Chapter 9 - Chapter 9 Managing Transaction Exposure and...

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Chapter 9 Managing Transaction Exposure and Economic Exposure 1. Transaction exposure occurs if there is a change in an exchange rate and . * A. an outstanding obligation denominated in a foreign currency is settled B. sales are made in cash C. purchases are made in cash D. an outstanding obligation denominated in a home currency is settled E. all of the above 2. If a foreign currency depreciates, exchange losses will occur when exposed . * A. receipts are greater than exposed payments B. payments are greater than exposed receipts C. receipts are greater than exposed net worth D. receipts and exposed payments are the same E. none of the above 3. Economic exposure measures the impact of actual exchange conversion involving the following cases except . A. cash flows from a foreign investment B. a foreign subsidiary borrows money in international financial markets C. a foreign subsidiary imports raw materials * D. local wages go up E. none of the above 4. A forward market hedge involves the following except . A. a fixed amount of foreign currency B. forward rate C. forward contract * D. future spot rate E. commercial banks 5. A money-market hedge does not involve the following . A. spot rate B. interest rate * C. forward rate D. marketable securities E. accounts receivable
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6. An option-market hedge in foreign exchange risk management is a form of a(n) . * A. covered hedge B. open position C. balance sheet hedge D. swap E. speculation 7. A currency swap involves the following . A. spot market only B. forward market only * C. spot and forward markets D. options and futures markets E. the New York Stock Exchange 8. In the case of a credit swap, a parent company . A. buys a foreign currency in the spot market and sells it in the forward market B. buys a foreign currency in a home market and sells it in a foreign market * C. deposits a home currency at a home bank on behalf of a foreign bank and the foreign bank lends money in a foreign currency to the company's foreign subsidiary D. all of the above E. none of the above
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This note was uploaded on 02/16/2012 for the course FIN 7023 taught by Professor Wald during the Spring '12 term at The University of Texas at San Antonio- San Antonio.

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Chapter 9 - Chapter 9 Managing Transaction Exposure and...

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