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Corp Finance Exam

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Question 1 10 points Save

Macomb Corporation is a U.S. firm that invoices some of its exports in Japanese yen. If it expects the yen to weaken, it could ____ to hedge the exchange rate risk on those exports.

sell yen put options buy yen call options buy futures contracts on yen sell futures contracts on yen Question 2 10 points Save

A U.S. corporation has purchased currency put options to hedge a 100,000 Canadian dollar (C$) receivable. The premium is $.01 and the exercise price of the option is $.75. If the spot rate at the time of maturity is $.85, what is the net amount received by the corporation if it acts rationally?

$74,000. $84,000. $75,000. $85,000.

Question 3 10 points Save

Magent Co. is a U.S. company that has exposure to the Swiss francs (SF) and Danish kroner (DK). It has net inflows of SF200 million and net outflows of DK500 million. The present exchange rate of the SF is about $.40 while the present exchange rate of the DK is $.10. Magent Co. has not hedged these positions. The SF and DK are highly correlated in their movements against the dollar. If the dollar weakens, then Magent Co. will:

benefit, because the dollar value of its SF position exceeds the dollar value of its DK position. benefit, because the dollar value of its DK position exceeds the dollar value of its SF position. be adversely affected, because the dollar value of its SF position exceeds the dollar value of its DK position. be adversely affected, because the dollar value of its DK position exceeds the dollar value of its SF position. Question 4 10 points Save

Dubas Co. is a U.S.-based MNC that has a subsidiary in Germany and another subsidiary in Greece. Both subsidiaries frequently remit their

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