This quiz works best with JavaScript enabled. Home > Finance > International Finance > International Finance – Quiz 5 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books International Finance Quiz 5 (30 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. Assuming the Canadian dollar spot rate is 0.76 USD/CAD and the 180-day forward rate is 0.74 USD/CAD, the difference between the forward and spot rates implies? A) Canadian dollar interest rate is higher than US dollar interest rate. B) CAD is expected to depreciate 180-day spot price against the US dollar. C) Commodity prices are more expensive in Canada than in the US. D) .Inflation of the US dollar is lower than the inflation rate of the Canadian dollar. Show Answer Correct Answer: B) CAD is expected to depreciate 180-day spot price against the US dollar. 2. Which of the following has accelerated the globalization of financial markets: A) The movement toward fixed exchange rates. B) A decrease in foreign access to domestic markets. C) An expansion of protectionism practices. D) The reduction of government regulations. Show Answer Correct Answer: D) The reduction of government regulations. 3. What is a reserve currency? A) System created a collective international currency exchange regime. B) A supply of a commodity not needed for immediate use but available if required. C) A large quantity currency maintained by major financial institutions to prepare for investments to influence their domestic exchange rate. D) An unpredictable event may occur which affects the asset prices. Show Answer Correct Answer: C) A large quantity currency maintained by major financial institutions to prepare for investments to influence their domestic exchange rate. 4. Derivative instruments relate to: A) Shares and bonds only. B) Any assets. C) Currencies only. D) None of above. Show Answer Correct Answer: B) Any assets. 5. The International Finance Corporation, the World Bank, the National Bureau of Economic Research and the International Monetary Fund play pivotal roles in the mediation of ..... A) International Finance. B) Internal corporation. Show Answer Correct Answer: A) International Finance. 6. The exchange rate for a stable country: A) Remains the same unless there is political change. B) Changes based on supply and demand. C) Is based on the U.S. dollar. D) Is based on gold. Show Answer Correct Answer: B) Changes based on supply and demand. 7. International business finance deals with financing businesses that operate across what type of frontiers? A) Political. B) Economic. C) Geographical. D) None of the above. Show Answer Correct Answer: C) Geographical. 8. Assume that the U.S. and Chile nominal interest rates are equal. Then, the U.S. nominal interest rate decreases while the Chilean nominal interest rate remains stable. According to the international Fisher effect, this implies expectations of ..... than before, and that the Chilean peso should ..... against the dollar. A) Lower U.S. inflation; appreciate. B) Higher U.S. inflation; depreciate. C) Lower U.S. inflation; depreciate. D) Higher U.S. inflation; appreciate. Show Answer Correct Answer: C) Lower U.S. inflation; depreciate. 9. A/An ..... business valuation is predicated on the idea that a business's true value lies in its ability to produce net income and positive cash flow in the future. A) Asset-based. B) Equity-based. C) Earnings-based. D) Market-based. Show Answer Correct Answer: C) Earnings-based. 10. What is the most important risk for investor when they invest in American depository Receipts A) Market risk is the most important risk for investors when they invest in American depository Receipts. B) Credit risk is the most important risk for investors when they invest in American depository Receipts. C) Liquidity risk is the most important risk for investors when they invest in American depository Receipts. D) Currency risk is the most important risk for investors when they invest in American depository Receipts. Show Answer Correct Answer: D) Currency risk is the most important risk for investors when they invest in American depository Receipts. 11. Uncovered interest rate parity only applies if investors are risk neutral A) False. B) True. Show Answer Correct Answer: B) True. 12. Which of the following is not a balance sheet item working capital management typically focuses on? A) Fixed assets. B) Cash. C) Inventory. D) Accounts receivable. Show Answer Correct Answer: A) Fixed assets. 13. An unsponsored American depository receipt (ADR) can be A) Traded on the London Stock Exchange. B) Listed on the New York Stock Exchange. C) Available for purchase directly from the issuing company. D) Traded on the over-the-counter (OTC) market. Show Answer Correct Answer: D) Traded on the over-the-counter (OTC) market. 14. Law of one price (LOOP) A) $P=\epsilon P^{\cdot}$. B) $P^{\cdot}=\epsilon P$. C) $P\ =\ P^{\cdot}$. D) None of above. Show Answer Correct Answer: A) $P=\epsilon P^{\cdot}$. 