MID-TERM REVIEW
B02041_IF Sept 2020
By Do Huong.
Content (40 MCQs)
Time: 45 minutes
Không sử dụng tài liệu
O Chapter 1:
O Chapter 2
O Chapter 3
O Chapter 4
O Chapter 5
REVIEW STRATEGIES
O Students should review using slides, textbooks, recording and work
in groups to help each others.
O Write any questions that you may occur, which can be explained
and discussed more in the class.
O Read the questions carefully and underline keywords.
O Cross out wrong answers, and choose the best among the remaining
ones.
O Use the diagram of supply and demand curve to analyze the
movement of currency.
O Arrange about 60-70 seconds per question and skip any questions
that you find difficult and come back later when you finish the
others.
CHAPTER 1
(Review Hints)
1. MNCs’ goal?
2. Agency problem, agency cost? Solutions to control?
3. Analyze the affect of exchange rate movements and other
factors on the value of the MNCs?
4. Reasons for international business?
5. How firms engage in International business?
6. Which method of international business is considered as
DFI?
7. Analyze the advantages and disadvantages of each
method of international business?
8. Calculate the expect cash flows of an MNC?
….
CHAPTER 1
(Review hints)
MCQ1: General Motor Co. has a subsidiary in Japan. The
subsidiary reinvests half of its net cash flows into
operations and remits half to the parent. Its expected cash
flows from domestic business are $1,000,000, and the
Japanese subsidiary is expected to generate 200 million
Japanese yen at the end of the year. The expected value of
the yen is 1 USD =104.85 JPY. What are the expected
dollar cash flows of General Motor?
O a/ $2,907,486.89
O b/ $1,953,3743.44
O c/ $200,000,000
O d/ None of the answers are correct
Chapter 2:
(Review Hints)
1. Components of BOP/CuA/K/FA? How economic transaction
can be recorded on each component of BOP: CuA, K, FA,
Reserve balance.
2. Credit/Debit (Inflows or outflows)
3. International trade flows and issues (data and events)
4. Deficit/Surplus and its impact on exchange rate movement?
5. Factors influencing on trade balance/CuA
6. J –curve effect (the impact of exchange rate changes on trade
balance/ CuA)
7. Agencies that facilitate trade and international trade flows and
their functions.
8. ….
Chapter 3
(Review hints)
O Direct and indirect quotations
O FX market and its characteristics.
O Spread, Bid/Ask; Factors influencing Spread
O Characteristics of International Money Market;
International Credit Market; International Bond Market;
International Bond Market.
O Characteristics of spot market/forward/..
O Simple cross exchange rate and bid-ask cross exchange rate.
O Exercise related to cross exchange rate/speculation Profit
or loss?
O ….
Chapter 3
(Review Hints)
1. Assume 1 USD = 106.29 JPY and 1 USD = 23400 VND.
If Honda Vietnam have an imported machinery value 1
billion yen, how much VND must this company pay?
2. Consider a trader who takes a long position in a three-
month forward contract on the Australian dollars. The
forward rate is $0.75 = 1. Aud and the contract size is
100,000 aud. At the maturity of the contract, the spot
exchange rate is $0.65 = 1 aud . Calculate the profit or loss
of this trader?
Chapter 4
(Review Hints)
O Calculate the percentage of appreciation/depreciation of
domestic and foreign currency
eurr/usd --> 1.2 today and 1.1 yesterday --> eur?
%usd = (1/1.2 -1/1.1)/(1/1.1) = -8.3%
O Change in supplies and demands; equilibrium exchange rate.
O Analyze the impact of inflation, interest rate, income level,
government policy, expectation on the change of currency
value appreciation/depreciation.
O …
Question 12: Assume that China. is going to
impose a strict quota on goods imported from the
U.S and that the U.S does not retaliate. Holding
other factors constant, this event should
immediately cause the China. demand for USD to
____ and the value of the USD to ____. Select one:
O a.increase; increase
O b.increase; decline
O c.decline; decline
O d.decline; increase
Chapter 5
(Review Hints)
O Characteristics and Functions of Forward/Futures/Option
O Choose the best currency derivative transaction?
(forward/futures/option) or spot?
O Calculate profit/loss with speculation
O Forward premium/discount
O Factors influencing option the premium of options.
O Call option (ATM/OTM/ITM) Profit/loss for buyer/seller
O Put option (ATM/OTM/ITM) Profit/loss for buyer/seller.
Chapter 5
(Review Hints)
1: Pymepharco is a Vietnamese medicine firm that usually
imports materials from Malaysian. According to the payment
terms these goods must be paid in Ringgit. And this company
expect that this currency will appreciate in the near future. Which
of the following is NOT an appropriate hedging technique under
these situation?
O a/ purchase Ringgit forward
O b/ purchase Ringgit put options.
O c/ purchase Ringgit futures contracts.
O d/ purchase Ringgit call options
Chapter 5
(Review Hints)
1: Pymepharco is a Vietnamese medicine firm that usually
imports materials from Malaysian. According to the payment
terms these goods must be paid in Ringgit. And this company
expect that this currency will appreciate in the near future. Which
of the following is NOT an appropriate hedging technique under
these situation?
