Question 1

According to the Big Mac Index,the dollar interest rate on U.S.and European bonds should be the same.Otherwise,there would be no arbitrage opportunities for investors.

Accepted Answer

A) True 
 B)False  False

Question 2

Buying goods in a lower priced market and selling them in a higher priced market to make profits is referred to as ______.

Accepted Answer

arbitrage

Question 3

In the equation "F=S(1+P)," "F" is defined as what?

Accepted Answer

A)   Forward rate
B)   Spot rate
C)   Forward premium
D)   Financial rate
E)   Future rate A

Question 4

In flow of funds analysis,money moving into a country is a debit (negative sign),while money leaving the same country is a credit (plus sign).

Accepted Answer

A) True 
 B)False

Question 5

When a new client signs on with the Whoppler Firm,its financial experts attempt to provide an educational orientation on finance for their newest customer.One of the many financial items discussed is the recommended primary reserve asset of the international monetary system.Which one of the following is most likely being discussed?

Accepted Answer

A)   Dirty float currency
B)   Purchasing power parity
C)   Clean float currency
D)   Special drawing right
E)   Dollarization

Question 6

The ________ consists of domestic-country-owned assets abroad,foreign-owned assets in the domestic country,and net financial derivatives.

Accepted Answer

The answer of The ________ consists of domestic-country-owned assets abroad,foreign-owned...

Question 7

A British firm may need dollars to pay for U.S.imports.It can work with banks in London to exchange pounds for dollars to make this payment via electronic transfer.This is an example of a(n)_____ market.

Accepted Answer

A)   exchange
B)   futures
C)   independent
D)   balance
E)   spot

Question 8

Which of the following is NOT true about the current account balance?

Accepted Answer

A)   It is the sum of the trade,services,income,and net transfers balance.
B)   China,France,Japan,and Singapore have consistently had current account surpluses over recent years.
C)   If foreign capital will not be available to finance the U.S.current account deficit,it can be predicted that the dollar will become stronger.
D)   The United States has had large account deficits in recent years.
E)   Countries with current account surpluses generally finance countries with current account deficits.

Question 9

In the forward market,the selling of a currency at a spot rate that is more than the forward rate is called _____.

Accepted Answer

A)   gaming the exchange rate
B)   cheating the bid-ask spread
C)   forward rate speculation
D)   selling at a premium
E)   selling at a discount

Question 10

The _____ account consists of domestic-country-owned assets abroad,foreign-owned assets in the domestic country,and net financial derivatives.

Accepted Answer

A)   balance
B)   financial
C)   risk
D)   services
E)   trade

Question 11

The _____ market is an informal OTC market run by banks.

Accepted Answer

A)   ​forward
B)   ​spot
C)   ​futures
D)   ​independent
E)   ​balance

Question 12

Which of the following rose substantially in value against most other currencies as well as served as a reserve asset in many countries during the global economic and financial crises of 2008-2009?

Accepted Answer

A)   U.S.dollar
B)   British pound
C)   Chinese yuan
D)   Japanese yen
E)   Euro

Question 13

If the dollar was expected to appreciate in the 60-day forward market against the Japanese yen,it would be selling at a premium.

Accepted Answer

A) True 
 B)False

Question 14

Security investments have little impact on the BOP's financial account.

Accepted Answer

A) True 
 B)False

Question 15

The net of services exports and imports is called the ______.

Accepted Answer

A)   trade balance
B)   services balance
C)   income balance
D)   services deficit
E)   services transfer ratio

Question 16

Scenario - S & I Creations
Sven and Ingrid Allgertson developed the idea for their thriving business while awaiting the birth of their first child,Olga.Finding nowhere to purchase fine handmade baby clothing and other items,the couple decided to start their own business.Neither Sven nor Ingrid imagined just how successful this endeavor would turn out to be for them.Their designer baby clothes and products were an instant hit in the world marketplace.And even though the baby items are quite expensive to purchase,shoppers from around the world are only too happy to spend large sums of money on their beloved children.
Originally S & I Creations only sold products within Sweden,but soon global demand necessitated the company offer its products in several other foreign markets.Now the proud parents of baby Olga are also the proud owners of a $10 billion per year business.Sven and Ingrid cannot wait to see what the future holds for their family and their business operations.
-S & I Creations has over ten thousand customers from London,England.The currency of England is not valued the same as the currency of Sweden.Which one of the following would S & I Creations be most interested in when it comes to currency value?

