This quiz works best with JavaScript enabled. Home > International Finance > International Finance – Quiz 7 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books International Finance Quiz 7 (20 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. Prior to the 1870s, both gold and silver were used as international means of payment and the exchange rates among currencies were determined by either their gold or silver contents. Suppose that the dollar was pegged to gold at $ 30 per ounce, the French franc is pegged to gold at 90 francs per ounce and to silver at 6 francs per ounce of silver, and the German mark pegged to silver at 1 mark per ounce of silver. What would the exchange rate between the U.S. dollar and German mark be under this system? A) 1 German mark = $ 2. B) 1 German mark = $ 0.50. C) 1 German mark = $ 45. D) 1 German mark = $ 1. Show Answer Correct Answer: A) 1 German mark = $ 2. 2. 3 Functions of money are ..... A) Medium of exchange. B) Store of value. C) Unit of account. D) All of the above. Show Answer Correct Answer: D) All of the above. 3. ..... are most commonly classified as a direct foreign investment. A) Foreign acquisitions. B) Purchases of international stocks. C) Licensing agreements. D) Exporting transactions. Show Answer Correct Answer: A) Foreign acquisitions. 4. 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) .Inflation of the US dollar is lower than the inflation rate of the Canadian dollar. B) Canadian dollar interest rate is higher than US dollar interest rate. C) Commodity prices are more expensive in Canada than in the US. D) CAD is expected to depreciate 180-day spot price against the US dollar. Show Answer Correct Answer: D) CAD is expected to depreciate 180-day spot price against the US dollar. 5. Which of the following has accelerated the globalization of financial markets: A) An expansion of protectionism practices. B) The reduction of government regulations. C) The movement toward fixed exchange rates. D) A decrease in foreign access to domestic markets. Show Answer Correct Answer: B) The reduction of government regulations. 6. NBER refers to A) National Bureau of Environment Research. B) National Bureau of Economic Research. C) National Branch of Economic Research. D) National Bureau of Economic Resource. Show Answer Correct Answer: B) National Bureau of Economic Research. 7. What is a reserve currency? A) An unpredictable event may occur which affects the asset prices. B) A large quantity currency maintained by major financial institutions to prepare for investments to influence their domestic exchange rate. C) System created a collective international currency exchange regime. D) A supply of a commodity not needed for immediate use but available if required. Show Answer Correct Answer: B) A large quantity currency maintained by major financial institutions to prepare for investments to influence their domestic exchange rate. 8. 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. 9. 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) Internal corporation. B) International Finance. Show Answer Correct Answer: B) International Finance. 10. 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. 11. 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. 12. Positive NIIP A) Country has external debt. B) Country is a net creditor to ROW. Show Answer Correct Answer: B) Country is a net creditor to ROW. 13. 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; depreciate. B) Lower U.S. inflation; appreciate. C) Higher U.S. inflation; depreciate. D) Higher U.S. inflation; appreciate. Show Answer Correct Answer: A) Lower U.S. inflation; depreciate. 14. 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) Earnings-based. C) Equity-based. D) Market-based. Show Answer Correct Answer: B) Earnings-based. 15. 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) Liquidity risk is the most important risk for investors when they invest in American depository Receipts. C) Currency risk is the most important risk for investors when they invest in American depository Receipts. D) Credit risk is the most important risk for investors when they invest in American depository Receipts. Show Answer Correct Answer: C) Currency risk is the most important risk for investors when they invest in American depository Receipts. 16. Uncovered interest rate parity only applies if investors are risk neutral A) True. B) False. Show Answer Correct Answer: A) True. 17. Which of the following is not a balance sheet item working capital management typically focuses on? A) Cash. B) Accounts receivable. C) Inventory. D) Fixed assets. Show Answer Correct Answer: D) Fixed assets. 18. An unsponsored American depository receipt (ADR) can be A) Listed on the New York Stock Exchange. B) Traded on the London Stock Exchange. C) Traded on the over-the-counter (OTC) market. D) Available for purchase directly from the issuing company. Show Answer Correct Answer: C) Traded on the over-the-counter (OTC) market. 19. 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) $P=\epsilon P^{\cdot}$. 20. Occurs when the value of exports exceeds the value of imports A) Dumping. B) Protective tariff. C) Trade surplus. D) Fixed exchange rate. Show Answer Correct Answer: C) Trade surplus. ← PreviousNext →Related QuizzesInternational Finance Quiz 1International Finance Quiz 2International Finance Quiz 3International Finance Quiz 4International Finance Quiz 5International Finance Quiz 6International Finance Quiz 8International Finance Quiz 9International Finance Quiz 10International Finance Quiz 11 🏠 Back to Homepage 📘 Download PDF Books 📕 Premium PDF Books