O a/ purchase Ringgit forward
O b/ purchase Ringgit put options.
O c/ purchase Ringgit futures contracts.
O d/ purchase Ringgit call options
Chapter 5
(Review Hints)
2. Dapton, Inc., based in NewYork, exports products to a French firm and
will receive payment of €100,000 in five months. On January 1, the spot
rate of the euro was $1.12, and the 5-month forward rate was $1.10. This
company decided to use a forward contract to sell €100,000 forward in
five months. The spot rate of the euro on June 1 is $1.15. Daption will
receive $____ for the euros.
O a/ 110,000
O b/ 115,000
O c/ 112,000
O d/ None of the answers are correct
Chapter 5
(Review Hints)
2. Dapton, Inc., based in NewYork, exports products to a French firm and
will receive payment of €100,000 in five months. On January 1, the spot
rate of the euro was $1.12, and the 5-month forward rate was $1.10. This
company decided to use a forward contract to sell €100,000 forward in
five months. The spot rate of the euro on June 1 is $1.15. Daption will
receive $____ for the euros.
O a/ 110,000
O b/ 115,000
O c/ 112,000
O d/ None of the answers are correct
Chapter 5
(Review Hints)
3. Speculating with Currency Call Options. Randy Rudecki
purchased a call option on British pounds for $.02 per unit. The
strike price was $1.45 and the spot rate at the time the option was
exercised was $1.46. Assume there are 31,250 units in a British
pound option. What was Randy’s net profit on this option?
4. Brian Tull sold a put option on Canadian dollars for $.03 per unit.
The strike price was $.75, and the spot rate at the time the option was
exercised was $.72. Assume Brian immediately sold off the Canadian
dollars received when the option was exercised. Also assume that
there are 50,000 units in a Canadian dollar option. What was Brian’s
net profit on the put option?
Chapter 3
(Review Hints)
5. LSU Corp. purchased Canadian dollar call
options for speculative purposes. If these Possible spot rate of Net profit (Loss) per
options are exercised, LSU will immediately sell Canadian dollar on unit to LSU Corp.
expiration date
the Canadian dollars in the spot market. Each
$.76 -0.02
option was purchased for a premium of $.03 per
.78 0
unit, with an exercise price of $.75. LSU plans
.80 +0.02
to wait until the expiration date before deciding
.82 +0.04
whether to exercise the options. Of course, LSU
.85 +0.07
will exercise the options at that time only if it is
.87 +0.09
feasible to do so. In the following table, fill in
the net profit (or loss) per unit to LSU Corp.
based on the listed possible spot rates of the
Canadian dollar on the expiration date as
follows:
17
Q&A
O Questions
O Answers
MORE PRACTICE
(Group working)
Question 2: Which of the following theories
identifies specialization as a reason for
international business?
O a/ theory of comparative advantage.
O b/ imperfect markets theory.
O c/ product cycle theory.
O d/ agency cost theory.
Question 3: Which of the following industries
would most likely take advantage of lower
costs in some less developed foreign countries?
O a/ assembly line production.
O b/ specialized professional services.
O c/ nuclear missile planning.
O d/ planning for more sophisticated computer
technology.
Question 4: Which of the following does not
constitute a form of direct foreign investment?
O a/ Franchising
O b/ International trade
O c/ Joint ventures
O d/ Acquisitions of existing operations
Question 5: The demand for U.S. exports tends
to increase when:
O a/the currencies of foreign countries
strengthen against the dollar.
O b/economic growth in foreign countries
decreases.
O c/U.S. inflation rises.
O d/none of the above answers are correct.
Question 6: Which of the following will probably not
result in an increase in a country's current account
balance (assuming everything else constant)?
O a/A decrease in the country's national income
level
O b/An increase in government restrictions in the
form of tariffs or quotas
O c/An appreciation of the country's currency
O d/A decrease in the country's rate of inflation
Question 7: If a country's government imposes
a tariff on imported goods, that country's
current account balance will likely ____
(assuming no retaliation by other
governments).
O a/ increase
O b/ decrease
O c/ remain unaffected
O d/ None of the above answers are correct.
Question 8: If the home currency begins to
appreciate against other currencies, this
should ____ the current account balance,
other things equal (assume that substitutes
are readily available in the countries, and that
the prices charged by firms remain the same).
O a/ have no impact on
O b/ increase
O c/ all of the answers are equally possible
O d/reduce
Question 9: A high home inflation rate relative to
other countries would ____ the home country's
current account balance, other things equal. A high
growth in the home income level relative to other
countries would ____ the home country's current
account balance, other things equal.
O a/decrease; decrease
O b/increase; decrease
O c/increase; increase
O d/decrease; increase
Question 10: ABC Inc., based in Washington, exports products to a
German firm and will receive payment of €200,000 in three
months. On June 1, the spot rate of the euro was $1.12, and the
3-month forward rate was $1.10. On June 1, ABC negotiated a
forward contract with a bank to sell €200,000 forward in three
months. The spot rate of the euro on September 1 is $1.15. ABC
will receive $____ for the euros.
O a/ 220,000
O b/ 224,000
O c/ 200,000
O d/ 230,000
