Question 1

Up until the start of the Vietnam War, the international monetary system operated mostly under a gold standard in which the currencies of major countries were convertible into gold at fixed exchange rates.
Not in the chapter

Accepted Answer

A) True 
 B)False

Question 2

A trust receipt as used in financing international transactions:

Accepted Answer

A) is issued by bonded warehouses for merchandise stored therein 
B) allows the release of merchandise on a consignment basis by the bank that issued the letter of credit 
C) is evidence of ownership of funds held in escrow by the importer's bank 
D) is a negotiable instrument that trades freely in the money market

Question 3

The attitude of central banks and commercial banks toward bankers' acceptances:

Accepted Answer

A) has been unfavorable regarding bankers' acceptances as attractive long-term commitments 
B) has never been constructive and has, in fact, been in opposition to their use at times 
C) is one of approval provided that before investing in such instruments guarantees can be obtained from the Export-Import Bank 
D) is irrelevant, since they are prevented from investing in such instruments by regulations or laws 
E) none of the above

Question 4

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

Question 5

An importer will generally try to avoid making payment for a purchase before the goods are actually shipped by:

Accepted Answer

A) purchasing a letter of credit 
B) having payment sent to a bank in the exporter's country to be held until proper shipment is made 
C) post-dating a check 
D) insisting on payment only upon delivery

Question 6

In foreign exchange, variations in quotations among countries at any time are quickly brought into alignment through arbitrage activities.

Accepted Answer

A) True 
 B)False

Question 7

Which factor does not impact international trade balances?

Accepted Answer

A) The exchange value of the U.S.dollar relative to other currencies 
B) How often the government sells treasury bills 
C) Relative inflation rates 
D) Economic growth 
E) The prices of goods in the U.S.

Question 8

Purchasing power parity (PPP) states that the currency of a country with relatively higher inflation will depreciate relative to the currency of a country with a relatively lower inflation rate.

Accepted Answer

A) True 
 B)False

Question 9

The lowest quotation on foreign exchange is given for: Not in chapter

Accepted Answer

A) cable rates 
B) banker's time drafts 
C) banker's sight drafts 
D) banker's acceptance

Question 10

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.

Question 11

To protect against loss as a result of adverse currency fluctuations, an export firm may:

Accepted Answer

A) demand cash settlement 
B) purchase use a futures contract as a hedge 
C) require the customer to make payment in the exporter's currency 
D) require a government guarantee against currency loss of valueall of the above are possible protections.

Question 12

The ultimate effect of large-scale arbitrage activities on exchange rates is the elimination of the variation between the two markets.

Accepted Answer

A) True 
 B)False

Question 13

If balances in a bank's foreign accounts are substantially reduced due to an excess of demand relative to supply:

Accepted Answer

A) loans are usually sought from central banks and other institutions to replenish balances 
B) they will buy currency from foreign exchange dealers price quotations are adjusted to affect a reduction in demand and an increase in supply 
C) currency may be shipped abroad for deposit in such accounts 
D) Export-Import Bank loans are sought to bolster balances

Question 14

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

Question 15

The 1992 1991 Maastricht Treaty formally committed the countries of the European Union to economic and monetary union.
Book says 1991.

Accepted Answer

A) True 
 B)False

Question 16

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

Question 17

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

Question 18

Which of the following statements is most correct?

Accepted Answer

A) The Export-Import Bank is a United States government-sponsored institution which is owned by member banks that deal in financing foreign trade. 
B) Foreign exchange markets can be characterized most properly as a communication network among many financial institutions than as an identifiable geographic location. 
C) When a financial institution with accounts abroad sells claims against those accounts, it must replenish those accounts by borrowing abroad or shipping currency. 
D) The banker's sight draft is the most expensive way to purchase a claim to foreign exchange.

Question 19

Balances in foreign accounts are maintained for purposes of dealing in foreign exchange by:

Accepted Answer

A) central banks 
B) correspondents of domestic banks 
C) correspondents or foreign branches of domestic banks 
D) most multinational corporations 
E) none of the above

Question 20

_________________________ 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

Exam 6: International Finance and Trade

Up until the start of the Vietnam War, the international monetary system operated mostly under a gold standard in which the currencies of major countries were convertible into gold at fixed exchange rates. Not in the chapter

A trust receipt as used in financing international transactions:

The attitude of central banks and commercial banks toward bankers' acceptances:

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

An importer will generally try to avoid making payment for a purchase before the goods are actually shipped by:

In foreign exchange, variations in quotations among countries at any time are quickly brought into alignment through arbitrage activities.

Which factor does not impact international trade balances?

Purchasing power parity (PPP) states that the currency of a country with relatively higher inflation will depreciate relative to the currency of a country with a relatively lower inflation rate.

The lowest quotation on foreign exchange is given for: Not in chapter

Which of the following statements is most correct?

To protect against loss as a result of adverse currency fluctuations, an export firm may:

The ultimate effect of large-scale arbitrage activities on exchange rates is the elimination of the variation between the two markets.

If balances in a bank's foreign accounts are substantially reduced due to an excess of demand relative to supply:

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 1992 1991 Maastricht Treaty formally committed the countries of the European Union to economic and monetary union. Book says 1991.

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

Before arbitragers take action with respect to exchange rate differentials:

Which of the following statements is most correct?

Balances in foreign accounts are maintained for purposes of dealing in foreign exchange by:

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