Final test

Question 1

Independent float

Answer 1

the currency is allowed to fluctuate according to market forces.

Question 2

Pegged to another currency

Answer 2

the currency’s value is fixed in terms of a particular foreign currency, and the central bank intervenes to maintain the fixed value.

Question 3

European Monetary System

Answer 3

a common currency (the euro) is used in multiple countries. Its value floats against other world currencies

Question 4

The difference between the rates at which a bank is willing to buy and sell currency is known as the

Answer 4

“spread”

Question 5

direct quotes

Answer 5

indicate the number of domestic currency needed to purchase one unit of foreign currency

Question 6

indirect quotes

Answer 6

indicate the number of foreign currency units that could be purchased with one unit of domestic currency. These rates are simply the inverse of direct quotes.

Question 7

spot rate

Answer 7

price at which a foreign currency can be purchased or sold today

Question 8

forwards rate

Answer 8

the price available today at which foreign currency can be purchased or sold in the future

Question 9

If forward rates exceed spot rates on any given date, the foreign currency is said to be selling at

Answer 9

a premium

Question 10

If forward rates are less than spot rates, the currency is said to be selling at a

Answer 10

discount

Question 11

“Put” options allow

Answer 11

for the sale of foreign currency by the option holder.

Question 12

“Call” options allow for

Answer 12

the purchase of foreign currency by the option holder.

Question 13

A ________ is the exchange rate at which options will be executed if option holders decide to exercise options

Answer 13

strike piece

Question 14

intrinsic value is equal to

Answer 14

the gain that could be realized by exercising the option immediately

Question 15

time value relates to the

Answer 15

spot rate which can change over time and cause the option’s intrinsic value to increase.

Question 16

Export Sales and import purchases are international transactions, they are components of what is called

Answer 16

trade

Question 17

The two types of exchange rates are

Answer 17

historical and current

Question 18

Historical exchange rate

Answer 18

the exchange rate that existed when a transaction occured

Question 19

current exchange rate

Answer 19

the exchange rate that exist at the balance sheet date

Question 20

The two major translation methods are

Answer 20

the current rate method or the temporal method

Question 21

what is a subsdiarys functional currency?

Answer 21

the currency in which the entity primarily generates and expends cash

Question 22

in comparing the current rate and temporal methods of translation, which of the following is true?

Answer 22

the reported balance of accounts receivable is normally the same under both methods

Question 23

which of the following statements is true for the translation process using the current rate method

Answer 23

a translation adjustment is created by the change in relative value of a subsidiarys net assets caused by exchange rate fluctuations

Question 24

at what rates should the equipment and accumulated depreciation-equipment balance sheet accounts be translated, using the current rate method in US dollars?

Answer 24

both current

Question 25

The securities act of 1933….

Answer 25

regulates the initial offering of securities by a company

Question 26

what is the purpose of regulation s-k?

Answer 26

establishes required disclosure of non-financial information with the SEC

Question 27

what is the difference between regulation s-k, and regulation s-x?

Answer 27

s-k establishes regulations of for non-financial information filed with the sec, whereas regulation s-x prescribes the form and content of financial statements included in sec filings

Question 28

the securities exchange act of 1934

Answer 28

regulates the public trading of previously issued securities through brokers and exchanges

Question 29

which of the following is not a way by which the sarbanes-oxley act attempts to ensure auditor independence from an audit client?

Answer 29

audit fees must be approved by PCAOB

Question 30

what is a registration statement

Answer 30

a statement that must be filled with the sec before a company can begin an initial offering of securities to the public

Question 31

which of the following is a registration statement used by large companies that already have a significant following in the stock market?

Answer 31

form s-3

Question 32

which of the following must be provided to every potential buyer of a new security?

Answer 32

a prospectus

Question 33

What does the term incorporation by reference mean?

Answer 33

filing information with the SEC by indicating that the information is already available in another document

Question 34

what is a letter of comments

Answer 34

a letter the SEC sends to a company indicating needed changes or clarifications in a registration statement

Question 35

what is a prospectus

Answer 35

the first part of a registration statement that a company must furnish to all potential buyers of a new security

Question 36

which of the following is ussually not filed with the SEC on a regular periodic basis

Answer 36

a prospectus

Question 37

what is a shelf registration

Answer 37

a registration process for large companies that allows them to offer securities over a period of time without seeking additional approval by the SEC

Question 38

what is EDGAR?

Answer 38

a system designed by the SEC to allow electronic filings