1. Licensing is the process by which a firm provides its technology (copyrights, patents, trademarks, or trade names) in exchange for fees or some other specified benefits.

a. true. B false

2 Assume the Canadian dollar is equal to £0.51 and the Peruvian Sol is equal to £0.16. The value of the Peruvian Sol in Canadian dollars is

a. about .3621 Canadian dollars. c. about 2.36 Canadian dollars.

b. about .3137 Canadian dollars. d. about 2.51 Canadian dollars.

3.LIBOR is:a. the interest rate commonly charged for loans between banks.

b. the average inflation rate in European countries.

c. the maximum loan rate ceiling on loans in the international money market.

d. the maximum deposit rate ceiling on deposits in the international money market.

e. the maximum interest rate offered on bonds that are issued in London.

7. Futures contracts are typically _______; forward contracts are typically _______.a. sold on an exchange; sold on an exchange

b. offered by commercial banks; sold on an exchange

c. sold on an exchange; offered by commercial banks

d. offered by commercial banks; offered by commercial banks

8An increase in UK interest rates relative to euro interest rates is likely to ________ the UK demand for euros and _________ the supply of euros for sale.

a. reduce; increase c. reduce; reduce

b. increase; reduce d. increase; increase

9. In general, when speculating on exchange rate movements, the speculator will borrow the currency that is expected to appreciate and invest in the country whose currency is expected to depreciate.

a. true. b. false.

10.The value of the Australian dollar (A$) today is £0.41. Yesterday, the value of the Australian dollar was £0.38. The Australian dollar by _______%.

a. depreciated; 7.90 c. appreciated; 7.90

b. depreciated; 7.30 d. appreciated; 7.30

11.European currency options can be exercised _______; American currency options can be exercised _______.a. any time up to the expiration date; any time up to the expiration date

b. any time up to the expiration date; only on the expiration date

c. only on the expiration date; only on the expiration date

d. only on the expiration date; any time up to the expiration date

12.Which of the following is the most likely strategy for a UK firm that will be receiving Swiss francs in the future and desires to avoid exchange rate risk (assume the firm has no offsetting position in francs)?a. purchase a call option on francs.

b. sell a futures contract on francs.

c. obtain a forward contract to purchase francs forward.

d. all of the above are appropriate strategies for the scenario described.

13. A major advantage of the euro is the complete elimination of exchange rate risk on transactions between participating European countries, which encourages more trade and capital flows within Europe.

a. true. b. false.

14. The international Fisher effect (IFE) suggests that:

a. a home currency will depreciate if the current home interest rate exceeds the current foreign interest rate.

b. a home currency will appreciate if the current home interest rate exceeds the current foreign interest rate.

c. a home currency will appreciate if the current home inflation rate exceeds the current foreign inflation rate.

d. a home currency will depreciate if the current home inflation rate exceeds the current foreign inflation rate.

15.Factors such as economic growth, inflation, and interest rates are an integral part of __________ forecasting.

a. technical c. market-based

b. fundamental d. none of the above

16.A firm may incorporate a country risk rating into the capital budgeting analysis by:

a.Adjusting the NPV upward if the country risk rating has fallen (implying increased risk) below a benchmark level.

b. adjusting the discount rate upward as the country risk rating decreases (implying increased risk).

c. A and B

d. none of the above