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Exam 21: International Corporate Finance

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Question 51

Multiple Choice

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International bonds issued in multiple countries but denominated solely in the issuer's currency are called:

A) Treasury bonds.
B) Bulldog bonds.
C) Eurobonds.
D) Yankee bonds.
E) Samurai bonds.

F) A) and B)
G) B) and E)

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Question 52

Multiple Choice

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You observe that the inflation rate in the United States is 3.5 percent per year and that T-bills currently yield 3.8 percent annually.What do you estimate the inflation rate to be in Australia,if short-term Australian government securities yield 4.5 percent per year?

A) 4.17 percent
B) 4.20 percent
C) 4.24 percent
D) 4.27 percent
E) 4.30 percent

F) All of the above
G) A) and B)

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Question 53

Multiple Choice

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Absolute purchasing power parity is most apt to exist for which one of the following items?

International bonds issued in a single country and denominated in that country's currency are called:

How many Euros can you get for $2,200 if one euro is worth $1.2762?

Mr.Black has agreed to a currency exchange with Mr.White.The parties have agreed to exchange C$12,500 for $10,000 with the exchange occurring 4 months from now.This agreed-upon exchange rate is called the:

Suppose the current spot rate for the Norwegian kroner is $1 = NKr6.7119.The expected inflation rate in Norway is 4 percent and in the U.S.3 percent.A risk-free asset in the U.S.is yielding 4.5 percent.What approximate real rate of return should you expect on a risk-free Norwegian security?

What conditions are necessary for absolute purchasing power parity (PPP)to exist? Is it realistic to believe PPP can exist within a country let alone across national borders?

U.S.dollars deposited in a bank in Switzerland are called:

Assume that $1 is equal to ¥98 and also equal to C$1.21.Based on this,you could say that C$1 is equal to: C$1(¥98/C$1.21) = ¥80.99.The exchange rate of C$1 = ¥80.99 is referred to as the:

Which one of the following states that the expected percentage change in the exchange rate between two countries is equal to the difference in the countries' interest rates?

Where does most of the trading in Eurobonds occur?

Which one of the following names matches the country where the bond is issued?

Assume the current spot rate is C$1.2103 and the one-year forward rate is C$1.1925.The nominal risk-free rate in Canada is 3 percent while it is 4 percent in the U.S.Using covered interest arbitrage you can earn an extra _____ profit over that which you would earn if you invested $1 in the U.S.

Uncovered interest parity is defined as:

Assume the spot rate on the Canadian dollar is C$0.9872.The risk-free nominal rate in the U.S.is 5.4 percent while it is only 4.2 percent in Canada.Which one of the following four-year forward rates best establishes the approximate interest rate parity condition?

Trader A has agreed to give 100,000 U.S.dollars to Trader B in exchange for British pounds based on today's exchange rate of $1 = £0.62.The traders agree to settle this trade within two business day.What is this exchange called?

In the spot market,$1 is currently equal to A$1.4910.Assume the expected inflation rate in Australia is 3.5 percent and in the U.S.4.0 percent.What is the expected exchange rate one year from now if relative purchasing power parity exists?

The LIBOR is primarily used as the basis for the rate charged on: