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- Question: 1 . Which of the following is not correct? Choices: Premium arises when the spot rate is higher than that of the forward rate Indirect quotation shows the number of units of a domestic currency corresponding to one unit of foreign currency Financial effects of possible stock market crashes can be mitigated through purchasing and holding golds Exchange rates is one of the vital factors in considering whether or not to invest in a security issued by entities from the other countries 2 . Which is not true with regards to risk management? Choices: Bankruptcy that arises from volatility of cash inflows can be mitigated through proper risk forecast and management Securities may be subjected to security price risk One of the ways to mitigate relevant risk is to increase the probability of occurrence of an adverse event Identifying the risk that the firm faces is the first step in risk management22. A firm may seek to avoid exchange-rate risk bya. Maintaining a net monetary debtor position in countries with strengthening currencies.b. Maintaining a net monetary creditor position in countries with weakening currencies.c. Avoiding diversification of foreign-currency transactions.d. Buying forward exchange contracts to cover liabilities denominated in a foreign currencyStatement I - Exchange rate risk is a factor that contributes to the difficulty of the company to manage its international creditStatement II - A relaxation in collection policy that lengthens the firm collection period ultimately lengthens the firms operating cycle and cash conversion cycle a. False; False b. True; False c. True; True d. False; True
- 1. At any given time, the bank will purchase foreign exchange currency at what cost? a. market price b. client's selling price c. lower than the selling price 2. A bond call price amount is a. lower than par value b. higher than par value c. lower than discount value4 - At what rate is the valuation of demand deposit accounts in foreign currency in the bank account?A) Nominal valueB) Foreign exchange selling rateC) Exchange rateD) With effective purchase rateE) With comparable valueThe deterioration of economic conditions; deterioration of the value of the local currency in terms of the bank’s base currency; convertibility or transfer risks; market crisis are examples of what kinds of risk? Select one: a. Solvency risk b. Foreign exchange risk c. Sovereign risk d. Credit risk
- 1. Explain the differences and similarities between Forward, Futures, andOptions. Then why can there be a Long Term Funding Deficit related to a company's cash flows? and Explain the meaning of international parity conditions, and why it can be used to predict exchange rates. and what is the meaning of foreign exchange exposure and types of foreign exchange exposure faced by multinational companies.The U.S. dollar, Norwegian krone, Swiss franc and Japanese yen often are labelled “haven currencies.” During times of international stress, each of these currencies typically can be expected to: (a) depreciate; (b) appreciate; (c) be devalued; (d) yield fewer units of foreign currencies when traded in open markets.Exchange rate risk is a. The risk associated with the use of debt financing by companies b. The risk of doing business in a particular industry or environment c. The risk of loss due to imports and exports dominated in other currencies d. The uncertainty about the time element, the price concession, and the conversion to cash. ************************** correct answer please.
- For the statements below indicate if it is true or false. If the statement is false, rewrite so that it is a true statement. Use the space available to answer your question. 2. When the actual foreign exchange rate for the dollar is greater than the equilibrium rate, the dollar is undervalued, meaning that it will buy less in international trade than it will buy at home. TRUE/False:PQ 3 In which of the following relationships between the expected future spot rate (E(e)) of a foreign currency and the current forward rate (e fwd) of a foreign currency would a speculator have an incentive to sell foreign currency in the forward market? a. E (e) = e fwd bb. E(e) greater than e fwd c. E(e) less than e fwd d. E (e) = (1/d fwd)1. Explain the differences and similarities between Forward, Futures, andOptions.2. Explain why there can be a Long-Term Funding Deficitrelated to the company's cash flows.3. Explain the meaning of international parity conditions, and why they canused to predict exchange rates.4. Explain the meaning of foreign exchange exposures and typesforeign exchange exposure faced by multinational companies.