FIN 410 CH 12 OPERATING EXPOSURE
STUDY GUIDE 2026 PRACTICE QUESTIONS
& CORRECT ANSWERS INTERNATIONAL
FINANCE EXAM PREP A+ REVIEW
14) A British firm and a U.S. Corporation each wish to enter into a currency
swap hedging agreement. The British firm is receiving U.S. dollars from
sales in the U.S. but wants pounds. The U.S. firm is receiving pounds from
sales in Britain but wants dollars. Which of the following choices would
best satisfy the desires of the firms?
A) The British firm pays dollars to a swap dealer and receives pounds from
the dealer. The U.S. firm pays pounds to the swap dealer and receives
dollars.
B) The U.S. firm pays dollars to a swap dealer and receives pounds from the
dealer. The British firm pays pounds to the swap dealer and receives
dollars.
C) The British firm pays pounds to a swap dealer and receives pounds from
the dealer. The U.S. firm pays dollars to the swap dealer and receives
dollars.
D) The British firm pays dollars to a swap dealer and receives dollars from
the dealer. The U.S. firm pays pounds to the swap dealer - CORRECT
ANSWER-A) The British firm pays dollars to a swap dealer and receives
pounds from the dealer. The U.S. firm pays pounds to the swap dealer and
receives dollars.
15) NorthRim Inc. (NRI), imports extreme condition outdoor wear and
equipment from the Allofit Territories Company (ATC) located in Canada.
With the steady decline of the U.S dollar against the Canadian dollar NRI is
,finding a continued relationship with ATC to be an increasingly difficult
proposition. In response to NRI's request, ATC has proposed the following
risk-sharing arrangement. First, set the current spot rate as the base rate.
As long as spot rates stay within 5% (up or down) NRI will pay at the base
rate. Any rate outside of the 5% range, ATC will share equally with NRI the
difference between the spot rate and the base rate. If the current spot rate is
C$1.20/$, what are the upper and lower limits for trading to take place at
C$1.20?
A) C$1.205/$ - C$1.195/$
B) C$1.15/$ - C$1.25/$
C) C$1.14/$ - C$1.26/$
D) none of the above - CORRECT ANSWER-C) C$1.14/$ - C$1.26/$
16) NorthRim Inc. (NRI), imports extreme condition outdoor wear and
equipment from The Allofit Territories Company (ATC) located in Canada.
With the steady decline of the U.S dollar against the Canadian dollar NRI is
finding a continued relationship with ATC to be an increasingly difficult
proposition. In response to NRI's request, ATC has proposed the following
risk-sharing arrangement. First, set the current spot rate of C$1.20/$ as the
base rate. As long as spot rates stay within 5% (up or down) NRI will pay at
the base rate. Any rate outside of the 5% range, ATC will share equally with
NRI the difference between the spot rate and the base rate. If NRI had a
payable of C$100,000 due today and the current spot rate were C$1.17/$,
how much does would NRI owe in U.S. dollars?
A) $83,333
B) $85,470
C) $85,837
D) $117,000 - CORRECT ANSWER-A) $83,333
, 17) Costs associated with the purchase of sizeable put options positions
include each of the following EXCEPT:
A) the purchase price of the options
B) the opportunity cost of buying the options rather than diversifying
operations to reduce risk
C) executive salaries of having corporate offices in more than one country
D) none of the above - CORRECT ANSWER-C) executive salaries of having
corporate offices in more than one country
18) Currency swaps are exclusively for periods of time under one year. -
CORRECT ANSWER-False
19) Most swap dealers arrange swaps so that each firm that is a party to the
transaction does not know who the counterparty is. - CORRECT
ANSWER-True
1) Another name for operating exposure is ________ exposure.
A) economic
B) competitive
C) strategic
D) all of the above - CORRECT ANSWER-D) all of the above
2) What type of international risk exposure measures the change in present
value of a firm resulting from changes in future operating cash flows caused
by any unexpected change in exchange rates?
