Corporate MBA - FINANCE 6644: Global Financial Strategy August 2012 Final Exam Review Questions Instructions A. Please be concise and precise in your answers. B. Practice answers for closed book‚ class room setting. C. Suggested length: minimum one page [1.5 spacing]; maximum two pages per question. D. You would answer 3 questions and 2 Problems in two hours in final exam. Questions 1. Ethical Standards
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Economic exposure emphasizes that the exposure is created by the economic consequences of an unexpected exchange rate change. Economic consequences‚ in turn‚ suggests that the impact is due to the response of external forces in the economy‚ rather than‚ say‚ something directly under the control of management. Competitive exposure suggests that the consequences of an unexpected exchange rate change are due to a shift in the competitive position of a firm‚ vis-á-vis its competitors. Strategic exposure
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Gresham’s law refers to the phenomenon that bad (abundant) money drives good (scarce) money out of circulation. The phenomenon was often observed under the bimetallic standard under which both gold and silver were used as means of payments‚ with the exchange rate between the two metals fixed. 2. Explain the mechanism which restores the balance-of-payments equilibrium when it is disturbed under the gold standard. Answer: The adjustment mechanism under the gold standard is referred to as the price-specie-flow
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Account. Rates at which the items in the trial balance of a foreign branch should be converted: It is true that the items in the trial balance of a foreign branch should be converted into the currency of the Head Office. But the question is at what rates the various items in the trial balance of a foreign branch should be converted. The following points should be borne in mind while converting the items in the Trial Balance of a foreign branch: 1. If the rate of exchange is not subject
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subdivided into 100 cents. * Prior to 1983‚ Australia maintained a fixed exchange rate. The first peg was between the Australian and British pounds‚ initially at par‚ and later at 0.8 GBP (16 shillings sterling). This reflected its historical ties as well as a view about the stability in value of the British pound. From 1946 to 1971‚ Australia maintained a peg under the Bretton Woods System‚ a fixed exchange rate system that pegged the U.S. dollar to gold‚ but the Australian dollar was effectively
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principals who are most importantly the firm’s shareholders? A) managers B) employees C) attorneys D) suppliers 2) The cash manager at AmFlex Company needs to buy 1‚000‚000 British pounds to pay a British supplier. A currency broker quotes him a bid-ask rate of ₤.4865-.5116/US$. What will be the dollar cost of the 1‚000‚000 pounds? A) $486‚618 B) $1‚954‚652 C) $511‚587 D) $2‚055‚499 3) In determining why a firm becomes multinational there are many reasons. One reason is that the firm is a market seeker.
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Foreign Exchange Rate Determination Multiple Choice and True/False Questions 8.1 Exchange Rate Determination: The Theoretical Thread 1) The important thing to remember about foreign exchange rate determination is that parity conditions‚ asset approach‚ and balance of payments approaches are ________ theories rather than ________ theories. A) competing; complementary B) competing; contemporary C) complementary; contiguous D) complementary; competing Answer: D Diff: 1 Topic: 8.1 Exchange Rate
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Hedging Currency Risks at AIF The American Institute of Foreign Studies (AIFS) is a company that organizes student exchange programs worldwide with two main divisions. The College Division arranges academic years and semesters or summer schools. The High School Division organizes 1-4 week educational travels for students and teachers. More than 50‚000 students participate each year in exchange programs of AIFS‚ which leads to annual revenues of around $ 200 million. AIFS receives most of its revenues in
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its circulation 3. Regulating financial markets‚ including the inter-bank lending market‚ the inter-bank bond market‚ foreign exchange market and gold market 4. Preventing and mitigating systemic financial risks to safeguard financial stability 5. Maintaining the Renminbi exchange rate at adaptive and equilibrium level 6. Holding and managing the state foreign exchange and gold reserves 7. Managing the State treasury as fiscal agent 8. Making payment and settlement rules in collaboration with
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Table of Contents 1. In what way(s) is Tiffany exposed to exchange-rate risk subsequent to its new distribution agreement with Mitsukoshi? How serious are these risks? 2. Should Tiffany actively manage its yen-dollar exchange rate risk? Why or why not? 3. If Tiffany were to manage exchange rate risk activity‚ what should be the objectives of such a program? Specifically‚ what exposures should be actively managed? How much of these exposures should be covered‚ and for how long? 4. As instruments
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