MANA 3312 CH 10&11 Quiz With Complete Solutions
You are an American, working for a US hospital. The hospital sells services to a French
hospital. Given a depreciation of the Euro, your French subsidiary (the one that receives the
revenues from the French Hospital) received a lesser income last year, although a clause in
your contract stipulates adjustment payment in US dollars. Therefore, your subsidiary has a
balance sheet loss, although your consolidated global result is positive. This type of foreign
exchange risk is known as: - ANSWER translation exposure.
You are an American, working for a hospital. The hospital agreed to buy from a German
exporter a big piece of diagnostic equipment. The hospital agreed to pay the German
exporter €1 million in 90 days. The extent to which the expense of that trade is affected by
fluctuations in foreign exchange values is known as: - ANSWER transaction exposure.
According to the Fisher effect, if the "real" rate of interest in a country is 4 percent and the
expected annual inflation is 9 percent, what would the "nominal" interest rate be? - ANSWER
13 percent
You are an American, working for a US hospital. The hospital agreed to buy from a German
exporter a big piece of diagnostic equipment. The hospital agreed to pay the German
exporter €1 million in 90 days. You have heard that the interest rates between the European
Union and the US are expected to be quite different in the next 3 months: the European
interest rates will be twice as those in the US. According to _____, you should expect the US
Dollar to _______ relative to the Euro. - ANSWER International Fisher Effect; appreciate
You are an American, working for a US hospital. The hospital sells services to a French
hospital. Given a depreciation of the Euro, your French subsidiary (the one that receives the
revenues from the French Hospital) received a lesser income last year, although a clause in
your contract stipulates adjustment payment in US dollars. Therefore, your subsidiary has a
balance sheet loss, although your consolidated global result is positive. This type of foreign
exchange risk is known as: - ANSWER translation exposure.
You are an American, working for a hospital. The hospital agreed to buy from a German
exporter a big piece of diagnostic equipment. The hospital agreed to pay the German
exporter €1 million in 90 days. The extent to which the expense of that trade is affected by
fluctuations in foreign exchange values is known as: - ANSWER transaction exposure.
According to the Fisher effect, if the "real" rate of interest in a country is 4 percent and the
expected annual inflation is 9 percent, what would the "nominal" interest rate be? - ANSWER
13 percent
You are an American, working for a US hospital. The hospital agreed to buy from a German
exporter a big piece of diagnostic equipment. The hospital agreed to pay the German
exporter €1 million in 90 days. You have heard that the interest rates between the European
Union and the US are expected to be quite different in the next 3 months: the European
interest rates will be twice as those in the US. According to _____, you should expect the US
Dollar to _______ relative to the Euro. - ANSWER International Fisher Effect; appreciate