A) transaction exposure
STUDY GUIDE 2026 PRACTICE QUESTIONS
& CORRECT ANSWERS INTERNATIONAL
FINANCE EXAM PREP A+ REVIEW
14) A British firm and a U.S. Corporation each wish to enter into a currency
swap hedging agreement. The British firm is receiving U.S. dollars from
sales in the U.S. but wants pounds. The U.S. firm is receiving pounds from
sales in Britain but wants dollars. Which of the following choices would
best satisfy the desires of the firms?
A) The British firm pays dollars to a swap dealer and receives pounds from
the dealer. The U.S. firm pays pounds to the swap dealer and receives
dollars.
B) The U.S. firm pays dollars to a swap dealer and receives pounds from the
dealer. The British firm pays pounds to the swap dealer and receives
dollars.
C) The British firm pays pounds to a swap dealer and receives pounds from
the dealer. The U.S. firm pays dollars to the swap dealer and receives
dollars.
D) The British firm pays dollars to a swap dealer and receives dollars from
the dealer. The U.S. firm pays pounds to the swap dealer - CORRECT
ANSWER-A) The British firm pays dollars to a swap dealer and receives
pounds from the dealer. The U.S. firm pays pounds to the swap dealer and
receives dollars.
15) NorthRim Inc. (NRI), imports extreme condition outdoor wear and
equipment from the Allofit Territories Company (ATC) located in Canada.
With the steady decline of the U.S dollar against the Canadian dollar NRI is
,finding a continued relationship with ATC to be an increasingly difficult
proposition. In response to NRI's request, ATC has proposed the following
risk-sharing arrangement. First, set the current spot rate as the base rate.
As long as spot rates stay within 5% (up or down) NRI will pay at the base
rate. Any rate outside of the 5% range, ATC will share equally with NRI the
difference between the spot rate and the base rate. If the current spot rate is
C$1.20/$, what are the upper and lower limits for trading to take place at
C$1.20?
A) C$1.205/$ - C$1.195/$
B) C$1.15/$ - C$1.25/$
C) C$1.14/$ - C$1.26/$
D) none of the above - CORRECT ANSWER-C) C$1.14/$ - C$1.26/$
16) NorthRim Inc. (NRI), imports extreme condition outdoor wear and
equipment from The Allofit Territories Company (ATC) located in Canada.
With the steady decline of the U.S dollar against the Canadian dollar NRI is
finding a continued relationship with ATC to be an increasingly difficult
proposition. In response to NRI's request, ATC has proposed the following
risk-sharing arrangement. First, set the current spot rate of C$1.20/$ as the
base rate. As long as spot rates stay within 5% (up or down) NRI will pay at
the base rate. Any rate outside of the 5% range, ATC will share equally with
NRI the difference between the spot rate and the base rate. If NRI had a
payable of C$100,000 due today and the current spot rate were C$1.17/$,
how much does would NRI owe in U.S. dollars?
A) $83,333
B) $85,470
C) $85,837
D) $117,000 - CORRECT ANSWER-A) $83,333
, 17) Costs associated with the purchase of sizeable put options positions
include each of the following EXCEPT:
A) the purchase price of the options
B) the opportunity cost of buying the options rather than diversifying
operations to reduce risk
C) executive salaries of having corporate offices in more than one country
D) none of the above - CORRECT ANSWER-C) executive salaries of having
corporate offices in more than one country
18) Currency swaps are exclusively for periods of time under one year. -
CORRECT ANSWER-False
19) Most swap dealers arrange swaps so that each firm that is a party to the
transaction does not know who the counterparty is. - CORRECT
ANSWER-True
1) Another name for operating exposure is ________ exposure.
A) economic
B) competitive
C) strategic
D) all of the above - CORRECT ANSWER-D) all of the above
2) What type of international risk exposure measures the change in present
value of a firm resulting from changes in future operating cash flows caused
by any unexpected change in exchange rates?
A) transaction exposure
