Questions and Answers of Multinational Business Finance

Which contract is more likely not to be performed, a payment due from a customer in foreign currency (a currency exposure), or a forward contract with a bank to exchange the foreign currency for the
How does currency hedging theoretically change the expected cash flows of the firm?
What – according to financial theory – is the value of a firm?
Define currency risk.
Which of the three currency exposures relate to cash flows already contracted for, and which of the exposures do not?
Why are there significantly larger swings in the value of a cross-currency swap than there is in a plain vanilla interest rate swap?
How do corporate borrowers use interest rate or cross currency swaps to reduce the costs of their debt?
If interest rate swaps are not the cost of government borrowing, what credit quality do they represent?
What would be the preferred strategy for a borrower paying interest on a future date if they expected interest rates to rise?
From the point of view of a borrowing corporation, what are credit and repricing risks? Explain steps a company might take to minimize both.
What is the difference between a historic volatility and an implied volatility?
What are the three different prices or ‘rates' integral to every foreign currency option contract?
What is the difference between the price of an option, the value of an option, the premium on an option, and the cost of a foreign currency option?
If transaction costs for undertaking covered or uncovered interest arbitrage were large, how do you think it would influence arbitrage activity?
According to the theory of purchasing power parity, what should happen to a currency which is undervalued?
Convert the following indirect quotes to direct quotes and direct quotes to indirect quotes:a. Euro: €1.22/$ (indirect quote);b. Russia: Rub 30/$ (indirect quote);c. Canada: $0.72/C$ (direct
Brazil has experienced periodic depreciation of its currency over the past 20 years despite occasionally running a current account surplus. Why has this phenomenon occurred?
What is the difference between a “real” asset and a “financial” asset?
What institution provides the primary source of similar statistics for balance of payments and economic performance worldwide?
What does it mean to say the international monetary system today is a global eclectic?
How does a crawling peg fundamentally differ from a pegged exchange rate?
What do the terms de facto and de jure mean in reference to the International Monetary Fund's use of the terms?

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