InternationalFinancialManagement_5thEd_Eun_TestBank08

InternationalFinancialManagement_5thEd_Eun_TestBank08 - 08...

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Unformatted text preview: 08 Student: ___________________________________________________________________________ 1. Transaction exposure is defined as: A . the sensitivity of realized domestic currency values of the firm's contractual cash flows denominated in foreign currencies to unexpected exchange rate changes B. the extent to which the value of the firm would be affected by unanticipated changes in exchange rate C. the potential that the firm's consolidated financial statement can be affected by changes in exchange rates D. ex post and ex ante currency exposures 2. The most direct and popular way of hedging transaction exposure is by: A. exchange-traded futures options B. currency forward contracts C. foreign currency warrants D. borrowing and lending in the domestic and foreign money markets 3. If you have a long position in a foreign currency, you can hedge with: A. A short position in an exchange-traded futures option B. A short position in a currency forward contract C. A short position in foreign currency warrants D. borrowing (not lending) in the domestic and foreign money markets 4. If you owe a foreign currency denominated debt, you can hedge with: A. A long position in a currency forward contract B. A long position in an exchange-traded futures option C. Buying the foreign currency today and investing it in the foreign county. D. Both a) and c) 5. If you own a foreign currency denominated bond, you can hedge with: A. A long position in a currency forward contract B. A long position in an exchange-traded futures option C. Buying the foreign currency today and investing it in the foreign county. D. A swap contract where pay the cash flows of the bond in exchange for dollars. 6. The sensitivity of "realized" domestic currency values of the firm's contractual cash flows denominated in foreign currency to unexpected changes in the exchange rate is: A. Transaction exposure B. Translation exposure C. Economic exposure D. None of the above 7. The sensitivity of the firm's consolidated financial statements to unexpected changes in the exchange rate is: A. Transaction exposure B. Translation exposure C. Economic exposure D. None of the above 8. The extent to which the value of the firm would be affected by unexpected changes in the exchange rate is: A. Transaction exposure B. Translation exposure C. Economic exposure D. None of the above 9. With any hedge A. Your losses on one side should about equal your gains on the other side. B. You should try to make money on both sides of the transaction: that way you make money coming and going. C. You should spend at least as much time working the hedge as working the underlying deal itself. D. You should agree to anything your banker puts in front of your face....
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This note was uploaded on 07/28/2011 for the course FIN 308 taught by Professor Canarella during the Summer '11 term at University of Nevada, Las Vegas.

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InternationalFinancialManagement_5thEd_Eun_TestBank08 - 08...

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