Chapter 9

612 Words3 Pages
Fundamentals of Multinational Finance, 5e (Moffett et al.) Chapter 9 Transaction Exposure Multiple Choice and True/False Questions 9.1 Types of Foreign Exchange Exposure 1) ________ exposure deals with cash flows that result from existing contractual obligations. A) Operating B) Transaction C) Translation D) Economic Answer: B Diff: 1 Topic: 9.1 Types of Foreign Exchange Exposure Skill: Recognition 5) ________ exposure is the potential for accounting-derived changes in owner 's equity to occur because of the need to translate foreign currency financial statements into a single reporting currency. A) Transaction B) Operating C) Economic D) Accounting Answer: D Diff: 1 Topic: 9.1 Types of Foreign Exchange Exposure Skill:…show more content…
A) No counter-measure B) Speculation C) Hedging D) All are techniques MNEs could use. Answer: D Diff: 1 Topic: 9.2 Why Hedge? Skill: Recognition 3) Assuming no transaction costs (i.e., hedging is "free"), hedging currency exposures should ________ the variability of expected cash flows to a firm and at the same time, the expected value of the cash flows should ________. A) increase; not change B) decrease; not change C) not change; increase D) not change; not change Answer: B Diff: 1 Topic: 9.2 Why Hedge? Skill: Conceptual 4) Which of the following is NOT cited as a good reason for hedging currency exposures? A) Reduced risk of future cash flows is a good planning tool. B) Reduced risk of future cash flows reduces the probability that the firm may not meet required cash flows. C) Currency risk management increases the expected cash flows to the firm. D) Management is in a better position to assess firm currency risk than individual investors. Answer: C Diff: 1 Topic: 9.2 Why Hedge? Skill: Recognition 8) ________ exposure may result from a firm having a payable in a foreign currency. A) Transaction B) Accounting C) Operating D) None of the above Answer: A Diff: 1 Topic: 9.2 Why Hedge? Skill: Conceptual 5) ________ is NOT a popular contractual hedge against foreign exchange transaction exposure. A) Forward market hedge B) Money market hedge C) Options market hedge D) All of

More about Chapter 9

Get Access