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Question;1.;The;best definition for direct quotes would be "direct quotes measure;a.;how much foreign currency must be exchanged to;receive 1 domestic currency.;b.;current or spot rates.;c.;how much domestic currency must be exchanged to;receive 1 foreign currency.;d. exchange rates at a future;point in time.;2.;A;U.S. company purchases medical lab equipment from a Japanese company. The;Japanese company requires payment in Japanese yen. In this transaction, the yen;would be referred to as the;a.;domestic currency for the U.S. company.;b.;denominated currency.;c.;purchasing currency.;d. selling currency.;3.;A U.S. company that has purchased inventory from a;German vendor would be exposed to a net exchange gain on the unpaid balance if;the;a.;amount to be paid was denominated in dollars.;b. dollar;weakened relative to the Euro and the Euro was the denominated currency.;c. dollar;strengthened relative to the Euro and the Euro was the denominated currency.;d. U.S. company purchased a;forward contract to buy Euros.;4.;A U.S. company that has sold its product to a German;firm would be exposed to a net exchange gain on the unpaid receivable if the;a.;amount to be paid was denominated in dollars.;b. dollar;weakened relative to the Euro and the Euro was the denominated currency.;c. dollar;strengthened relative to the Euro and the Euro was the denominated currency.;d. U.S. company purchased a;forward contract to buy Euros.;5.;A bank dealing in foreign currency tells you that;the foreign currency will buy you $.80 US dollars. The bank has given you;a.;a direct quote.;b.;an indirect quote.;c.;the official (fixed) rate.;d. a forward rate.;Chapter 10;6.;When an economic transaction is denominated in a;currency other than the entity's domestic currency, the entity must establish a;a.;domestic rate.;b.;hedge rate.;c.;rate of currency change.;d. rate of exchange.;7.;A forward exchange contract is being transacted at a;premium if the current forward rate is;a.;less than the expected spot rate.;b.;greater than the expected spot rate.;c.;less than the current spot rate.;d. greater than the current;spot rate.;8.;Which of the following factors influences the spread;between forward and spot rates?;a.;which currency is denominated as the domestic;currency;b.;the length of the forward exchange contract;c.;the current cross rate between the two currencies;d. all are factors that may;influence the spread;9.;Foreign currency transactions not involving a hedge;should be accounted for using;a.;the one-transaction method.;b.;the two-transaction method.;c.;a hybrid of the one- and two-transaction methods.;d. either the;one- or the two-transaction method (allowed by the FASB).;10.;A transaction denominated in a foreign currency will;most likely result in gains and losses to the reporting entity if the;a.;forward exchange contract is selling at a premium.;b. transaction;is denominated and measured in the reporting entity's currency.;c. transaction;takes place in a country with a tiered monetary system.;d. transaction;is denominated in a foreign currency and measured in the reporting entity's;currency.;10-2;Chapter 10;11. Given the following information for a 90 day;contract;US Dollars;FC;Value;Today;3,750;5,000;Interest;Rate;4%;7%;3;months interest;37.50;87.50;Value in 3 months;??;??;The spot rate today is 1FC =.75;What will be the forward rate?;a.;1FC =.75 US Dollars;b.;1FC =.57 US Dollars;c.;1FC =.745 US Dollars;d. 1FC =.70 US Dollars;12.;A U.S. firm has purchased, for 50,000 FCs, an;electric generator from a foreign firm. The exchange rates were 1 FC = $0.80 on;the delivery date and 1 FC = $0.76 when the payable was paid. What is the final;recorded value if the two-transaction method is used?;a.;$40,000;b.;$38,000;c.;$42,000;d. $50,000;13.;A U.S. manufacturer has sold computer services to a;foreign firm and received 200,000 foreign currency units (FCs). The exchange rates;were 1 FC = $.75 on the date of the sale and 1 FC = $.80 when the receivable;was settled. On the transaction date, the settlement exchange rate is estimated;to be 1FC = $.72. By the settlement date, what is the total exchange gain or;loss recorded for the transaction if the two-transaction method is used?;a.;$10,000 exchange gain;b.;$6,000 exchange loss;c.;$10,000 exchange loss;d. no gain or loss;10-3;Chapter 10;14.;A U.S. manufacturer has sold goods to a foreign firm;for a sale price of 80,000FC on 12/15/X1. The invoice is due 1/15/X2. The U.S.;Firm fiscal year is 12/31/X1. Given the following exchange rates, what gain or;loss would the US firm record on 12/31?;12/15 1FC = $0.60 US Dollars;12/31 1FC = $0.65 US Dollars;1/15 1FC = $0.63 US Dollars;d. loss of $4,000;e.;loss of $1,600;f.;gain of $2,400;g. gain of $4,000;15.;Which of the following does not represent an;exchange risk on an exposed position to a company transacting business with a;foreign vendor?;a.;transaction is denominated in foreign currency;settled at a future date;b.;firm commitment to purchase inventory to be paid for;in foreign currency;c.;Forecasted foreign currency transaction with a high;probability of occurrence;d. firm commitment to purchase;inventory denominated in U.S. dollars;16. Exchange gains and losses on;a forward exchange contract that covers the same time period as the transaction;which it provides a hedge for should be recognized as;a.;an extraordinary item.;b.;part of the original sales transaction.;c.;income from continuing operations.;d. income from continuing;operations, but only if material.

 

Paper#44391 | Written in 18-Jul-2015

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