Question 1

A problem with having coins serve as a medium of exchange is

Accepted Answer

A)  it is difficult to duplicate coins 
B)  it is difficult to mint them 
C)  it is difficult to verify the purity of the coins 
D)  it is easy for coins to increase inflation 
E)  it is difficult to trade coins over long distances

Question 2

Market makers of currencies are always willing to buy or sell currencies and make money on commissions.

Accepted Answer

A) True 
 B)False

Question 3

If an American investor purchases British pounds for $2.00/£, and if the dollar depreciates by 10 percent, the new rate will be

Accepted Answer

A)  $1.80/£ 
B)  $2.20/£ 
C)  £2.20/$ 
D)  £1.80/$ 
E)  none of the above

Question 4

The higher the inflation rate, the more likely the currency will depreciate.

Accepted Answer

A) True 
 B)False

Question 5

If the dollar depreciates against the pound, then

Accepted Answer

A)  exports to the United States will increase from the United Kingdom 
B)  exports to the United Kingdom will increase from the United States 
C)  exports to the United States will increase from all countries except the United Kingdom 
D)  exports to the United Kingdom will increase from all countries except the United States 
E)  None of the above

Question 6

When a company sells products overseas, it is important to forecast foreign exchange prices because it can impact profits in the future.

Accepted Answer

A) True 
 B)False

Question 7

Gold and silver became the popular choice of commodity to serve as coins for the following reasons, except

Accepted Answer

A)  indivisibility 
B)  scarcity 
C)  durability 
D)  consistency 
E)  transportability

Question 8

If the direct quote for the British Pound for an American investor is $2.00/£, then the indirect quote is £0.50/$.

Accepted Answer

A) True 
 B)False

Question 9

Assume a company in the United States expects to receive £100,000 in three months. It expects the pound to appreciate in the near future.

Accepted Answer

A)  it should lead the payments 
B)  it should lag the payments 
C)  it should lead the receivables 
D)  it should lag the receivables 
E)  none of the above

Question 10

During the interwar period

Accepted Answer

A)  many countries kept decreasing the price of gold to depreciate their currency 
B)  the period was marked by tranquility as countries coordinated their exchange rates 
C)  many countries abandoned the gold standard and did not resume it till after World War II 
D)  many countries kept increasing the price of gold to depreciate their currency 
E)  the period was marked by trust by all countries in the exchange rates of all countries

Question 11

In the foreign market, the following hold true except

Accepted Answer

A)  there is a centralized location for trading 
B)  the major players are international banks 
C)  the purchase and sale can be classified into two markets: retail and wholesale 
D)  in wholesale markets, the minimum denominations are usually $5 million 
E)  the majority of exchange takes place over the phone, fax or Internet

Question 12

A depreciating dollar against the Euro is the same as the Euro depreciating against the dollar.

Accepted Answer

A) True 
 B)False

Question 13

The United States is one of the few countries to rarely intervene in the foreign exchange market to influence the price of the dollar.

Accepted Answer

A) True 
 B)False

Question 14

What is the indirect quote for a European investor who wishes to sell dollars if the direct quote is €0.80/$1? What is the relationship between an indirect and direct quote?

Accepted Answer

The answer of What is the indirect quote for a...

Question 15

How do foreign exchange rates play a role in business decisions? Explain that in relation to the pricing of products?

Accepted Answer

The answer of How do foreign exchange rates play a...

Question 16

If the dollar appreciates against the Japanese Yen, imports from Japan to the United States should decrease.

Accepted Answer

A) True 
 B)False

Question 17

The Euro began circulating officially as a currency and replaced the local currency on January 1

Accepted Answer

A)  1988 
B)  1995 
C)  1999 
D)  2002 
E)  2005

Question 18

In a freely floating exchange rate system, the price of a currency is determined by the demand and supply of the currency.

Accepted Answer

A) True 
 B)False

Question 19

What precious metals were used historically in the minting of coins and why?

Accepted Answer

The answer of What precious metals were used historically in...

Question 20

What is the impact on a country's imports and exports when the dollar depreciates? Explain.

Accepted Answer

The answer of What is the impact on a country's...

Exam 10: International Finance

A problem with having coins serve as a medium of exchange is

Market makers of currencies are always willing to buy or sell currencies and make money on commissions.

If an American investor purchases British pounds for $2.00/£, and if the dollar depreciates by 10 percent, the new rate will be

The higher the inflation rate, the more likely the currency will depreciate.

If the dollar depreciates against the pound, then

When a company sells products overseas, it is important to forecast foreign exchange prices because it can impact profits in the future.

Gold and silver became the popular choice of commodity to serve as coins for the following reasons, except

If the direct quote for the British Pound for an American investor is $2.00/£, then the indirect quote is £0.50/$.

Assume a company in the United States expects to receive £100,000 in three months. It expects the pound to appreciate in the near future.

During the interwar period

In the foreign market, the following hold true except

A depreciating dollar against the Euro is the same as the Euro depreciating against the dollar.

The United States is one of the few countries to rarely intervene in the foreign exchange market to influence the price of the dollar.

What is the indirect quote for a European investor who wishes to sell dollars if the direct quote is €0.80/$1? What is the relationship between an indirect and direct quote?

How do foreign exchange rates play a role in business decisions? Explain that in relation to the pricing of products?

If the dollar appreciates against the Japanese Yen, imports from Japan to the United States should decrease.

The Euro began circulating officially as a currency and replaced the local currency on January 1

In a freely floating exchange rate system, the price of a currency is determined by the demand and supply of the currency.

What precious metals were used historically in the minting of coins and why?

What is the impact on a country's imports and exports when the dollar depreciates? Explain.