Question 1

Holding demand constant,an increase in supply for one currency relative to another will cause its value to appreciate relative to that currency.

Accepted Answer

A) True 
 B)False

Question 2

_________________________ 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 3

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 great deal of cash in various currencies 
E) none of the above 
A) travelers' checks 
B) a commercial letter of credit 
C) regular checkbook drafts 
D) a great deal of cash in various currencies 
E) none of the above

Question 4

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

Question 5

The benefits of specialization of effort among nations depend primarily upon:

Accepted Answer

A) geographical locations 
B) market research 
C) the existence of adequate financial facilities 
D) accommodating laws and regulations 
A) geographical locations 
B) market research 
C) the existence of adequate financial facilities 
D) accommodating laws and regulations

Question 6

Political risk is the risk associated with possible actions by a sovereign nation to interrupt or change the value of cash flows accruing to foreign investors.

Accepted Answer

A) True 
 B)False

Question 7

A draft requiring immediate payment 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 8

A nation with relatively lower interest rate levels than other countries will have a relatively stronger currency.

Accepted Answer

A) True 
 B)False

Question 9

The bankers' acceptance is a draft drawn on and accepted by a bank rather than the importing firm.

Accepted Answer

A) True 
 B)False

Question 10

Quotations of foreign exchange rates in the many cities of the world are identical or nearly so because of:

Accepted Answer

A) central bank control 
B) price fixing 
C) clearinghouse activities 
D) arbitrage activities 
A) central bank control 
B) price fixing 
C) clearinghouse activities 
D) arbitrage activities

Question 11

A stronger U.S.dollar generally

Accepted Answer

A) results in more imports of foreign merchandise 
B) leads to concern about worsening trade deficits 
C) results in lower domestic inflation 
D) all of the above 
A) results in more imports of foreign merchandise 
B) leads to concern about worsening trade deficits 
C) results in lower domestic inflation 
D) all of the above

Question 12

Under conditions of interest rate parity (IRP),a country with a relatively _______ higher nominal interest rate will have its currency _______ relative to a country with a relatively _______ nominal interest rate.

Accepted Answer

A) higher,depreciate,lower 
B) lower,depreciate,higher 
C) higher,appreciate,lower 
D) lower,appreciate,higher. 
A) higher,depreciate,lower 
B) lower,depreciate,higher 
C) higher,appreciate,lower 
D) lower,appreciate,higher.

Question 13

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) Subsidiary banking corporations established by foreign banks in this country are not subject to any special restrictions because of foreign ownership. 
C) Economic risk reflects the uncertainty associated with national government action that might affect asset values. 
D) All the above statements are false. 
A) The prices quoted to the individual buyer of foreign exchange are always in favor of the seller. 
B) Subsidiary banking corporations established by foreign banks in this country are not subject to any special restrictions because of foreign ownership. 
C) Economic risk reflects the uncertainty associated with national government action that might affect asset values. 
D) All the above statements are false.

Question 14

The firm that enters into a futures contract with respect to foreign exchange does so:

Accepted Answer

A) to offset possible loss in its collection process by a gain in the delivery process of the futures contract 
B) in anticipation of an increase in the value of the currency of the country for which the contract is established 
C) to decrease the cost of their sales transactions 
D) to eliminate a loss in the collection process of their accounts receivable in that country 
A) to offset possible loss in its collection process by a gain in the delivery process of the futures contract 
B) in anticipation of an increase in the value of the currency of the country for which the contract is established 
C) to decrease the cost of their sales transactions 
D) to eliminate a loss in the collection process of their accounts receivable in that country

Question 15

An instrument requiring immediate payment is classified as a time draft.

Accepted Answer

A) True 
 B)False

Question 16

Interest rate parity states that a country with a relatively higher expected inflation rate will have its currency depreciate relative to a country with a relatively lower inflation rate.

