This quiz works best with JavaScript enabled. Home > Finance > International Finance > International Finance – Quiz 1 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books International Finance Quiz 1 (30 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. According to the theory of interest rate parity, which of the following would be equal when hedged arbitrage investment and domestic investment in the money market are concerned: A) Exchange rate. B) Interest rate. C) Profit rate. D) Investment capital ratio. Show Answer Correct Answer: C) Profit rate. 2. Compared to international trade, direct foreign investment generally results in ..... exposure to international political risk and ..... exposure to international economic conditions. A) Higher; higher. B) (None). C) (None). D) (None). Show Answer Correct Answer: A) Higher; higher. 3. Selling products abroad for less than it cost to produce them at home A) Protectionists. B) Tariff. C) Dumping. D) Balance of payments. Show Answer Correct Answer: C) Dumping. 4. A system in which currency values are based on supply and demand is: A) An exchange control. B) A floating exchange rate. C) A foreign exchange market. D) A currency future. Show Answer Correct Answer: B) A floating exchange rate. 5. Why QIB is better for domestic investors A) QIB is better for domestic investors because it offers access to a wider range of investment opportunities and allows for diversification of their portfolio. B) QIB is not better for domestic investors because it has higher fees and costs. C) QIB is not better for domestic investors because it does not allow for portfolio diversification. D) QIB is not better for domestic investors because it limits their investment options. Show Answer Correct Answer: A) QIB is better for domestic investors because it offers access to a wider range of investment opportunities and allows for diversification of their portfolio. 6. The international monetary system went through several distinct stages of evolution. These stages are summarized, in alphabetic order, as follows (i)-Bimetallism (ii)-Bretton Woods system (iii)-Classical gold standard (iv)-Flexible exchange rate regime (v)-Interwar period The chronological order that they actually occurred is: A) (iii), (i), (iv), (ii), and (v). B) (i), (iii), (v), (ii), and (iv). C) (vi), (i), (iii), (ii), and (v). D) (v), (ii), (i), (iii), and (iv). Show Answer Correct Answer: B) (i), (iii), (v), (ii), and (iv). 7. In the foreign exchange market, the ..... of one country is traded for the ..... of another country. A) Currency; financial instruments. B) Currency; currency. C) Goods; goods. D) Currency; goods. Show Answer Correct Answer: B) Currency; currency. 8. Monetary policy for the euro-12 countries is now conducted by: A) The Federal Reserve. B) The Bundesbank. C) European Central Bank. D) None of the above. Show Answer Correct Answer: C) European Central Bank. 9. Exchange Rate If one euro is equivalent to 1.20 dollars, how many dollars is 240 euros? A) 279 DOLLARS. B) 288 DOLLARS. C) 280 DOLLARS. D) 278 DOLLARS. Show Answer Correct Answer: B) 288 DOLLARS. 10. Also called the Forex, this is where currencies are bought and sold and exchange rates are determined. A) Foreign trade. B) Foreign exchange. C) Foreign exchange market. D) None of the above. Show Answer Correct Answer: C) Foreign exchange market. 11. System under which the price of one currency remainsunchanged in relation to the value of another currency A) Dumping. B) Fixed exchange rate. C) Country protectors". D) North American Free TradeAgreement. Show Answer Correct Answer: B) Fixed exchange rate. 12. Floating exchange rates occur when the government (central bank) of a country decide what its currency will be worth relative to other countries. A) Do not choose. B) False. C) Do not choose. D) True. Show Answer Correct Answer: B) False. 13. Which of the following is not a characteristic of international finance? A) Foreign exchange risk and political risk. B) Market mperfections. C) The international environment opens up many opportunities. D) Regardless of the political and economic situation of each country. Show Answer Correct Answer: D) Regardless of the political and economic situation of each country. 