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a)Please mark the only statement below that DOES NOT characterize the financial operations of a multinational corporation a. Multinational corporations can finance their affiliates using intercompany loans b. Gaining economies of scale in production; gaining access to lower labor costs; shifting taxation around the globe are possible reasons encouraging multinationals to invest abroad c. While multinationals gain new market access by establishing affiliates in emerging countries, this exposes the firm to country risk and political risk, incuding capital controls and nationalization of assets d. Multinationals only issue debt denomoinated in the currency of the country where the headquarters are located to minimize translation risk

b)

1. Please mark the only instrument that is NOT USED in TRADE FINANCE

   	a.	Forfaiting
   	b.	Bill of exchange (B/E)
   	c.	Letter of Credit
   	d.	Bill of landing

c)

If China's economic policy goal is to maintain a weak currency (i.e. avoid the appreciation of the Renminbi to keep export competitiveness) against the US dollar, then the economic policy makers should (mark the CORRECT option):

	a.	Intervene in the FX market by aggressively selling US dollars and buying Renminbi
	b.	Intervene in the FX market by aggressively buying US dollars and selling Renminbi
	c.	tighten controls on capital outflows
	d.	Raise the policy nominal interest rate

d)

1. A large share of BMW's revenues are denominated in EUR. At the same time, a large share of BMWs long term debt is denominated in US dollars. BMW's CEO, Fritz Carwagen (who is based in Frankfurt), is convinced that the Euro will depreciate significantly against the US dollar in the next 12-months. Please indicate the only hedging strategy that WILL NOT HELP Fritz to protect BMW against its USD FX exposure

   	a.	Since he is based in Frankfurt, Fritz could buy FRAs
   	b.	Fritz could buy USD futures to hedge its USD exposure on the external debt
   	c.	Fritz could buy USD calls (american) with an expiration in 12 months
   	d.	Fritz could use an FX swap to change its debt to EUR from USD currently

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