This quiz works best with JavaScript enabled. Home > International Finance > International Finance – Quiz 13 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books International Finance Quiz 13 (20 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. Licensing is the transfer of rights and permission to produce and sell a product to a foreign firm. A) True. B) False. C) Do not choose. D) Do not choose. Show Answer Correct Answer: A) True. 2. Which of the following statements about business valuation is false? A) The discounted cash flow method of business valuation determines a value for a business based upon the expected future cash flows of the business. B) The discount rates used for business valuation are usually higher than the discount rates used for capital budgeting. C) A business valuation may become necessary because of insurance requirements, because one of the owners wants to exit the business, or because of the tax planning or tax reporting needs of either the business or one of its owners. D) An entrepreneur should place a value on his business based on how much time and money the entrepreneur has invested in the business. Show Answer Correct Answer: D) An entrepreneur should place a value on his business based on how much time and money the entrepreneur has invested in the business. 3. The valuation of an MNC should rise when an event causes the expected cash flows from foreign to ..... and when foreign currencies denominating these cash flows are expected to ..... A) Decrease; appreciate. B) Increase; appreciate. C) Decrease; depreciate. D) Increase; depreciate. Show Answer Correct Answer: B) Increase; appreciate. 4. These are financial claims whose value is derived from the value of the underlying asset. A) Money market. B) Shares. C) Derivatives. D) None of the above. Show Answer Correct Answer: C) Derivatives. 5. The derivatives contracts which are standardized and traded on a futures exchange are called ..... A) Options. B) Futures. C) Derivatives. D) Capital. Show Answer Correct Answer: B) Futures. 6. An aging of accounts receivable is a schedule that: A) Lists customers with unpaid balances in alphabetical order. B) Categorizes unpaid customer invoices based on the number of days they have been outstanding. C) Categorizes unpaid customer invoices based on how quickly they have been paid. D) Lists customers with unpaid balances in the order of least likely to most likely to pay. Show Answer Correct Answer: B) Categorizes unpaid customer invoices based on the number of days they have been outstanding. 7. The advantage of forward contracts over future contracts is that they A) Are standardized. B) Have lower default risk. C) Are more liquid. D) None of the above. Show Answer Correct Answer: D) None of the above. 8. U9V-8) Limit on the amount of a foreign good or service that may be legally imported. A) Trade fails. B) Trade Barrier. C) Standards. D) Quota. Show Answer Correct Answer: D) Quota. 9. Jensen Co. wants to establish a new subsidiary in Mexico that will sell computers to Mexican customers and remit earnings back to the U.S. parent. The value of this project will be favorably affected if the value of the peso ..... while it establishes the new subsidiary and ..... when the subsidiary starts operations. A) Depreciates; appreciates. B) Appreciates; appreciates. C) Appreciates; depreciates. D) Depreciates; depreciates. Show Answer Correct Answer: A) Depreciates; appreciates. 10. Futures markets have grown rapidly because futures A) Are standardized. B) Have lower default risk. C) Are liquid. D) All of the above. Show Answer Correct Answer: D) All of the above. 11. Tata Steel financed acquisitions of Corus steel thorough A) Tata Steel financed acquisitions of Corus Steel through a government bailout. B) Tata Steel financed acquisitions of Corus Steel through a combination of debt and equity. C) Tata Steel financed acquisitions of Corus Steel through selling off its automotive division. D) Tata Steel financed acquisitions of Corus Steel through cryptocurrency investments. Show Answer Correct Answer: B) Tata Steel financed acquisitions of Corus Steel through a combination of debt and equity. 12. 3 Suppose at time t, the market rate:1 EUR = 1 USD, 1 GBP= 1.5 USD of the bank:2 EUR = 1 GBP, 1.5EUR = 1 GBP. So transaction cost = 0 investor has USD, he will exploit the opportunity = how? A) Buy GBP for 1 GBP = 1.5 USD, use the buy table EUR for:1 GBP = 2 EUR then sell EUR for 1 EUR = 1 USD. B) .Buy EUR for 1 EUR = 1 USD, convert EUR to GBP for 1 GBP = 2 EUR then buy USD for 1 GBP = 1.5USD. C) Sell GBP for 1 GBP = 1.5 USD then convert USD to EUR then sell EUR for 2 EUR = 1 GBP. D) He judged no chance. Show Answer Correct Answer: A) Buy GBP for 1 GBP = 1.5 USD, use the buy table EUR for:1 GBP = 2 EUR then sell EUR for 1 EUR = 1 USD. 13. Bank A quotes a bid price of $ 1.52 and an ask price of $ 1.54 for the British pound. Bank B quotes a bid price of $ 1.51 and an ask price of $ 1.53 for the British pound. If a trader has $ 100, 000 to invest, what should the trader do to take advantage of locational arbitrage and how much profit would the trader make? A) Buy pounds at Bank A, sell pounds at Bank B, make $ 1, 000. B) Buy pounds at Bank A, sell pounds at Bank B, make $ 657.89. C) Buy pounds at Bank B, sell pounds at Bank A, make $ 1, 000. D) None of the above, locational arbitrage is not possible. Show Answer Correct Answer: D) None of the above, locational arbitrage is not possible. 14. The rate a lender charges to a borrower for a loan, presented as a fixed percentage of the total amount borrowed A) Interest Rate. B) Forward Rate. C) Spot Rate. D) Fixed Exchange Rate. Show Answer Correct Answer: A) Interest Rate. 15. What type of exchange rate system does the United States have? A) Floating exchange rate. B) Managed exchange rate. C) Fixed exchange rate. D) None of the above. Show Answer Correct Answer: A) Floating exchange rate. 16. In order to protect itself effectively against a very significant rise in the euro, an American importer with a debt in this currency must: A) Buy EUR/USD call option. B) Buy a USD/EUR call option. C) Buy a EUR/USD put option. D) Sell a EUR/USD call option. E) Sell a EUR/USD put option. Show Answer Correct Answer: A) Buy EUR/USD call option. 17. The covered interest rate differential should be zero A) True. B) False. Show Answer Correct Answer: A) True. 18. The transaction method used for making payments between countries; the simultaneous act of buying one currency and selling the other A) Foreign Exchange. B) Currency. C) Trade Failure. D) International Finance. Show Answer Correct Answer: A) Foreign Exchange. 19. Latin American countries have historically experienced relatively high inflation, and their currencies have weakened. This information is somewhat consistent with the concept of: A) Interest rate parity. B) Locational arbitrage. C) Purchasing power parity. D) The exchange rate mechanism. Show Answer Correct Answer: C) Purchasing power parity. 20. . Bank A quotes GBP/USD = 1.52/54; Bank B quotes GBP/USD = 1.51/52. assuming transaction fee = 0, an American investor will? A) Buy GBP at Bank A, Sell GBP at Bank B. B) Buy GBP at Bank B, Sell GBP at Bank A. C) Sell USD at Bank A, buy GBP at Bank B. D) There is no arbitrage opportunity. Show Answer Correct Answer: D) There is no arbitrage opportunity. ← PreviousNext →Related 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 9International Finance Quiz 10 🏠 Back to Homepage 📘 Download PDF Books 📕 Premium PDF Books