Question

12) In the United Kingdom, the majority of public companies A) voluntarily abide by the Code of Best Practice on corporate governance. B) do not abide by the Code of Best Practice on corporate governance. g are compelled by law to abide by the Code of Best Practice on corporate 12) governance. D) none of the options 13) The board of directors may grant stock options to managers. A) to use as a substitute for bonus. B) to align the interest of managers with that of shareholders. to save executive compensation costs. D) none of the options 13) 14) Most foreign exchange transactions are for A) interbank trades between international banks or nonbank dealers. B) purchase of hard currencies. 9 intervention by central banks. D) retail trade. 14) 15) Indirect exchange rate quotations from the U.S. perspective are A) the price of one U.S. dollar in the foreign currency. B) the price of one unit of the foreign currency in terms of the U.S. dollar. 15) 16) Suppose that the current exchange rate is £1.00-$2.00. The indirect quote, from the U.S. perspective is A) £0.50 $1.00. 9E1.00-$2.00 16) B) fl.00-$0.50 D) none of the options 17) 17) U.S. S equiv Tuesday Monday Currency per U.S. S Tuesday Country Monday 0.6211 Britain (Pound) £62,500 I Month Forward 3 Months Forward 6 Months Forward 12 Months Forward 1.6000 1.6100 0.6250 0.6173 1.6100 1.6300 0.6211 0.6173 1.6300 1.6600 0,6024 1.7200 1.8000 0.6024 1.6600 0.5814 1.7200 0.5814 0.5556 Using the table shown, what is the most current spot exchange rate shown for British pounds? Use a direct quote from a U.S. perspective. A) $1.00 £0.625 q S1.60-E1.00 B) $1.61-£1.00 D) S1.72= £1.00

Answer 1

12]

A - The Code is voluntary in nature. They are not compulsory, but many companies do abide by the Code.

13]

B - to align manager interest with shareholders. The objective of shareholders is to maximize their wealth, which happens by maximizing share price. By giving stock options to managers, their interest is aligned with that of shareholders.

A is incorrect - Options take time to vest, and bonus is paid immediately. Hence, options are not a substitute for bonus.

C is incorrect - Stock options are a part of executive compensation.

14]

A - Interbank trade forms the majority of forex transactions.

15]

A - an indirect quote is a currency quote where the amount of foreign currency required to purchase/sell one unit of domestic currency is quoted.