This quiz works best with JavaScript enabled. Home > International Finance > International Finance – Quiz 8 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books International Finance Quiz 8 (20 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. 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) Triangular arbitrage. B) Forward realignment arbitrage. C) Covered interest arbitrage. D) Locational arbitrage. Show Answer Correct Answer: A) Triangular arbitrage. 2. 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. 3. 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. 4. 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. 5. 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. 6. 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. 7. . 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) Loss of 625 USD. B) Loss of 6250 USD. C) 6250 USD profit. D) Loss 66.28788 USD. Show Answer Correct Answer: B) Loss of 6250 USD. 8. 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 simplify the procedure. B) To prevent an exchange loss. C) To take advantage of a discount. D) To increase the payment time. Show Answer Correct Answer: B) To prevent an exchange loss. 9. 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) Sell; long. D) Buy; long. Show Answer Correct Answer: A) Sell; short. 10. 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 exists arbitrage, profit 366.5 USD. B) There exists arbitrage, profit 376.5 EUR. C) There exists arbitrage, loss of-642.6 USD. D) There is no arbitrage. Show Answer Correct Answer: A) There exists arbitrage, profit 366.5 USD. 11. Exchange Rate If one dollar is equivalent to 0.82 euros, how many euros is 150 dollars? A) 125.00 EUROS. B) 113.00 EUROS. C) 123.00 EUROS. D) 133.00 EUROS. Show Answer Correct Answer: C) 123.00 EUROS. 12. 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. 13. One U.S. dollar = 1.01389 Japanese yen. A) True. B) False. C) Do not choose. D) Do not choose. Show Answer Correct Answer: B) False. 14. 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. 15. 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. 16. While in India, you purchasd a hat for $ 15 U.S. dollars. How many rupees would you pay if each rupee was 0.32 U.S. dollars? A) 48 Rupees. B) 233.33 Rupees. C) 450 Rupees. D) 468.75 Rupees. Show Answer Correct Answer: D) 468.75 Rupees. 17. Assume U.S. and Swiss investors require a real rate of return of 3 percent. Assume the nominal U.S. interest rate is 6 percent and the nominal Swiss rate is 4 percent. According to the international Fisher effect, the franc will ..... by about ..... A) Appreciate; 3 percent. B) Depreciate; 3 percent. C) Depreciate; 2 percent. D) Appreciate; 2 percent. Show Answer Correct Answer: D) Appreciate; 2 percent. 18. Bid rate A) Rate at which dealers buy currency A (and sell currency B). B) Rate at which dealers sell currency A (and buy currency B). Show Answer Correct Answer: A) Rate at which dealers buy currency A (and sell currency B). 19. A European importer wishing to protect himself against a rising dollar buys a zero premium option (or zero premium). This operation consists for him in: A) To buy a USD/EUR call and sell a USD/EUR put. B) To buy a USD/EUR call and to sell a USD/EUR call. C) To buy a USD/EUR put and sell a USD/EUR call. D) To buy a USD/EUR put and to sell a USD/EUR put. Show Answer Correct Answer: A) To buy a USD/EUR call and sell a USD/EUR put. 20. The total value of the shares issued by a corporation is known as the market ..... A) Funding. B) Capitalization. C) Score. D) None of the above. Show Answer Correct Answer: B) Capitalization. ← 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 9International Finance Quiz 10International Finance Quiz 11 🏠 Back to Homepage 📘 Download PDF Books 📕 Premium PDF Books