Name: ________KEY____________________

Midterm I
Finance 410
International Financial Management
Spring 2007

Instructions:

1. There are 10 multiple-choice questions, each worth 3 points and 6 problems worth a total of 70 points.

2. Write your answers (IN CAPITAL LETTERS) for the multiple choice questions on the answer sheet provided at the back of the exam.

3. You need a calculator and some writing utensil; all the formulas are provided in the back of the exam in a separate formula sheet.

4. Do not forget to write your names at the top of this page. Exams without names will not be graded.

5. GOOD LUCK!!!!!!!!

MULTIPLE CHOICE QUESTIONS: 1. Which of the following investment strategies will allow an investor to make a profit if they anticipate that the value of the Euro, a currency that they do not currently own, is going to fall over the next 90 days, and they are correct in their prediction? A. Sell Euros short B. Buy Euros short C. Sell dollars short D. Buy Euros long

2. Foreign exchange ___________________ earn a profit by the bid-ask spread on the currencies they buy and sell. Foreign exchange _________________, on the other hand, earn a profit by bringing together buyers and sellers of foreign currencies and earning a commission on each sale and purchase. A. central banks; treasuries B. dealers; brokers C. brokers; dealers D. speculators; arbitragers

3. When categorizing investments for the financial account component of the balance of payments, the _____________________ is an investment where the investor has no control, whereas the _____________________ is an investment where the investor ahs control over the asset. A. direct investment; portfolio investment B. direct investment; indirect investment C. portfolio