This quiz works best with JavaScript enabled. Home > International Finance > International Finance – Quiz 17 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books International Finance Quiz 17 (20 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. 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. 2. The Nomial Exchange Rate is the relative price of currencies of two countries. A) False. B) True. Show Answer Correct Answer: B) True. 3. Current account deficit A) Increases net external debt. B) Decreases net external debt. Show Answer Correct Answer: A) Increases net external debt. 4. Risk averse A) Require risk premium in order to hold risky assets. B) Willing to pay a premium for the privilege of bearing risk. C) Willing to take risk for a zero risk premium. D) None of above. Show Answer Correct Answer: A) Require risk premium in order to hold risky assets. 5. International markets arerelatively more homogeneousin nature. A) True. B) False. Show Answer Correct Answer: B) False. 6. 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) 4.5. D) 0.9710. Show Answer Correct Answer: D) 0.9710. 7. A business can be profitable and still go out of business because it runs out of cash. A) True. B) False. Show Answer Correct Answer: A) True. 8. What paradigm is used to define the futures price A) Hedge ratio. B) Black Scholes. C) IRP. D) Risk neutral valuation. Show Answer Correct Answer: C) IRP. 9. 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. 10. 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. 11. The IMF was conceived in A) JUNE 1944. B) JUNE 1945. C) JULY 1944. D) JULY 1945. Show Answer Correct Answer: C) JULY 1944. 12. 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. 13. 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) Joint venture. B) Licensing. C) Partial acquisition of existing Japanese firm. D) Establishment of Japanese subsidiary. Show Answer Correct Answer: B) Licensing. 14. People or organization's from one nation participate in domestic business transactions. A) True. B) False. Show Answer Correct Answer: A) True. 15. What is the purpose of the International Development Association (IDA)? A) Facilitate cooperation among countries with regard to international transactions. B) Provide loans at low interest rates to poor nations. C) Extend loans at low interest rates to poor nations. D) Promote private enterprise within countries. Show Answer Correct Answer: C) Extend loans at low interest rates to poor nations. 16. The derivative contract which allows the contract holder the choice to exercise the contract is called ..... A) Options. B) Futures. C) Derivatives. D) Store of value. Show Answer Correct Answer: A) Options. 17. 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. 18. 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. 19. 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. 20. What is the impact of a weak home currency solution on international trade? A) Prearranged international trade transactions. B) Impact of other currencies. C) Intracompany trade. D) Competition. Show Answer Correct Answer: D) Competition. ← 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