Question 1

The currencies of countries suffering from balance of payment trade deficits or high inflation rates are more likely to sell at a ________.

Accepted Answer

A)  spot discount 
B)  spot premium 
C)  forward discount 
D)  forward premium 
A)  spot discount 
B)  spot premium 
C)  forward discount 
D)  forward premium C

Question 2

Euroloans are quotes at which of the following rates?

Accepted Answer

A)  LIBOR 
B)  the euro rate 
C)  prime plus 2 percent 
D)  prime plus .5 percent 
A)  LIBOR 
B)  the euro rate 
C)  prime plus 2 percent 
D)  prime plus .5 percent A

Question 3

In 2007, the Canadian dollar fell against the U.S. dollar.

Accepted Answer

A) True 
 B)False  False

Question 4

An inconvertible currency ________.

Accepted Answer

A)  is a foreign exchange transaction that is consummated immediately 
B)  is a foreign exchange transaction that occurs sometime in the future 
C)  involves currencies that are not freely tradable 
D)  involves a transaction in which the same currency is bought and sold simultaneously 
A)  is a foreign exchange transaction that is consummated immediately 
B)  is a foreign exchange transaction that occurs sometime in the future 
C)  involves currencies that are not freely tradable 
D)  involves a transaction in which the same currency is bought and sold simultaneously

Question 5

What is a currency selling at if the forward price is less than the spot price?

Accepted Answer

A)  forward premium 
B)  forward discount 
C)  par value 
D)  swap price 
A)  forward premium 
B)  forward discount 
C)  par value 
D)  swap price

Question 6

Rowland Enterprises wants to hedge the foreign-exchange risks involved in international transactions. Which of the following would be LEAST appropriate for Rowland?

Accepted Answer

A)  currency futures 
B)  forward market 
C)  currency options 
D)  spot market 
A)  currency futures 
B)  forward market 
C)  currency options 
D)  spot market

Question 7

What kind of arbitrage occurs when the difference between two countries' interest rates is not equal to the forward discount/premium on their currencies?

Accepted Answer

A)  two-point arbitrage 
B)  three-point arbitrage 
C)  covered interest 
D)  geographic arbitrage 
A)  two-point arbitrage 
B)  three-point arbitrage 
C)  covered interest 
D)  geographic arbitrage

Question 8

Which of the following would most likely help international businesspeople to forecast future changes in exchange rates?

Accepted Answer

A)  swap transaction 
B)  forward price 
C)  put option 
D)  spot price 
A)  swap transaction 
B)  forward price 
C)  put option 
D)  spot price

Question 9

A call option ________.

Accepted Answer

A)  is a privately traded currency vehicle available only through stockbrokers 
B)  grants the right to buy a specified amount of foreign currency at a set price 
C)  allows the holder to buy foreign exchange at the wholesale rate 
D)  is another term for currency future 
A)  is a privately traded currency vehicle available only through stockbrokers 
B)  grants the right to buy a specified amount of foreign currency at a set price 
C)  allows the holder to buy foreign exchange at the wholesale rate 
D)  is another term for currency future

Question 10

The ________ consists of foreign-exchange transactions that are to occur sometime in the future.

Accepted Answer

A)  soft currency market 
B)  spot market 
C)  hard currency market 
D)  forward market 
A)  soft currency market 
B)  spot market 
C)  hard currency market 
D)  forward market

Question 11

Why are arbitrage activities important to the international monetary system?

Accepted Answer

Arbitrage activities, which make up a ma

Question 12

The currency option requires a firm to buy or sell a specified amount of a foreign currency at a specified price any time up to a specified date.

Accepted Answer

A) True 
 B)False

Question 13

Exchange rates are quoted both directly and indirectly.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following is not a method of establishing an overseas banking operation?

Accepted Answer

A)  subsidiary bank 
B)  branch bank 
C)  affiliated bank 
D)  correspondent bank 
A)  subsidiary bank 
B)  branch bank 
C)  affiliated bank 
D)  correspondent bank

Question 15

What is a Eurodollar?

Accepted Answer

A)  a euro held by an American 
B)  a U.S. dollar deposited in a European bank 
C)  a euro deposited in a U.S. bank. 
D)  any currency deposited in a country other than the country of issue 
A)  a euro held by an American 
B)  a U.S. dollar deposited in a European bank 
C)  a euro deposited in a U.S. bank. 
D)  any currency deposited in a country other than the country of issue

Question 16

What is the difference between a forward contract and a currency future?

Accepted Answer

A currency future is

Question 17

What percentage of all foreign exchange transactions take place in the spot market?

Accepted Answer

A)  10 percent 
B)  24 percent 
C)  33 percent 
D)  47 percent 
A)  10 percent 
B)  24 percent 
C)  33 percent 
D)  47 percent

Question 18

Why have international banks increasingly provided their own overseas operations rather than utilizing correspondent banks?

