

Inaccurate stock price forecasts

Inadequate forward contracts for some currencies

Taxation on gains from forward contracts

Increased transaction exposure

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