15. Occurs when the value of exports exceeds the value of imports A) Fixed exchange rate. B) Trade surplus. C) Protective tariff. D) Dumping. Show Answer Correct Answer: B) Trade surplus. 16. Due to ....., market forces should realign the cross exchange rate between two foreign currencies based on the spot exchange rates of the two currencies against the U.S. dollar. A) Forward realignment arbitrage. B) Triangular arbitrage. C) Covered interest arbitrage. D) Locational arbitrage. Show Answer Correct Answer: B) Triangular arbitrage. 17. An option that gives the owner the right to buy a financial instrument at the exercise price within a specified period of time is a A) Call option. B) Put option. C) American option. D) European option. Show Answer Correct Answer: A) Call option. 18. Where is the forex market? A) Trading in shares and bonds in foreign currency takes place. B) Trading in foreign currency recording instruments. C) Precious metal trading. D) Trading of different currencies takes place. Show Answer Correct Answer: D) Trading of different currencies takes place. 19. If you buy an option you are A) Not obligated to buy an asset at the agreed upon price on a specific date. B) Obligated to buy an asset at the agreed upon price on a specific date. Show Answer Correct Answer: A) Not obligated to buy an asset at the agreed upon price on a specific date. 20. Currency futures contracts sold on exchanges: A) Includes owner obligations, and is standardized. B) Includes the obligations of the owner, and can be adjusted to the wishes of the owner. C) Provides the rights but not the obligations of the owner and can be tailored to the wishes of the owner. D) Provides rights but not obligations of owners and is standardized. Show Answer Correct Answer: A) Includes owner obligations, and is standardized. 21. A French exporter with a dollar claim fears a significant fall in the US currency. To hedge against this risk, without losing the opportunity to benefit from a rise, the exporter: A) Buy a euro/dollar put option. B) Buy a dollar/euro put option. C) Sell a dollar/euro put option. D) Sell a euro/dollar put option. E) Buy a euro/dollar call option. Show Answer Correct Answer: E) Buy a euro/dollar call option. 22. . Mr. A buys GBP 6 months forward at forward rate 1 GBP = 1.75USD. The contract is 62500 GBP. At the time of expiration of the forward contract, the spot rate GBP / USD = 1.65 A) 6250 USD profit. B) Loss of 625 USD. C) Loss 66.28788 USD. D) Loss of 6250 USD. Show Answer Correct Answer: D) Loss of 6250 USD. 23. Why would a business in Country A buy products from a business in Country B and arrange to pay for the products in the currency of Country A? A) To prevent an exchange loss. B) To simplify the procedure. C) To take advantage of a discount. D) To increase the payment time. Show Answer Correct Answer: A) To prevent an exchange loss. 24. Parties who have sold a futures contract and thereby agreed to ..... (deliver) the bonds are said to have taken a ..... position. A) Sell; short. B) Buy; short. C) Buy; long. D) Sell; long. Show Answer Correct Answer: A) Sell; short. 25. For 3 currency pairs listed at 3 different banks:GBP/USD 1.2205-1.2212, EUR/USD = 1.1105-1.1109, GBP/EUR= 1.1017-1, 1022. Does arbitrage exist? If yes, calculate the return on investment starting with 200, 000 USD. A) There is no arbitrage. B) There exists arbitrage, loss of-642.6 USD. C) There exists arbitrage, profit 376.5 EUR. D) There exists arbitrage, profit 366.5 USD. Show Answer Correct Answer: D) There exists arbitrage, profit 366.5 USD. 26. Exchange Rate If one dollar is equivalent to 0.82 euros, how many euros is 150 dollars? A) 113.00 EUROS. B) 123.00 EUROS. C) 133.00 EUROS. D) 125.00 EUROS. Show Answer Correct Answer: B) 123.00 EUROS. 27. Compared with forward contracts, futures contracts have the following advantages: A) Flexibility. B) Liquidity. C) Easy to use. D) All is wrong. Show Answer Correct Answer: B) Liquidity. 28. One U.S. dollar = 1.01389 Japanese yen. A) False. B) True. C) Do not choose. D) Do not choose. Show Answer Correct Answer: A) False. 29. Positive globalization processes A) Destablilization of the world economy, increase in unemployment. B) Increasing access to knowledge and information exchange. C) Increasing poverty and the use of cheap labor in underdeveloped countries. D) None of above. Show Answer Correct Answer: B) Increasing access to knowledge and information exchange. 30. Which of the following is the most direct example of political risk in Spain for a U.S.-based MNC with a subsidiary in Spain? A) Spain's government may impose special taxes on the subsidiary. B) (None). C) (None). D) (None). Show Answer Correct Answer: A) Spain's government may impose special taxes on the subsidiary. ← PreviousNext →Related QuizzesFinance QuizzesInternational Finance Quiz 1International Finance Quiz 2International Finance Quiz 3International Finance Quiz 4International Finance Quiz 6International Finance Quiz 7International Finance Quiz 8International Finance Quiz 9International Finance Quiz 10 🏠 Back to Homepage 📘 Download PDF Books 📕 Premium PDF Books