This quiz works best with JavaScript enabled. Home > International Finance > International Finance – Quiz 1 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books International Finance Quiz 1 (20 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) Investment capital ratio. B) Exchange rate. C) Interest rate. D) Profit rate. Show Answer Correct Answer: D) 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) Dumping. B) Protectionists. C) Balance of payments. D) Tariff. Show Answer Correct Answer: A) Dumping. 4. A system in which currency values are based on supply and demand is: A) A foreign exchange market. B) A currency future. C) An exchange control. D) A floating exchange rate. Show Answer Correct Answer: D) 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; currency. B) Currency; financial instruments. C) Currency; goods. D) Goods; goods. Show Answer Correct Answer: A) 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) 280 DOLLARS. B) 279 DOLLARS. C) 288 DOLLARS. D) 278 DOLLARS. Show Answer Correct Answer: C) 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. Trade balance A) Exports-Imports. B) Investment income. C) Gifts and government transfers. D) None of above. Show Answer Correct Answer: A) Exports-Imports. 12. System under which the price of one currency remainsunchanged in relation to the value of another currency A) Dumping. B) Country protectors". C) Fixed exchange rate. D) North American Free TradeAgreement. Show Answer Correct Answer: C) Fixed exchange rate. 13. Floating exchange rates occur when the government (central bank) of a country decide what its currency will be worth relative to other countries. A) True. B) False. C) Do not choose. D) Do not choose. Show Answer Correct Answer: B) False. 14. 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. 15. The international Fisher effect (IFE) suggests that the foreign currency will appreciate when: A) The current home nominal interest rate exceeds the current foreign nominal interest rate. B) The current home real interest rate exceeds the current foreign real interest rate. C) The current home inflation rate exceeds the current foreign nominal interest rate. D) The current foreign inflation rate exceeds the current home inflation rate. Show Answer Correct Answer: A) The current home nominal interest rate exceeds the current foreign nominal interest rate. 16. 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. 17. 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) Treasury. B) Common. C) Preferred. D) Dual class. Show Answer Correct Answer: C) Preferred. 18. 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. 19. The International Monetary Fund has approximately 100 members. A) True. B) False. C) Do not choose. D) Do not choose. Show Answer Correct Answer: B) False. 20. U9V-1) When a country has the ability to produce more of a product relative to another country. A) Absolute Advantage. B) Favorable Balance of Trade. C) Positive Net Export. D) Comparative Advantage. Show Answer Correct Answer: A) Absolute Advantage. Next →Related 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 10International Finance Quiz 11 🏠 Back to Homepage 📘 Download PDF Books 📕 Premium PDF Books