Chapter 13 Multiple Choice Questions | Global Strategic Management by Philippe Lasserre

1. Non-hedging techniques against transaction exposure include (choose both that apply):

Options contracts Leading and lagging Buying forward contracts Netting

2. Netting consists of:

Buying put options and call options simultaneously Delaying the collection of or accelerating the payment of payables, according to fluctuations in currency value Delaying the payment of taxes by using tax havens Only hedging the net cash balance among subsidiaries against transaction exposures

3. A German company wants to borrow euros to finance an investment in Japan that will generate yen in the future, while a Japanese company seeks to borrow yen to finance an investment in Italy that will generate euros in the future. Assuming that the two transactions are of the same equivalent amount, what kind of technique can these two companies use to protect themselves against fluctuations in the two currencies?

Leading and lagging Netting Currency swap Each company buys forward contracts

4. In the Adjusted Present Value cash-flow calculation:

The discount factor is adjusted according to a country risk premium Cash flows are adjusted using a probability distribution of risks Cash flows are calculated with adjustments for inflation The Net Present Value is reduced by a risk factor

5. Islamic finance is:

A mode of financing mosques A type of loan where the rate of return is determined by the religious authorities A type of financial product in which investing in certain activities is prohibited A type of financial product that can only be used by Muslims

6. Integrated capital markets can occur when:

Countries have negotiated a free trade agreement The structure, costs and risks of equity and debt financing are similar across countries When countries use the US dollar in their foreign trade transactions

7. If a British borrower issues a dollar-denominated bond to investors in Japan, this is:

A foreign bond A global bond A Eurobond A British bond

8. A credit rating is:

The determination of a rate for an international bond The rating of the value of the project for which the credit is granted An assessment of the probability of default by the borrower An assessment of currency risks

9. A letter of credit is:

A document issued by the importer’s bank A document issued by the exporter’s bank A document issued by the International Chamber of Commerce

10. What is a countertrade agreement (choose both that apply)?

The buyer pays all or part of a contract in products or services An exporter of equipment is paid in products from the importer’s country The exporter and importer belong to the same free trade agreement The supplier of equipment also agrees to operate the equipment for a certain time after delivery

Chapter 13: Global Financial Management