This quiz works best with JavaScript enabled. Home > Finance > International Finance > International Finance – Quiz 11 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books International Finance Quiz 11 (30 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. An example of an exchange control is when the government limits the amount of money a tourist may take out of the country A) False. B) True. Show Answer Correct Answer: B) True. 2. What is two way fungibility in Global depository receipts A) The ability to convert GDRs into cryptocurrency. B) Two way fungibility in Global depository receipts refers to the ability to convert GDRs into underlying shares and vice versa. C) The ability to convert GDRs into real estate. D) The ability to convert GDRs into art pieces. Show Answer Correct Answer: B) Two way fungibility in Global depository receipts refers to the ability to convert GDRs into underlying shares and vice versa. 3. The value of currency is closely managed by government and central bank policy. A) Fixed exchange rate. B) Foreign exchange market. C) Managed exchange rate. D) Floating exchange rate. Show Answer Correct Answer: C) Managed exchange rate. 4. FX transactions are executed immediately, the rate ..... ? A) Forward rate. B) Spot Rate. C) Option contract strike price. D) The sentences above are correct. Show Answer Correct Answer: B) Spot Rate. 5. . Assuming the IRP holds, the USD interest rate is 5% and the GBP interest rate is 2%, the GBP/USD forward rate will? A) Decrease 2.94%. B) Increase 2.86%. C) Increase 2.94%. D) Decrease 2.86%. Show Answer Correct Answer: C) Increase 2.94%. 6. If interest rate parity exists, then ..... is not feasible A) Locational arbitrage. B) Covered interest arbitrage. C) Forward realignment arbitrage. D) Triangular arbitrage. Show Answer Correct Answer: B) Covered interest arbitrage. 7. People who favor trade barriers that protect domestic industries A) Dumping. B) Balance of payments. C) Protectionists. D) Tariff. Show Answer Correct Answer: C) Protectionists. 8. What are the similarities between currency futures and forwards: A) With Self-Adjustment. B) Are transformed according to the scale of activity. C) Are converted to the transaction date. D) None of the sentences are correct. Show Answer Correct Answer: B) Are transformed according to the scale of activity. 9. What is the summary of flow of funds resulting from the sale of assets between one specified country and all other countries over a specified period of time? A) Secondary Income. B) Capital Account. C) Financial Account. D) Current Account. Show Answer Correct Answer: B) Capital Account. 10. During the period between World War I and World War II A) The major European powers and the U.S. returned to the gold standard and fixed exchange rates. B) While most countries abandoned the gold standard during World War I, international trade and investment flourished during the interwar period under a coherent international monetary system. C) The U.S. dollar emerged as the dominant world currency, gradually replacing the British pound for the role. D) None of the above. Show Answer Correct Answer: C) The U.S. dollar emerged as the dominant world currency, gradually replacing the British pound for the role. 11. The Nomial Exchange Rate is the relative price of currencies of two countries. A) False. B) True. Show Answer Correct Answer: B) True. 12. Current account deficit A) Increases net external debt. B) Decreases net external debt. Show Answer Correct Answer: A) Increases net external debt. 13. International markets arerelatively more homogeneousin nature. A) False. B) True. Show Answer Correct Answer: A) False. 14. If the annual inflation rate is 2.5 percent in the United States and 4 percent in the U.K., and the dollar appreciated against the pound by 1.5 percent, then the real exchange rate, assuming that PPP initially held, is A) Parity. B) -0.0198. C) 0.9710. D) 4.5. Show Answer Correct Answer: C) 0.9710. 15. A business can be profitable and still go out of business because it runs out of cash. A) False. B) True. Show Answer Correct Answer: B) True. 16. What paradigm is used to define the futures price A) Hedge ratio. B) Black Scholes. C) Risk neutral valuation. D) IRP. Show Answer Correct Answer: D) IRP. 17. What is the major objective of the International Monetary Fund (IMF)? A) Promote cooperation among countries on international monetary issues. B) Provide loans to enhance economic development. C) Facilitate governance in governments and corporations of countries with market economics. D) Extend loans at low interest rates to poor nations. Show Answer Correct Answer: A) Promote cooperation among countries on international monetary issues. 