Question 1

Interest rate parity states that:

Accepted Answer

A) relative forward exchange rates determine the relativity between the forward interest rate and the spot interest rate. 
B) relative spot exchange rates determine the relativity between the forward exchange rate and the forward interest rate. 
C) relative interest rates determine the relativity between the forward exchange rate and the spot exchange rate. 
D) relative forward exchange rates determine the relativity between the forward exchange rate and the spot interest rate. 
A) relative forward exchange rates determine the relativity between the forward interest rate and the spot interest rate. 
B) relative spot exchange rates determine the relativity between the forward exchange rate and the forward interest rate. 
C) relative interest rates determine the relativity between the forward exchange rate and the spot exchange rate. 
D) relative forward exchange rates determine the relativity between the forward exchange rate and the spot interest rate.

Question 2

Which of the following statements is true of international diversification?

Accepted Answer

A) International diversification is more beneficial to an investor because he/she can trade at any time of the day. 
B) Greater diversification benefits arise from holding a portfolio of shares in companies from countries with stable governments,rather than from emerging countries with greater political risk. 
C) Holding a portfolio of shares traded on foreign exchanges increases the likelihood that the correlation between the shares is lower because of the larger number of assets that an investor can choose from. 
D) Greater diversification benefits arise from holding a portfolio of shares in companies from countries with stable governments,rather than from emerging countries with greater political risk and holding a portfolio of shares traded on foreign exchanges increases the likelihood that the correlation between the shares is lower because of the larger number of assets that an investor can choose from. 
A) International diversification is more beneficial to an investor because he/she can trade at any time of the day. 
B) Greater diversification benefits arise from holding a portfolio of shares in companies from countries with stable governments,rather than from emerging countries with greater political risk. 
C) Holding a portfolio of shares traded on foreign exchanges increases the likelihood that the correlation between the shares is lower because of the larger number of assets that an investor can choose from. 
D) Greater diversification benefits arise from holding a portfolio of shares in companies from countries with stable governments,rather than from emerging countries with greater political risk and holding a portfolio of shares traded on foreign exchanges increases the likelihood that the correlation between the shares is lower because of the larger number of assets that an investor can choose from.

Question 3

Which theory states that the exchange rate between two currencies adjusts to reflect the relative inflation rates in the two currencies?

Accepted Answer

A) Interest rate parity. 
B) Unbiased forward rates. 
C) International fisher effect. 
D) Purchasing power parity. 
A) Interest rate parity. 
B) Unbiased forward rates. 
C) International fisher effect. 
D) Purchasing power parity.

Question 4

Purchasing power parity states that:

Accepted Answer

A) interest rates must compensate for expected inflation. 
B) the expected change in the exchange rate between two currencies is due to differences in expected inflation rates in the respective countries. 
C) relative interest rates determine the relativity between the forward exchange rate and the spot exchange rate. 
D) the expected change in the exchange rate is due to differences in expected interest rates in the respective countries. 
A) interest rates must compensate for expected inflation. 
B) the expected change in the exchange rate between two currencies is due to differences in expected inflation rates in the respective countries. 
C) relative interest rates determine the relativity between the forward exchange rate and the spot exchange rate. 
D) the expected change in the exchange rate is due to differences in expected interest rates in the respective countries.

Question 5

Which of the following statements regarding purchasing power parity (PPP)is true?

Accepted Answer

A) Overseas evidence mostly supports PPP,provided that transaction costs are factored into the model. 
B) International comparisons using current exchange rates can be misleading because deviations from PPP are substantially larger in the long run than in the short run. 
C) Under PPP,a country with a low inflation rate will have an appreciating exchange rate. 
D) None of the given options. 
A) Overseas evidence mostly supports PPP,provided that transaction costs are factored into the model. 
B) International comparisons using current exchange rates can be misleading because deviations from PPP are substantially larger in the long run than in the short run. 
C) Under PPP,a country with a low inflation rate will have an appreciating exchange rate. 
D) None of the given options.

Question 6

Which theory states that a forward exchange rate is given by relative interest rates in the two currencies?

Accepted Answer

A) Interest rate parity. 
B) Purchasing power parity. 
C) International fisher effect. 
D) Unbiased forward rates. 
A) Interest rate parity. 
B) Purchasing power parity. 
C) International fisher effect. 
D) Unbiased forward rates.

Question 7

Calculate the exchange rate between Australian dollars and UK pounds (GBP)if A$1 = US$0.753 and US$1 = GBP 0.629?

