Question 1

Which of the following statements is false?

Accepted Answer

A)  The prices quoted to the individual buyer of foreign exchange are always in favor of the seller. 
B)  An indirect quote is in terms of units of foreign currency per unit of the home country's currency. 
C)  Economic risk reflects the uncertainty associated with national government action that might affect asset values. 
D)  political risk exists when dealing financially in international markets. 
A)  The prices quoted to the individual buyer of foreign exchange are always in favor of the seller. 
B)  An indirect quote is in terms of units of foreign currency per unit of the home country's currency. 
C)  Economic risk reflects the uncertainty associated with national government action that might affect asset values. 
D)  political risk exists when dealing financially in international markets.

Question 2

Large multinational corporations enjoy special opportunities for risk reduction or speculative gains from currency activities

Accepted Answer

A)  because of their influence on currency developments in the various countries. 
B)  since they can move balances from one country to another as monetary conditions seem to warrant. 
C)  because of their generally stronger credit ratings. 
D)  because they always deal in currencies denominated in U.S. dollars. 
A)  because of their influence on currency developments in the various countries. 
B)  since they can move balances from one country to another as monetary conditions seem to warrant. 
C)  because of their generally stronger credit ratings. 
D)  because they always deal in currencies denominated in U.S. dollars.

Question 3

In foreign exchange, variations in quotations among countries at any time are quickly brought into alignment through arbitrage activities.

Accepted Answer

A) True 
 B)False

Question 4

The traveler's letter of credit is issued by a bank to banks in other countries authorizing foreign banks to cash checks or purchase drafts presented by the bearer.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following statements is most correct?

Accepted Answer

A)  Exporters may use sight or time drafts in billing foreign customers when they have confidence in the purchaser's ability and willingness to pay. 
B)  A time draft becomes a banker's acceptance when the customer receives, signs, and returns the draft to the exporter. 
C)  The currency rate is the rate at which a given unit of a foreign currency is quoted in terms of gold. 
D)  All of the above statements are correct. 
A)  Exporters may use sight or time drafts in billing foreign customers when they have confidence in the purchaser's ability and willingness to pay. 
B)  A time draft becomes a banker's acceptance when the customer receives, signs, and returns the draft to the exporter. 
C)  The currency rate is the rate at which a given unit of a foreign currency is quoted in terms of gold. 
D)  All of the above statements are correct.

Question 6

The European Monetary Union (EMU) began as a 14-member subset of the 1995 15-member EU.

Accepted Answer

A) True 
 B)False

Question 7

If U.S. interest rates are expected to be 6 percent next year, European interest rates are expected to be 4 percent next year, and the spot rate between the euro and dollar is $1.30, then according to interest rate parity, we would expect the dollar to _________ against the euro from $1.30 to __________.

Accepted Answer

A)  appreciate, $1.275 
B)  appreciate, $1.325 
C)  depreciate, $1.275 
D)  depreciate, $1.3256 
A)  appreciate, $1.275 
B)  appreciate, $1.325 
C)  depreciate, $1.275 
D)  depreciate, $1.3256

Question 8

The order bill of lading represents the written acceptance of goods for shipment by a transportation company and the terms under which the goods are to be transported to their destination.

Accepted Answer

A) True 
 B)False

Question 9

The banker's acceptance and the commercial letter of credit involve four principal parties. Which of the following is not one of those parties?

Accepted Answer

A)  The importer 
B)  The exporter 
C)  The receiving country's customs office 
D)  The exporter's bank 
A)  The importer 
B)  The exporter 
C)  The receiving country's customs office 
D)  The exporter's bank

Question 10

Interest rate parity (IRP) states that the currency of a country with relatively higher interest rate will appreciate relative to the currency of a country with a relatively lower interest rate.

Accepted Answer

A) True 
 B)False

Question 11

The ultimate effect of large-scale arbitrage activities on exchange rates is the elimination of the variation between the two markets.

Accepted Answer

A) True 
 B)False

Question 12

A contract for the purchase or sale of a currency where delivery will take place at a future date is called a forward contract.

Accepted Answer

A) True 
 B)False

Which of the following statements is false?

Large multinational corporations enjoy special opportunities for risk reduction or speculative gains from currency activities

In foreign exchange, variations in quotations among countries at any time are quickly brought into alignment through arbitrage activities.

The traveler's letter of credit is issued by a bank to banks in other countries authorizing foreign banks to cash checks or purchase drafts presented by the bearer.

Which of the following statements is most correct?

The European Monetary Union (EMU) began as a 14-member subset of the 1995 15-member EU.

If U.S. interest rates are expected to be 6 percent next year, European interest rates are expected to be 4 percent next year, and the spot rate between the euro and dollar is $1.30, then according to interest rate parity, we would expect the dollar to _ against the euro from $1.30 to __.

The order bill of lading represents the written acceptance of goods for shipment by a transportation company and the terms under which the goods are to be transported to their destination.

The banker's acceptance and the commercial letter of credit involve four principal parties. Which of the following is not one of those parties?

Interest rate parity (IRP) states that the currency of a country with relatively higher interest rate will appreciate relative to the currency of a country with a relatively lower interest rate.

The ultimate effect of large-scale arbitrage activities on exchange rates is the elimination of the variation between the two markets.

A contract for the purchase or sale of a currency where delivery will take place at a future date is called a forward contract.

The Financial Environment

Money and the Monetary System

Banks and Other Financial Institutions

Federal Reserve System

Policy Makers and the Money Supply

Savings and Investment Process

Interest Rates

Time Value of Money

Bonds and Stocks: Characteristics and Valuations

Securities and Markets

Financial Return and Risk Concepts

Business Organization and Financial Data

Financial Analysis and Long-Term Financial Planning

Managing Working Capital

Short-Term Business Financing

Capital Budgeting Analysis

Capital Structure and the Cost of Capital

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Exam 6: International Finance and Trade

Which of the following statements is false?

Large multinational corporations enjoy special opportunities for risk reduction or speculative gains from currency activities

In foreign exchange, variations in quotations among countries at any time are quickly brought into alignment through arbitrage activities.

The traveler's letter of credit is issued by a bank to banks in other countries authorizing foreign banks to cash checks or purchase drafts presented by the bearer.

Which of the following statements is most correct?

The European Monetary Union (EMU) began as a 14-member subset of the 1995 15-member EU.

The order bill of lading represents the written acceptance of goods for shipment by a transportation company and the terms under which the goods are to be transported to their destination.

The banker's acceptance and the commercial letter of credit involve four principal parties. Which of the following is not one of those parties?

Interest rate parity (IRP) states that the currency of a country with relatively higher interest rate will appreciate relative to the currency of a country with a relatively lower interest rate.

The ultimate effect of large-scale arbitrage activities on exchange rates is the elimination of the variation between the two markets.

A contract for the purchase or sale of a currency where delivery will take place at a future date is called a forward contract.

The Financial Environment

Money and the Monetary System

Banks and Other Financial Institutions

Federal Reserve System

Policy Makers and the Money Supply

Savings and Investment Process

Interest Rates

Time Value of Money

Bonds and Stocks: Characteristics and Valuations

Securities and Markets

Financial Return and Risk Concepts

Business Organization and Financial Data

Financial Analysis and Long-Term Financial Planning

Managing Working Capital

Short-Term Business Financing

Capital Budgeting Analysis

Capital Structure and the Cost of Capital

Filters