Question 1

A purchasing agent for a domestic art gallery touring foreign countries for possible acquisitions might find it convenient to have:

Accepted Answer

A) travelers' checks 
B) a commercial letter of credit 
C) regular checkbook drafts 
D) a traveler's letter of credit 
A) travelers' checks 
B) a commercial letter of credit 
C) regular checkbook drafts 
D) a traveler's letter of credit

Question 2

Slow economic growth in investments in another country would be an example of political risk.

Accepted Answer

A) True 
 B)False

Question 3

Under a floating exchange rate system,the value of one currency relative to another is determined by the forces of supply and demand.

Accepted Answer

A) True 
 B)False

Question 4

_________________________ was created to promote world trade through monitoring and maintaining fixed exchange rates and by making loans to countries with payments problems.

Accepted Answer

A) The World Bank 
B) The International Monetary Fund 
C) The International Bank for Reconstruction and Development 
D) none of the above 
A) The World Bank 
B) The International Monetary Fund 
C) The International Bank for Reconstruction and Development 
D) none of the above

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

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 7

The exchange rate is the rate at which a given unit of foreign currency is quoted in terms of:

Accepted Answer

A) commodity prices 
B) the domestic currency 
C) the foreign currency 
D) gold 
A) commodity prices 
B) the domestic currency 
C) the foreign currency 
D) gold

Question 8

Should a business fail after receiving shipping documents from its bank on the basis of a trust receipt,the bank:

Accepted Answer

A) becomes a preferred creditor to the extent of the amount due less cash deposits with the bank 
B) sells off the assets 
C) auctions off the merchandise 
D) has a prior claim relative to other general creditors 
E) none of the above 
A) becomes a preferred creditor to the extent of the amount due less cash deposits with the bank 
B) sells off the assets 
C) auctions off the merchandise 
D) has a prior claim relative to other general creditors 
E) none of the above

Question 9

An indirect exchange rate quotation is simply the reciprocal of a direct exchange rate quotation.

Accepted Answer

A) True 
 B)False

Question 10

Before arbitragers take action with respect to exchange rate differentials:

Accepted Answer

A) central bank approval must be obtained 
B) loans to cover transactions must be obtained 
C) a market differential of at least 1¢ must exist between two currencies 
D) a differential of as little as 1/16 of 1¢ may trigger action 
A) central bank approval must be obtained 
B) loans to cover transactions must be obtained 
C) a market differential of at least 1¢ must exist between two currencies 
D) a differential of as little as 1/16 of 1¢ may trigger action

Question 11

The 1992 Maastricht Treaty formally committed the countries of the European Union to economic and monetary union.

Accepted Answer

A) True 
 B)False

Question 12

The currency quotation method that indicates the amount of a home country's currency needed to purchase one unit of a foreign currency is called the

Accepted Answer

A) direct quotation method 
B) indirect quotation method 
C) floating exchange rate method 
D) none of the above 
A) direct quotation method 
B) indirect quotation method 
C) floating exchange rate method 
D) none of the above

Question 13

The traveler's letter of credit is usually used by:

Accepted Answer

A) purchasing agents making purchases in foreign countries 
B) individuals traveling abroad 
C) importers' banks 
D) correspondent banks,in order to reduce shipment of gold between countries 
A) purchasing agents making purchases in foreign countries 
B) individuals traveling abroad 
C) importers' banks 
D) correspondent banks,in order to reduce shipment of gold between countries

Question 14

The _______ includes ALL international transactions.

Accepted Answer

A) balance of trade 
B) balance of payments 
C) current account balance 
D) capital account balance 
A) balance of trade 
B) balance of payments 
C) current account balance 
D) capital account balance

Question 15

The Board of Governors of the Federal Reserve System authorizes member banks to accept drafts that arise in the course of certain types of international transactions.

Accepted Answer

A) True 
 B)False

Question 16

If the exchange rate in New York for British pounds sterling is quoted at 1 pound = $1.60,and in London the rate is quoted at 1 pound = $1.62,financial arbitragers might:

Accepted Answer

A) buy pounds in New York 
B) sell dollars in London 
C) simultaneously sell pounds in New York and buy dollars in London 
D) simultaneously buy pounds in New York and sell dollars in London 
A) buy pounds in New York 
B) sell dollars in London 
C) simultaneously sell pounds in New York and buy dollars in London 
D) simultaneously buy pounds in New York and sell dollars in London

Question 17

In effect,the commercial letter of credit enables the importer to:

