Question 1 1. Which of the following could reduce agency problems for an MNC? Answer stock options as managerial compensation. hostile takeover threat. investor monitoring. independent board members 10 points Question 2 1. Assume that Live Co. has expected cash flows of 200,000 USD from domestic operations, 200,000 CHF from Swiss operations, and 150,000 EUR from Italian operations at the end of the year. The Swiss franc's value and euro's value are expected to be $.83 and $1.29 respectively, at the end this year. What are the expected net USD cash flows of Live Co? Answer 10 points Question 3 1. 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. Answer a. decrease; increase b. increase; increase c. increase; decrease d. decrease; decrease 10 points Question 4 1. According to the "J curve effect," a weakening of the U.S. dollar relative to its trading partners' currencies would result in an initial ____ in the current account balance, followed by a subsequent ____ in the current account balance. Answer a. increase; decrease b. decrease; decrease c. decrease; increase d. increase; increase 10 points Question 5 1. Assume a Japanese firm invoices exports to the U.S. in U.S. dollars. Assume that the forward rate and spot rate of the Japanese yen are equal. If the Japanese firm expects the U.S. dollar to ____ against the yen, it would likely wish to hedge. It could hedge by ____ dollars forward. Answer a. depreciate; buying b. depreciate; selling c. appreciate; buying d. appreciate; selling 10 points Question 6 1. A share of the ADR of a Dutch firm represents one share of that firm's stock that is traded on a Dutch stock exchange. The share price of the firm was 15 EUR when the Dutch market closed. As the U.S. market opens, the exchange rate on the euro is 1.10 USD/EUR. Assuming no significant news has happened in the interim, the price of the ADR should be about ____ USD. Answer 10 points Question 7 1. Your company expects to receive 5,000,000 Japanese yen 60 days from now. You decide to hedge your position by selling Japanese yen forward (entering into a short forward contract on the yen). The current spot rate of the yen is 0.0089 USD/JPY, while the forward rate is 0.0095 USD/JPY. You expect the spot rate in 60 days to be 0.0090 USD/JPY. How many dollars will you receive for the 5,000,000 yen 60 days from now if you sell yen forward? Answer 10 points Question 8 1. All else equal, an increase in U.S. interest rates relative to German interest rates would likely ____ the U.S. demand for euros and ____ the supply of euros for sale. Answer a. reduce; reduce b. reduce; increase c. increase; increase d. increase; reduce 10 points Question 9 1. Baylor ...