Accepted Answer

A) True 
 B)False

Question 17

Foreign exchange hedging by a multinational corporation is:

Accepted Answer

A) a normal responsibility of foreign exchange specialists 
B) not ordinarily considered to be prudent business 
C) usually described in speculative terms 
D) permitted only for defensive purposes 
A) a normal responsibility of foreign exchange specialists 
B) not ordinarily considered to be prudent business 
C) usually described in speculative terms 
D) permitted only for defensive purposes

Question 18

An unconditional order for the payment of money from one person to another 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 19

Loans by an exporter's bank based on the security of a documentary draft:

Accepted Answer

A) are supported entirely by the strength of the importer 
B) are subject to the approval of the importer's bank 
C) are available only to exporters with strong credit ratings 
D) have not only the financial strength of the exporter to support them,but also that of the importer 
A) are supported entirely by the strength of the importer 
B) are subject to the approval of the importer's bank 
C) are available only to exporters with strong credit ratings 
D) have not only the financial strength of the exporter to support them,but also that of the importer

Question 20

Commercial letters of credit are:

Accepted Answer

A) customarily required by importers of their suppliers 
B) negotiable in the money markets of major cities 
C) customarily provided by banks to their customers to accommodate their import activities 
D) ordinarily provided by issuing bank at no charge to customers 
A) customarily required by importers of their suppliers 
B) negotiable in the money markets of major cities 
C) customarily provided by banks to their customers to accommodate their import activities 
D) ordinarily provided by issuing bank at no charge to customers

Holding demand constant,an increase in supply for one currency relative to another will cause its value to appreciate relative to that currency.

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

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

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 benefits of specialization of effort among nations depend primarily upon:

Political risk is the risk associated with possible actions by a sovereign nation to interrupt or change the value of cash flows accruing to foreign investors.

A draft requiring immediate payment is called a (n)

A nation with relatively lower interest rate levels than other countries will have a relatively stronger currency.

The bankers' acceptance is a draft drawn on and accepted by a bank rather than the importing firm.

Quotations of foreign exchange rates in the many cities of the world are identical or nearly so because of:

A stronger U.S.dollar generally

Under conditions of interest rate parity (IRP),a country with a relatively ___ higher nominal interest rate will have its currency _ relative to a country with a relatively _____ nominal interest rate.

Which of the following statements is false?

The firm that enters into a futures contract with respect to foreign exchange does so:

An instrument requiring immediate payment is classified as a time draft.

Interest rate parity states that a country with a relatively higher expected inflation rate will have its currency depreciate relative to a country with a relatively lower inflation rate.

Foreign exchange hedging by a multinational corporation is:

An unconditional order for the payment of money from one person to another is called a (n)

Loans by an exporter's bank based on the security of a documentary draft:

Commercial letters of credit are:

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

Holding demand constant,an increase in supply for one currency relative to another will cause its value to appreciate relative to that currency.

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

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

The benefits of specialization of effort among nations depend primarily upon:

Political risk is the risk associated with possible actions by a sovereign nation to interrupt or change the value of cash flows accruing to foreign investors.

A draft requiring immediate payment is called a (n)

A nation with relatively lower interest rate levels than other countries will have a relatively stronger currency.

The bankers' acceptance is a draft drawn on and accepted by a bank rather than the importing firm.

Quotations of foreign exchange rates in the many cities of the world are identical or nearly so because of:

A stronger U.S.dollar generally

Under conditions of interest rate parity (IRP),a country with a relatively _______ higher nominal interest rate will have its currency _______ relative to a country with a relatively _______ nominal interest rate.

Which of the following statements is false?

The firm that enters into a futures contract with respect to foreign exchange does so:

An instrument requiring immediate payment is classified as a time draft.

Interest rate parity states that a country with a relatively higher expected inflation rate will have its currency depreciate relative to a country with a relatively lower inflation rate.

Foreign exchange hedging by a multinational corporation is:

An unconditional order for the payment of money from one person to another is called a (n)

Loans by an exporter's bank based on the security of a documentary draft:

Commercial letters of credit are:

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

Under conditions of interest rate parity (IRP),a country with a relatively ___ higher nominal interest rate will have its currency _ relative to a country with a relatively _____ nominal interest rate.