Accepted Answer

A) substitute the bank's financial strength for his or her own 
B) shift the burden of financing the transaction to the exporter 
C) borrow from his or her bank on the basis of merchandise importer 
D) have ample of time to sell the imported merchandise and meet payment obligations 
A) substitute the bank's financial strength for his or her own 
B) shift the burden of financing the transaction to the exporter 
C) borrow from his or her bank on the basis of merchandise importer 
D) have ample of time to sell the imported merchandise and meet payment obligations

Question 18

During the latter part of the decade ending in 2010:

Accepted Answer

A) housing prices peaked in 2006. 
B) stock prices peaked in 2007. 
C) debt-heavy individuals and business firms default rates skyrocketed. 
D) the U.S.dollar declining rapidly against an index of major currencies. 
E) all of the above 
A) housing prices peaked in 2006. 
B) stock prices peaked in 2007. 
C) debt-heavy individuals and business firms default rates skyrocketed. 
D) the U.S.dollar declining rapidly against an index of major currencies. 
E) all of the above

Question 19

A draft that is accompanied by an order bill of lading and other documents is called a (n)

Accepted Answer

A) bill of exchange 
B) sight draft 
C) time draft 
D) documentary draft 
A) bill of exchange 
B) sight draft 
C) time draft 
D) documentary draft

Question 20

Purchasing commodities,securities,or bills of exchange in one market and immediately selling them in another to make a profit from price differences in the two markets is called:

Accepted Answer

A) profiteering 
B) skimming 
C) arbitrage 
D) all of the above 
A) profiteering 
B) skimming 
C) arbitrage 
D) all of the above

A purchasing agent for a domestic art gallery touring foreign countries for possible acquisitions might find it convenient to have:

Slow economic growth in investments in another country would be an example of political risk.

Under a floating exchange rate system,the value of one currency relative to another is determined by the forces of supply and demand.

_________________________ was created to promote world trade through monitoring and maintaining fixed exchange rates and by making loans to countries with payments problems.

Which of the following statements is most correct?

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 exchange rate is the rate at which a given unit of foreign currency is quoted in terms of:

Should a business fail after receiving shipping documents from its bank on the basis of a trust receipt,the bank:

An indirect exchange rate quotation is simply the reciprocal of a direct exchange rate quotation.

Before arbitragers take action with respect to exchange rate differentials:

The 1992 Maastricht Treaty formally committed the countries of the European Union to economic and monetary union.

The currency quotation method that indicates the amount of a home country's currency needed to purchase one unit of a foreign currency is called the

The traveler's letter of credit is usually used by:

The _______ includes ALL international transactions.

The Board of Governors of the Federal Reserve System authorizes member banks to accept drafts that arise in the course of certain types of international transactions.

If the exchange rate in New York for British pounds sterling is quoted at 1 pound = $1.60,and in London the rate is quoted at 1 pound = $1.62,financial arbitragers might:

In effect,the commercial letter of credit enables the importer to:

During the latter part of the decade ending in 2010:

A draft that is accompanied by an order bill of lading and other documents is called a (n)

Purchasing commodities,securities,or bills of exchange in one market and immediately selling them in another to make a profit from price differences in the two markets is called:

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 Valuation

Securities 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

Exam 6: International Finance and Trade

A purchasing agent for a domestic art gallery touring foreign countries for possible acquisitions might find it convenient to have:

Slow economic growth in investments in another country would be an example of political risk.

Under a floating exchange rate system,the value of one currency relative to another is determined by the forces of supply and demand.

_________________________ was created to promote world trade through monitoring and maintaining fixed exchange rates and by making loans to countries with payments problems.

Which of the following statements is most correct?

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 exchange rate is the rate at which a given unit of foreign currency is quoted in terms of:

Should a business fail after receiving shipping documents from its bank on the basis of a trust receipt,the bank:

An indirect exchange rate quotation is simply the reciprocal of a direct exchange rate quotation.

Before arbitragers take action with respect to exchange rate differentials:

The 1992 Maastricht Treaty formally committed the countries of the European Union to economic and monetary union.

The currency quotation method that indicates the amount of a home country's currency needed to purchase one unit of a foreign currency is called the

The traveler's letter of credit is usually used by:

The _______ includes ALL international transactions.

The Board of Governors of the Federal Reserve System authorizes member banks to accept drafts that arise in the course of certain types of international transactions.

If the exchange rate in New York for British pounds sterling is quoted at 1 pound = $1.60,and in London the rate is quoted at 1 pound = $1.62,financial arbitragers might:

In effect,the commercial letter of credit enables the importer to:

During the latter part of the decade ending in 2010:

A draft that is accompanied by an order bill of lading and other documents is called a (n)

Purchasing commodities,securities,or bills of exchange in one market and immediately selling them in another to make a profit from price differences in the two markets is called:

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 Valuation

Securities 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