Accepted Answer

Providing its own overseas operations en

Question 19

Explain the theory of purchasing power parity. How does it affect arbitrage?

Accepted Answer

This theory states that the prices of tr

Question 20

If the British pound is selling at $1.7775 spot on September 3, and at a 90-day forward rate of $1.7661, then ________.

Accepted Answer

A)  the pound is selling at a forward premium 
B)  the pound is selling at a forward discount 
C)  an investor should buy a call option 
D)  speculators should buy put options 
A)  the pound is selling at a forward premium 
B)  the pound is selling at a forward discount 
C)  an investor should buy a call option 
D)  speculators should buy put options

The currencies of countries suffering from balance of payment trade deficits or high inflation rates are more likely to sell at a ________.

Euroloans are quotes at which of the following rates?

In 2007, the Canadian dollar fell against the U.S. dollar.

An inconvertible currency ________.

What is a currency selling at if the forward price is less than the spot price?

Rowland Enterprises wants to hedge the foreign-exchange risks involved in international transactions. Which of the following would be LEAST appropriate for Rowland?

What kind of arbitrage occurs when the difference between two countries' interest rates is not equal to the forward discount/premium on their currencies?

Which of the following would most likely help international businesspeople to forecast future changes in exchange rates?

A call option ________.

The ________ consists of foreign-exchange transactions that are to occur sometime in the future.

Why are arbitrage activities important to the international monetary system?

The currency option requires a firm to buy or sell a specified amount of a foreign currency at a specified price any time up to a specified date.

Exchange rates are quoted both directly and indirectly.

Which of the following is not a method of establishing an overseas banking operation?

What is a Eurodollar?

What is the difference between a forward contract and a currency future?

What percentage of all foreign exchange transactions take place in the spot market?

Why have international banks increasingly provided their own overseas operations rather than utilizing correspondent banks?

Explain the theory of purchasing power parity. How does it affect arbitrage?

If the British pound is selling at $1.7775 spot on September 3, and at a 90-day forward rate of $1.7661, then ________.

An Overview of International Business

Global Marketplaces and Business Centers

Legal, Technological, Accounting, and Political Environments

The Role of Culture

Ethics and Social Responsibility in International Business

International Trade and Investment

The International Monetary System and the Balance of Payments

Formulation of National Trade Policies

International Cooperation Among Nations

International Strategic Management

Strategies for Analyzing and Entering Foreign Markets

International Strategic Alliances

International Organization Design and Control

Leadership and Employee Behavior in International Business

International Marketing

International Operations Management

International Financial Management

International Human Resource Management and Labor Relations

Filters

Exam 8: Foreign Exchange and International Financial Markets

The currencies of countries suffering from balance of payment trade deficits or high inflation rates are more likely to sell at a ________.

Euroloans are quotes at which of the following rates?

In 2007, the Canadian dollar fell against the U.S. dollar.

An inconvertible currency ________.

What is a currency selling at if the forward price is less than the spot price?

Rowland Enterprises wants to hedge the foreign-exchange risks involved in international transactions. Which of the following would be LEAST appropriate for Rowland?

What kind of arbitrage occurs when the difference between two countries' interest rates is not equal to the forward discount/premium on their currencies?

Which of the following would most likely help international businesspeople to forecast future changes in exchange rates?

A call option ________.

The ________ consists of foreign-exchange transactions that are to occur sometime in the future.

Why are arbitrage activities important to the international monetary system?

The currency option requires a firm to buy or sell a specified amount of a foreign currency at a specified price any time up to a specified date.

Exchange rates are quoted both directly and indirectly.

Which of the following is not a method of establishing an overseas banking operation?

What is a Eurodollar?

What is the difference between a forward contract and a currency future?

What percentage of all foreign exchange transactions take place in the spot market?

Why have international banks increasingly provided their own overseas operations rather than utilizing correspondent banks?

Explain the theory of purchasing power parity. How does it affect arbitrage?

If the British pound is selling at $1.7775 spot on September 3, and at a 90-day forward rate of $1.7661, then ________.

An Overview of International Business

Global Marketplaces and Business Centers

Legal, Technological, Accounting, and Political Environments

The Role of Culture

Ethics and Social Responsibility in International Business

International Trade and Investment

The International Monetary System and the Balance of Payments

Formulation of National Trade Policies

International Cooperation Among Nations

International Strategic Management

Strategies for Analyzing and Entering Foreign Markets

International Strategic Alliances

International Organization Design and Control

Leadership and Employee Behavior in International Business

International Marketing

International Operations Management

International Financial Management

International Human Resource Management and Labor Relations

Filters