Intl. Financial Sample Queations

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CitedBrigham, Eugene F. , and Phillip R. Daves. Intermediate Financial Management. 8th ed. Mason: Thomson South-Western, 2004.

This solutions manual provides the answers to all the review questions and end-of-chapter problems in Financial Management: Principles and Practice, by Timothy Gallagher. The answers and the steps taken to obtain the answers are shown. Readers are reminded that in finance there is often more than one answer to a question or to a problem, depending on one‘s viewpoint and assumptions. One answer is

Additionally, Sally will spend her $72.90 loan where it will make its way to Bank #4 where Raul will acquire a loan for $65.61. Therefore, Bank #4 is required to hold 10% of the $72.90 which is $7.29 better known as required reserves. Moreover, Raul will spend his $65.61oan which will make its way to Bank #5 where the bank will make a loan out to Mark. The amount of the loan for Mark will be $59.05 where 10% of the required reserves of $6.56 is held in Bank #5. In addition, Bank #5 will loan out from the excess reserves $52.49 where 10% or $5.25 will be held back in Bank #5 as required

Type the letter that represents the best answer to each of the multiple choice questions. Answer all questions in this section. Each question is worth 1 point.

Question 1. 1. (TCOs B, C) The difference between the rate of return on assets and the cost of borrowing is: (Points : 5)

iii) With a money market hedge, the company would invest in GBP borrowing, which comes at a cost of 2.5%. This would be invested in USD, which carries a rate of 1.5%. So the company would receive $1,764,000, and then in three months would have $1,790,460. At the same time, the company would pay back the GBP borrowing with the payment from the company. The GBP borrowing would be worth £1,025,000. It is expected that this will be worth $1,797,850. Now, the company would basically be able to repay the principal with the cash flow from the customer, but still needs to pay £25,000 interest. The company would have earned $26.460 in interest in the US. Converted to pounds, that is £15,085. Thus, the company is still down £10,000 or as the result of all this, but it has cost certainty. If the GBP rate moves in an unfavorable direction, it will not matter because there is cost certainty with this arrangement. The £10,000 or so difference reflects the spread that the bankers are going to take, the cost of

A young firm NCI Corporation builds wind power driven energy systems. It is considering raising $400 million in debt capital for an expansion project and can issue bank debt at 16% or junk bonds at a yield of 14%.

Module Description Learning Outcomes Indicative Content Delivery Indicative Reading List Lecture Sequence 6-8 Sample Questions 9-16

The author has experience in dealing with financial data during his day to day job. Therefore he is comfortable with extracting relevant figures and come to a conclusion on his

A)  quantity supplied; does not change      B)  supply; decreases      C)  supply; increases      D)  quantity supplied; increases         12)  A decrease in the domestic interest rate causes the demand for domestic assets to ________ and    the domestic currency to ________, everything else held constant.    A)  decrease; appreciate      B)  increase; depreciate      C)  decrease; depreciate      D)  increase; appreciate         13)  ________ in the foreign interest rate causes the demand for domestic assets to shift to the    ________ and the domestic currency to appreciate, everything else held constant.    A)  An increase; left      B)  An increase; right      C)  A decrease; right      D)  A decrease; left         14)  During the beginning on the subprime crisis in the United States when the effects of the crisis    were mostly confined within the United States, the U. S. dollar ________ because demand for U.S.  assets ________.    A)  depreciated; increased      B)  appreciated; increased      C)  depreciated; decreased      D)  appreciated; decreased         15)  When Canadians or foreigners expect the return on ________ assets to be high relative to the    return on ________ assets, there is a ________ demand for dollar assets, everything else held  constant.    A)  foreign; dollar; constant      B)  foreign; dollar; higher      C)  dollar; foreign; constant

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Journal of Money, Investment and Banking ISSN 1450-288X Issue 7 (2009) © EuroJournals Publishing, Inc. 2009 http://www.eurojournals.com/JMIB.htm

Carmen Cotei Department of Economics, Finance and Insurance University of Hartford, 200 Bloomfield Ave., West Hartford, CT, 06117, USA E-mail: cotei@hartford.edu Joseph Farhat Department of Finance Central Connecticut State University, 1615 Stanley St., New Britain, CT 06050, USA E-mail: farhatjob@ccsu.edu

from Q. 1 to 9 carries +6 marks for correct answer and –2 marks for wrong answer. Each question