Question 1

If a country is has high interest rates because of inflation, the forward price of its currency will be higher than the spot price.

Accepted Answer

A) True 
 B)False  False

Question 2

With foreign exchange contracts, currencies are exchanged

Accepted Answer

A)  at the specified future date, but at the rate agreed upon at the date of the contract. 
B)  immediately, but at the rate agreed upon at the date of the contract. 
C)  both parties must place the amount of the contract in escrow until the exercise date of the contract. 
D)  payment is made immediately, but the contracted currency will be delivered at the specified future date. 
A)  at the specified future date, but at the rate agreed upon at the date of the contract. 
B)  immediately, but at the rate agreed upon at the date of the contract. 
C)  both parties must place the amount of the contract in escrow until the exercise date of the contract. 
D)  payment is made immediately, but the contracted currency will be delivered at the specified future date. A

Question 3

Multinational corporations can have lower cost of capital and more continuous access to external finance compared to a domestic firm.

Accepted Answer

A) True 
 B)False  True

Question 4

Risks of foreign direct investment potentially include

Accepted Answer

A)  exchange rate fluctuations. 
B)  political instability. 
C)  competition from foreign competitors. 
D)  all of the above. 
A)  exchange rate fluctuations. 
B)  political instability. 
C)  competition from foreign competitors. 
D)  all of the above.

Question 5

The major advantage of the forward market is risk reduction.

Accepted Answer

A) True 
 B)False

Question 6

If a currency's forward price in U. S. dollars is lower than the spot price, interest rates are higher in the foreign country than they are in the U.S.

Accepted Answer

A) True 
 B)False

Question 7

The efficiency of foreign currency markets is ensured, in large measure, by the process of arbitrageurs.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following statements is true?

Accepted Answer

A)  The forward rate is the same as the spot rate that will prevail in the future. 
B)  Only the forward rate is known. 
C)  An indirect quote is the exchange rate that indicates the number of units of the home currency required to buy one unit of foreign currency. 
D)  Both B and C. 
A)  The forward rate is the same as the spot rate that will prevail in the future. 
B)  Only the forward rate is known. 
C)  An indirect quote is the exchange rate that indicates the number of units of the home currency required to buy one unit of foreign currency. 
D)  Both B and C.

Question 9

After the U.S. dollar, the most widely traded currency is

Accepted Answer

A)  the U.K. pound 
B)  the euro. 
C)  the Swiss franc. 
D)  the Japanese yen. 
A)  the U.K. pound 
B)  the euro. 
C)  the Swiss franc. 
D)  the Japanese yen.

Question 10

The exchange rate that represents the number of units of a home currency that is required to purchase one unit of a foreign currency is referred to as a(n) ________ quote.

Accepted Answer

A)  forward 
B)  direct 
C)  market 
D)  indirect 
A)  forward 
B)  direct 
C)  market 
D)  indirect

Question 11

The price of the British pound in Swiss francs rate is

Accepted Answer

A)  1.4173 Swiss francs to the British pound. 
B)  1.4842 Swiss francs to the British pound. 
C)  .7056 Swiss francs to the British pound. 
D)  .6738 Swiss francs to the British pound. 
A)  1.4173 Swiss francs to the British pound. 
B)  1.4842 Swiss francs to the British pound. 
C)  .7056 Swiss francs to the British pound. 
D)  .6738 Swiss francs to the British pound.

Question 12

If the net present value of a direct foreign investment is negative, the multinational firm should

Accepted Answer

A)  reject any proposals. 
B)  consider establishing a sales office. 
C)  consider licensing. 
D)  both A and C. 
A)  reject any proposals. 
B)  consider establishing a sales office. 
C)  consider licensing. 
D)  both A and C.

Question 13

Jean-Marc lives in Besançon, a French city near the Swiss border. The exchange rate is 1.20 Swiss francs to the euro. If Jean-Marc's shopping cart of groceries typically costs him 80 euros, what should it cost him if he drives across the border to Switzerland? Do you think that purchase price parity would apply in this situation?

Accepted Answer

If purchase price parity applies, Jean-M

Question 14

One U.S. dollar buys 21.9923 Mexican pesos and .8885 euro. What is the peso/euro exchange rate?

Accepted Answer

21.9923/.8

Question 15

The difference between the asked price and the bid price is known as the spread.

Accepted Answer

A) True 
 B)False

Question 16

Participants in foreign exchange trading include

Accepted Answer

A)  importers and exporters. 
B)  investors and portfolio managers. 
C)  currency traders. 
D)  all of the above. 
A)  importers and exporters. 
B)  investors and portfolio managers. 
C)  currency traders. 
D)  all of the above.

Question 17

The price of a Swiss franc in British pounds is

Accepted Answer

A)  1.4842 British pounds to the Swiss franc. 
B)  1.4173 British pounds to the Swiss franc. 
C)  .7056 British pounds to the Swiss franc. 
D)  .6738 British pounds to the Swiss franc 
A)  1.4842 British pounds to the Swiss franc. 
B)  1.4173 British pounds to the Swiss franc. 
C)  .7056 British pounds to the Swiss franc. 
D)  .6738 British pounds to the Swiss franc

Question 18

Some complexities of conducting international business include

Accepted Answer

A)  multiple currencies. 
B)  differing legal requirements. 
C)  restrictions on repatriating earnings. 
D)  all of the above. 
A)  multiple currencies. 
B)  differing legal requirements. 
C)  restrictions on repatriating earnings. 
D)  all of the above.