Accepted Answer

A) A$1 = GBP 1.20 
B) A$1 = GBP 0.74 
C) GBP 1 = A$2.11 
D) GBP 1 = A$0.83 
A) A$1 = GBP 1.20 
B) A$1 = GBP 0.74 
C) GBP 1 = A$2.11 
D) GBP 1 = A$0.83

Question 8

The Australian dollar was floated in:

Accepted Answer

A) 1982. 
B) 1983. 
C) 1984. 
D) 1985. 
A) 1982. 
B) 1983. 
C) 1984. 
D) 1985.

Question 9

How many Australian dollars can one US dollar buy if the exchange rate is A$1 = US$0.782?

Accepted Answer

A) $1.28 
B) $1.32 
C) $1.00 
D) $0.782 
A) $1.28 
B) $1.32 
C) $1.00 
D) $0.782

Question 10

The intercountry correlation coefficients for share price indices between Australia and other countries are as follows:  
Which country is likely to offer the best diversification benefits for an Australian investor?

Accepted Answer

A) Canada 
B) Japan 
C) UK 
D) US 
A) Canada 
B) Japan 
C) UK 
D) US

Question 11

The forward rate refers to:

Accepted Answer

A) the spot exchange rate. 
B) the exchange rate that is determined at a specified future date. 
C) the exchange rate that is determined now but with payment and delivery to occur at a specified future date. 
D) the upper bound of a currency. 
A) the spot exchange rate. 
B) the exchange rate that is determined at a specified future date. 
C) the exchange rate that is determined now but with payment and delivery to occur at a specified future date. 
D) the upper bound of a currency.

Question 12

Which of the following is not an overseas borrowing by BHP Billiton?

Accepted Answer

A) BHP Billiton purchases debentures from a US company. 
B) BHP Billiton sells Eurocommercial paper in overseas markets. 
C) BHP Billiton sells debentures to overseas investors denominated in Swiss francs. 
D) BHP Billiton organises a loan through the Bundesberg Bank in Germany. 
A) BHP Billiton purchases debentures from a US company. 
B) BHP Billiton sells Eurocommercial paper in overseas markets. 
C) BHP Billiton sells debentures to overseas investors denominated in Swiss francs. 
D) BHP Billiton organises a loan through the Bundesberg Bank in Germany.

Question 13

An exchange rate that is established now but with payment and delivery to occur on a specified future date is known as:

Accepted Answer

A) forward margin. 
B) future rate. 
C) forward rate. 
D) unbiased rate. 
A) forward margin. 
B) future rate. 
C) forward rate. 
D) unbiased rate.

Question 14

The general principle of exchange rate hedging is to:

Accepted Answer

A) transact in the currency of the country with which you are dealing. 
B) deposit foreign currency in a cash deposit until commitment is due. 
C) enter into an offsetting commitment in another foreign currency. 
D) enter into an offsetting commitment in the same foreign currency. 
A) transact in the currency of the country with which you are dealing. 
B) deposit foreign currency in a cash deposit until commitment is due. 
C) enter into an offsetting commitment in another foreign currency. 
D) enter into an offsetting commitment in the same foreign currency.

Question 15

The price at which Australian dollars can be converted into,say,US dollars is known as the:

Accepted Answer

A) spot exchange rate. 
B) direct exchange rate. 
C) exchange rate between Australian dollars and US dollars. 
D) gold standard. 
A) spot exchange rate. 
B) direct exchange rate. 
C) exchange rate between Australian dollars and US dollars. 
D) gold standard.

Question 16

An Australian importer wishes to exchange Australian dollars for Japanese yen to pay for goods.How many Australian dollars are needed to pay for a bill of 500 000 yen if A$1 = 70 yen?

Accepted Answer

A) $350 000 
B) $3 500 000 
C) $71 428.57 
D) $7 142.86 
A) $350 000 
B) $3 500 000 
C) $71 428.57 
D) $7 142.86

Question 17

Bonds denominated in US dollars and issued in the US by non-US companies are known as:

Accepted Answer

A) American bonds. 
B) USA bonds. 
C) Yankee bonds. 
D) Bulldog bonds. 
A) American bonds. 
B) USA bonds. 
C) Yankee bonds. 
D) Bulldog bonds.

Question 18

If $A1 buys US$0.5200,how many Australian dollars can be exchanged for US$1000?