18. Which of the following examples definitely illustrates a depreciation of the U.S. dollar? A) The dollar exchanges for 1 pound and then exchanges for 1.2 pounds. B) The dollar exchanges for 250 yen and then exchanges for 275 francs. C) The dollar exchanges for 100 francs and then exchanges for 120 yen. D) The dollar exchanges for 120 francs and then exchanges for 100 francs. Show Answer Correct Answer: A) The dollar exchanges for 1 pound and then exchanges for 1.2 pounds. 19. The IMF was conceived in A) JUNE 1945. B) JULY 1944. C) JULY 1945. D) JUNE 1944. Show Answer Correct Answer: B) JULY 1944. 20. In country A, the opportunity cost of producing 2, 000 pounds of microprocessors is 4, 000 tablet devices. In country B, the opportunity cost of 3, 000 tablet devices is 4, 000 pounds of microprocessors. Both countries canexperience gains from trade if the exchange rate for a ton of cereal is 3 tablet devices per pound of microprocessors. A) True. B) False. Show Answer Correct Answer: A) True. 21. Assume that Boca Co. wants to expand its business to Japan, and wants complete control over the operations in Japan. Which method of international business is most appropriate for Boca Co? A) Establishment of Japanese subsidiary. B) Joint venture. C) Partial acquisition of existing Japanese firm. D) Licensing. Show Answer Correct Answer: D) Licensing. 22. People or organization's from one nation participate in domestic business transactions. A) True. B) False. Show Answer Correct Answer: A) True. 23. What is the purpose of the International Development Association (IDA)? A) Facilitate cooperation among countries with regard to international transactions. B) Promote private enterprise within countries. C) Provide loans at low interest rates to poor nations. D) Extend loans at low interest rates to poor nations. Show Answer Correct Answer: D) Extend loans at low interest rates to poor nations. 24. The derivative contract which allows the contract holder the choice to exercise the contract is called ..... A) Store of value. B) Options. C) Futures. D) Derivatives. Show Answer Correct Answer: B) Options. 25. Which of the following derivative instruments tend to have small to medium companies as both counterparties? A) A traditional currency forward contract. B) A non-deliverable forward contract. C) A currency futures contract. D) A currency swap. Show Answer Correct Answer: D) A currency swap. 26. U9V-10) Safety, environmental, health, or other technical requirements on imports that are set by a government. A) Standards. B) Tariffs. C) Embargoes. D) Subsidies. Show Answer Correct Answer: A) Standards. 27. Suppose that the pound is pegged to gold at £20 per ounce and the dollar is pegged to gold at $ 35 per ounce. This implies an exchange rate of $ 1.75 per pound. If the current market exchange rate is $ 1.80 per pound, how would you take advantage of this situation? Hint:assume that you have $ 350 available for investment. A) Start with $ 350. Buy 10 ounces of gold with dollars at $ 35 per ounce. Convert the gold to £200 at £20 per ounce. Exchange the £200 for dollars at the current rate of $ 1.80 per pound to get $ 360. B) Start with $ 350. Exchange the dollars for pounds at the current rate of $ 1.80 per pound. Buy gold with pounds at £20 per ounce. Convert the gold to dollars at $ 35 per ounce. C) A) and b) both work. D) None of the above. Show Answer Correct Answer: A) Start with $ 350. Buy 10 ounces of gold with dollars at $ 35 per ounce. Convert the gold to £200 at £20 per ounce. Exchange the £200 for dollars at the current rate of $ 1.80 per pound to get $ 360. 28. What is the impact of a weak home currency solution on international trade? A) Intracompany trade. B) Competition. C) Impact of other currencies. D) Prearranged international trade transactions. Show Answer Correct Answer: B) Competition. 29. Which of the following is NOT one of the economic conditions affecting international business? A) Voting rates. B) Inflation rates. C) GDP. D) Unemployment rates. Show Answer Correct Answer: A) Voting rates. 30. A forward contract is an agreement between ..... and ..... to exchange a certain amount of currency at a specified exchange rate (called the forward rate) at a specified date in the future. A) All answers are correct. B) A seller/ a buyer. C) A bank/ a company. D) None of above. Show Answer Correct Answer: C) A bank/ a company. ← PreviousNext →Related QuizzesFinance QuizzesInternational Finance Quiz 1International Finance Quiz 2International Finance Quiz 3International Finance Quiz 4International Finance Quiz 5International Finance Quiz 6International Finance Quiz 7International Finance Quiz 8International Finance Quiz 9 🏠 Back to Homepage 📘 Download PDF Books 📕 Premium PDF Books