Question 19

What keeps foreign exchange quotes in two different countries in line with each other?

Accepted Answer

A)  Cross rates 
B)  Forward rates 
C)  Arbitrage 
D)  Spot rates 
A)  Cross rates 
B)  Forward rates 
C)  Arbitrage 
D)  Spot rates

Question 20

Trading in foreign exchange markets is dominated by

Accepted Answer

A)  Russian rubles, Indian rupees and Indonesian rupeas. 
B)  Spanish pesetas, German marks, French francs. 
C)  Chinese renminbis, Saudi ryals, pesos of various Latin American countries. 
D)  U. S. dollars, the British pound, the euro and the yen. 
A)  Russian rubles, Indian rupees and Indonesian rupeas. 
B)  Spanish pesetas, German marks, French francs. 
C)  Chinese renminbis, Saudi ryals, pesos of various Latin American countries. 
D)  U. S. dollars, the British pound, the euro and the yen.

If a country is has high interest rates because of inflation, the forward price of its currency will be higher than the spot price.

With foreign exchange contracts, currencies are exchanged

Multinational corporations can have lower cost of capital and more continuous access to external finance compared to a domestic firm.

Risks of foreign direct investment potentially include

The major advantage of the forward market is risk reduction.

If a currency's forward price in U. S. dollars is lower than the spot price, interest rates are higher in the foreign country than they are in the U.S.

The efficiency of foreign currency markets is ensured, in large measure, by the process of arbitrageurs.

Which of the following statements is true?

After the U.S. dollar, the most widely traded currency is

The exchange rate that represents the number of units of a home currency that is required to purchase one unit of a foreign currency is referred to as a(n) ________ quote.

The price of the British pound in Swiss francs rate is

If the net present value of a direct foreign investment is negative, the multinational firm should

One U.S. dollar buys 21.9923 Mexican pesos and .8885 euro. What is the peso/euro exchange rate?

The difference between the asked price and the bid price is known as the spread.

Participants in foreign exchange trading include

The price of a Swiss franc in British pounds is

Some complexities of conducting international business include

What keeps foreign exchange quotes in two different countries in line with each other?

Trading in foreign exchange markets is dominated by

Getting Started-Principles of Finance

Firms and the Financial Market

Understanding Financial Statements, Taxes, and Cash Flows

Financial Analysis-Sizing up Firm Performance

Time Value of Money-The Basics

The Time Value of Money-Annuities and Other Topics

An Introduction to Risk and Return-History of Financial Market Returns

Risk and Return-Capital Market Theory

Debt Valuation and Interest Rates

Stock Valuation

Investment Decision Criteria

Analyzing Project Cash Flows

Risk Analysis and Project Evaluation

The Cost of Capital

Capital Structure Policy

Dividend Policy

Financial Forecasting and Planning

Working Capital Management

Corporate Risk Management

Filters

Exam 19: International Business Finance

If a country is has high interest rates because of inflation, the forward price of its currency will be higher than the spot price.

With foreign exchange contracts, currencies are exchanged

Multinational corporations can have lower cost of capital and more continuous access to external finance compared to a domestic firm.

Risks of foreign direct investment potentially include

The major advantage of the forward market is risk reduction.

If a currency's forward price in U. S. dollars is lower than the spot price, interest rates are higher in the foreign country than they are in the U.S.

The efficiency of foreign currency markets is ensured, in large measure, by the process of arbitrageurs.

Which of the following statements is true?

After the U.S. dollar, the most widely traded currency is

The exchange rate that represents the number of units of a home currency that is required to purchase one unit of a foreign currency is referred to as a(n) ________ quote.

The price of the British pound in Swiss francs rate is

If the net present value of a direct foreign investment is negative, the multinational firm should

One U.S. dollar buys 21.9923 Mexican pesos and .8885 euro. What is the peso/euro exchange rate?

The difference between the asked price and the bid price is known as the spread.

Participants in foreign exchange trading include

The price of a Swiss franc in British pounds is

Some complexities of conducting international business include

What keeps foreign exchange quotes in two different countries in line with each other?

Trading in foreign exchange markets is dominated by

Getting Started-Principles of Finance

Firms and the Financial Market

Understanding Financial Statements, Taxes, and Cash Flows

Financial Analysis-Sizing up Firm Performance

Time Value of Money-The Basics

The Time Value of Money-Annuities and Other Topics

An Introduction to Risk and Return-History of Financial Market Returns

Risk and Return-Capital Market Theory

Debt Valuation and Interest Rates

Stock Valuation

Investment Decision Criteria

Analyzing Project Cash Flows

Risk Analysis and Project Evaluation

The Cost of Capital

Capital Structure Policy

Dividend Policy

Financial Forecasting and Planning

Working Capital Management

Corporate Risk Management

Filters