Accepted Answer

A) A$1000 
B) A$520 
C) A$1945 
D) A$1923 
A) A$1000 
B) A$520 
C) A$1945 
D) A$1923

Interest rate parity states that:

Which of the following statements is true of international diversification?

Which theory states that the exchange rate between two currencies adjusts to reflect the relative inflation rates in the two currencies?

Purchasing power parity states that:

Which of the following statements regarding purchasing power parity (PPP)is true?

Which theory states that a forward exchange rate is given by relative interest rates in the two currencies?

Calculate the exchange rate between Australian dollars and UK pounds (GBP)if A$1 = US$0.753 and US$1 = GBP 0.629?

The Australian dollar was floated in:

How many Australian dollars can one US dollar buy if the exchange rate is A$1 = US$0.782?

The intercountry correlation coefficients for share price indices between Australia and other countries are as follows: Which country is likely to offer the best diversification benefits for an Australian investor?

The forward rate refers to:

Which of the following is not an overseas borrowing by BHP Billiton?

An exchange rate that is established now but with payment and delivery to occur on a specified future date is known as:

The general principle of exchange rate hedging is to:

The price at which Australian dollars can be converted into,say,US dollars is known as the:

An Australian importer wishes to exchange Australian dollars for Japanese yen to pay for goods.How many Australian dollars are needed to pay for a bill of 500 000 yen if A$1 = 70 yen?

Bonds denominated in US dollars and issued in the US by non-US companies are known as:

If $A1 buys US$0.5200,how many Australian dollars can be exchanged for US$1000?

Introduction

Consumption, Investment and the Capital Market

The Time Value of Money: An Introduction to Financial Mathematics

Applying the Time Value of Money to Security Valuation

Project Evaluation: Principles and Methods

The Application of Project Evaluation Methods

Risk and Return

The Capital Market

Sources of Finance: Equity

Sources of Finance: Debt

Payout Policy

Principles of Capital Structure

Capital Structure Decisions

The Cost of Capital and Taxation Issues in Project Evaluation

Leasing and Other Equipment Finance

Capital Market Efficiency

Futures Contracts

Options and Contingent Claims

Analysis of Takeovers

Management of Short-Term Assets: Inventory

Management of Short-Term Assets: Liquid Assets and Accounts Receivable

Filters

Exam 20: International Financial Management

Interest rate parity states that:

Which of the following statements is true of international diversification?

Which theory states that the exchange rate between two currencies adjusts to reflect the relative inflation rates in the two currencies?

Purchasing power parity states that:

Which of the following statements regarding purchasing power parity (PPP)is true?

Which theory states that a forward exchange rate is given by relative interest rates in the two currencies?

Calculate the exchange rate between Australian dollars and UK pounds (GBP)if A$1 = US$0.753 and US$1 = GBP 0.629?

The Australian dollar was floated in:

How many Australian dollars can one US dollar buy if the exchange rate is A$1 = US$0.782?

The intercountry correlation coefficients for share price indices between Australia and other countries are as follows: Which country is likely to offer the best diversification benefits for an Australian investor?

The forward rate refers to:

Which of the following is not an overseas borrowing by BHP Billiton?

An exchange rate that is established now but with payment and delivery to occur on a specified future date is known as:

The general principle of exchange rate hedging is to:

The price at which Australian dollars can be converted into,say,US dollars is known as the:

An Australian importer wishes to exchange Australian dollars for Japanese yen to pay for goods.How many Australian dollars are needed to pay for a bill of 500 000 yen if A$1 = 70 yen?

Bonds denominated in US dollars and issued in the US by non-US companies are known as:

If $A1 buys US$0.5200,how many Australian dollars can be exchanged for US$1000?

Introduction

Consumption, Investment and the Capital Market

The Time Value of Money: An Introduction to Financial Mathematics

Applying the Time Value of Money to Security Valuation

Project Evaluation: Principles and Methods

The Application of Project Evaluation Methods

Risk and Return

The Capital Market

Sources of Finance: Equity

Sources of Finance: Debt

Payout Policy

Principles of Capital Structure

Capital Structure Decisions

The Cost of Capital and Taxation Issues in Project Evaluation

Leasing and Other Equipment Finance

Capital Market Efficiency

Futures Contracts

Options and Contingent Claims

Analysis of Takeovers

Management of Short-Term Assets: Inventory

Management of Short-Term Assets: Liquid Assets and Accounts Receivable

Filters