14. The international Fisher effect (IFE) suggests that the foreign currency will appreciate when: A) The current home real interest rate exceeds the current foreign real interest rate. B) The current foreign inflation rate exceeds the current home inflation rate. C) The current home nominal interest rate exceeds the current foreign nominal interest rate. D) The current home inflation rate exceeds the current foreign nominal interest rate. Show Answer Correct Answer: C) The current home nominal interest rate exceeds the current foreign nominal interest rate. 15. Bank X quotes GBP/USD = 1.6500/20; Bank Y quotes GBP/USD = 1.6475/98. Assuming transaction fees = 0, an American investor would? A) There is no arbitrage opportunity. B) Buy USD at bank X, buy GBP at bank Y. C) Buy GBP at bank X, sell GBP at bank Y. D) Buy GBP at bank Y, sell USD at bank X. Show Answer Correct Answer: D) Buy GBP at bank Y, sell USD at bank X. 16. The holders of this stock have an additional advantage, in that they enjoy a higher priority in the distribution of dividends and assets. The disadvantage is that they do not enjoy any voting right. A) Common. B) Preferred. C) Dual class. D) Treasury. Show Answer Correct Answer: B) Preferred. 17. An MNC may be more exposed to agency problems if most of its shares are held by: A) A few mutual funds. B) A widely dispersed set of individual investors. C) A few pension funds. D) All of these would prevent agency problems. Show Answer Correct Answer: B) A widely dispersed set of individual investors. 18. The International Monetary Fund has approximately 100 members. A) Do not choose. B) True. C) Do not choose. D) False. Show Answer Correct Answer: D) False. 19. U9V-1) When a country has the ability to produce more of a product relative to another country. A) Favorable Balance of Trade. B) Positive Net Export. C) Comparative Advantage. D) Absolute Advantage. Show Answer Correct Answer: D) Absolute Advantage. 20. If, for a $ 1000 premium, you buy a $ 100, 000 call option on bond futures with a strike price of 110, and at the expiration date the price is 114 A) Your profit is $ 3000. B) Your loss is $ 3000. C) Your loss is $ 4000. D) Your profit is $ 4000. Show Answer Correct Answer: A) Your profit is $ 3000. 21. Livingston Co. has a subsidiary in Korea. The subsidiary reinvests half of its net cash flows into operations and remits half to the parent. Livingston's expected cash flows from domestic business are $ 100, 000 and the Korean subsidiary is expected to generate 100 million Korean won at the end of the year. The expected value of won is $ .0012. What are the expected dollar cash flows of Livingston Co.? A) $ 60, 000. B) $ 200, 000. C) $ 100, 000. D) $ 160, 000. Show Answer Correct Answer: D) $ 160, 000. 22. The SSE Composite 50 Index: A) Measures the stock market performance of Chinese blue chip companies (large cap). B) Is traded only on the Shanghai Stock Exchange. C) None of the above answers is correct. D) None of above. Show Answer Correct Answer: A) Measures the stock market performance of Chinese blue chip companies (large cap). 23. Zest Co. has a subsidiary in Mexico. The expected cash flows in pesos to be received in the future from this subsidiary have not changed since last month, but the valuation of Zest Co. has increased since last month. What could have caused this increase in value? A) Appreciation of the Mexican peso. B) (None). C) (None). D) (None). Show Answer Correct Answer: A) Appreciation of the Mexican peso. 24. Covered Interest Rate Parity A) $\left(1+r\right)=\left(1+r^{\cdot}\right)\left(\frac{S}{F}\right)$. B) $\left(1+r\right)=\left(1+r^{\cdot}\right)\left(\frac{F}{S}\right)$. C) $\left(1+r\right)=\left(1+r^{\cdot}\right)\left(\frac{S}{S^e}\right)$. D) $\left(1+r\right)=\left(1+r^{\cdot}\right)\left(\frac{S^e}{S}\right)$. Show Answer Correct Answer: B) $\left(1+r\right)=\left(1+r^{\cdot}\right)\left(\frac{F}{S}\right)$. 25. Hedging is mechanism to gain a profit A) False. B) True. Show Answer Correct Answer: A) False. 26. This is the most common form of stocks. The holders have the power to vote in important corporate decisions. A) Preferred. B) Treasury. C) Dual class. D) Common. Show Answer Correct Answer: D) Common. 27. The secondary market: A) Promotes business financing. B) Connects investors with each other. C) Is reserved for stocks only. D) None of above. Show Answer Correct Answer: B) Connects investors with each other. 28. ..... means importing goods from one country and exporting the same to foreign countries. A) Entrepot trade. B) Export Trade. C) Import Trade. D) None of the above. Show Answer Correct Answer: A) Entrepot trade. 29. At Vietcombank, the buying rate is listed as follows:1 USD = 7, 7852 HKD and 1 HKD = 2003.8 VND. So for the bank, the buying rate of 1 USD is? A) 16.453. B) 15.547. C) 15.599. D) 15.762. Show Answer Correct Answer: C) 15.599. 30. The primary purpose of the World Bank is to maintain an orderly system of world trade and exchange rates A) True. B) False. Show Answer Correct Answer: B) False. Next →Related QuizzesFinance QuizzesInternational Finance Quiz 2International Finance Quiz 3International Finance Quiz 4International Finance Quiz 5International Finance Quiz 6International Finance Quiz 7International Finance Quiz 8International Finance Quiz 9International Finance Quiz 10 🏠 Back to Homepage 📘 Download PDF Books 📕 Premium PDF Books