* not completed

. Which of these statements is false?

The forward exchange rate is a good predictor of the future spot exchange rate. correct incorrect

The forward exchange rate and the future spot rate may not be the same. correct incorrect

The forward exchange rate is an unbiased predictor of the future exchange rate. correct incorrect

The spot exchange rate is a good predictor of the future exchange rate. correct incorrect

* not completed

. The objectives of a central bank include:

To ensure that a country's Balance of Payments remains in equilibrium. correct incorrect

To accumulate a country's foreign exchange reserves. correct incorrect

To ensure the implementation of a country's exchange rate policy. correct incorrect

To control international trade. correct incorrect

* not completed

. The global factory encounters the following exposures to foreign exchange risk:

Translation exposure. correct incorrect

Economic exposure. correct incorrect

Transaction exposure. correct incorrect

All of the above correct incorrect

* not completed

. The role of a hedging protocol is to:

Assist a firm in determining which foreign exchange transactions is should hedge. correct incorrect

Assist a firm in determining the terms of a currency or interest rate swap. correct incorrect

Assist a firm evaluate the choice between a forward currency hedge and a currency option. correct incorrect

Assist a firm in determining the extent of its translation exposure. correct incorrect

* not completed

. If a transaction in the global factory is said to be 'uncovered', it means that:

It is a spot transaction and therefore has no exposure to currency risk. correct incorrect

It is trading the good or service on the arm's-length market so that it has no exposure. correct incorrect

It has a transaction exposure that has not been hedged to cover against change in an exchange rate. correct incorrect

It has located an exposure that needs to be 'covered'. correct incorrect

* not completed

. Lead payments would generally be expected to be made:

From a hard currency to a weak currency. correct incorrect

From a weak currency to a hard currency. correct incorrect

From a weak currency to another weak currency. correct incorrect

From a hard currency to another hard currency. correct incorrect

* not completed

. What is the key feature of a currency option?

It cannot be traded. correct incorrect

It is the lowest cost hedging instrument available. correct incorrect

It provides the holder with an asymmetric hedge against currency movements. correct incorrect

It permits the holder to determine the exchange rate at which it is redeemed. correct incorrect

* not completed

. Which of these is not a general characteristic of a currency swap?

It provides a firm with a short-term hedge against transaction exposure. correct incorrect

It provides a firm with a hedge against economic exposure. correct incorrect

It permits a firm's revenue and payment streams in different currencies to be offset against each other. correct incorrect

It permits a firm to renegotiate the exchange rate being used for a currency swap. correct incorrect

* not completed

. Why is the 'netting' of foreign exchange transactions an additional source of competitive advantage for the global factory?

It gives reduces their costs of intermediation. correct incorrect

It enhances the efficiency of their subsidiaries and affiliates. correct incorrect

It can reduce or eliminate their transaction exposure. correct incorrect

All of the above. correct incorrect

* not completed

. Which of these is not a function of a re-invoicing centre?

To manage the global factory's foreign exchange transactions. correct incorrect

To minimise the global factory's transaction exposure. correct incorrect

To minimise the global factory's hedging costs. correct incorrect

To optimise the global factory's foreign investments. correct incorrect

* not completed

. Translation or balance sheet exposure is best defined as:

The exposure of the global factory to country risk. correct incorrect

The exposure of the global factory to the effects of currency movements on its assets. correct incorrect

The exposure of the global factory to the effects of currency movements on the balance sheet. correct incorrect

All of the above. correct incorrect

* not completed

. A transfer price has which of the following characteristics?

It is the price given to a good or service that is transferred inside a global factory. correct incorrect

It is the price of a good or service that minimises the tax liabilities of a global factory. correct incorrect

It is the price of a good or service that varies with changes in an exchange rate. correct incorrect

It is the price of a good or service that is sold by a global factory at arm's-length to a third party. correct incorrect

* not completed

. Which of the following statements about transfer prices is false?

A transfer price may bear no relation to the equivalent arm's-length price. correct incorrect

The use of transfer prices may affect managerial performance incentives in the global factory. correct incorrect

A transfer price will determine the distribution of profit between subsidiaries and affiliates in the global factory. correct incorrect

A transfer price will reduce profits in a host-country. correct incorrect