Accepted Answer

A)   The currency exchange rate
B)   The gold standard
C)   The Bretton Woods system
D)   The International Monetary System
E)   Foreign direct investment margin

Question 17

Scenario - S & I Creations
Sven and Ingrid Allgertson developed the idea for their thriving business while awaiting the birth of their first child,Olga.Finding nowhere to purchase fine handmade baby clothing and other items,the couple decided to start their own business.Neither Sven nor Ingrid imagined just how successful this endeavor would turn out to be for them.Their designer baby clothes and products were an instant hit in the world marketplace.And even though the baby items are quite expensive to purchase,shoppers from around the world are only too happy to spend large sums of money on their beloved children.
Originally S & I Creations only sold products within Sweden,but soon global demand necessitated the company offer its products in several other foreign markets.Now the proud parents of baby Olga are also the proud owners of a $10 billion per year business.Sven and Ingrid cannot wait to see what the future holds for their family and their business operations.
-When S & I Creations exports its products to foreign marketplaces,which one of the following is most likely to be affected for the country of Sweden?

Accepted Answer

A)   The income balance of Sweden
B)   The services balance of Sweden
C)   The World Bank
D)   The trade balance of Sweden
E)   The FDI of Sweden

Question 18

The law of one price is the underlying principle of the ______ theory.

Accepted Answer

The answer of The law of one price is the...

Question 19

Scenario - S & I Creations
Sven and Ingrid Allgertson developed the idea for their thriving business while awaiting the birth of their first child,Olga.Finding nowhere to purchase fine handmade baby clothing and other items,the couple decided to start their own business.Neither Sven nor Ingrid imagined just how successful this endeavor would turn out to be for them.Their designer baby clothes and products were an instant hit in the world marketplace.And even though the baby items are quite expensive to purchase,shoppers from around the world are only too happy to spend large sums of money on their beloved children.
Originally S & I Creations only sold products within Sweden,but soon global demand necessitated the company offer its products in several other foreign markets.Now the proud parents of baby Olga are also the proud owners of a $10 billion per year business.Sven and Ingrid cannot wait to see what the future holds for their family and their business operations.
-When the experts at the Whoppler Firm suggest to a client that it is advisable to engage in arbitrage,what exactly are the experts recommending their client to do?

Accepted Answer

A)   Sell goods in lower priced markets to move material throughout the globe
B)   Buy goods in a lower priced market and sell them in a higher priced market in order to make a profit
C)   Sell identical goods for the same prices in differing markets
D)   Buy and sell using only what are considered hard currencies
E)   Avoid transactions involving the use of soft currencies

Question 20

Which of the following represents the top trading partner of the United States?

Accepted Answer

A)   Mexico
B)   Canada
C)   Germany
D)   Japan
E)   France

Exam 4: The International Flow of Funds and Exchange Rates

According to the Big Mac Index,the dollar interest rate on U.S.and European bonds should be the same.Otherwise,there would be no arbitrage opportunities for investors.

Buying goods in a lower priced market and selling them in a higher priced market to make profits is referred to as ______.

In the equation "F=S(1+P) ," "F" is defined as what?

In flow of funds analysis,money moving into a country is a debit (negative sign),while money leaving the same country is a credit (plus sign).

The ________ consists of domestic-country-owned assets abroad,foreign-owned assets in the domestic country,and net financial derivatives.

A British firm may need dollars to pay for U.S.imports.It can work with banks in London to exchange pounds for dollars to make this payment via electronic transfer.This is an example of a(n) _____ market.

Which of the following is NOT true about the current account balance?

In the forward market,the selling of a currency at a spot rate that is more than the forward rate is called _____.

The _____ account consists of domestic-country-owned assets abroad,foreign-owned assets in the domestic country,and net financial derivatives.

The _____ market is an informal OTC market run by banks.

Which of the following rose substantially in value against most other currencies as well as served as a reserve asset in many countries during the global economic and financial crises of 2008-2009?

If the dollar was expected to appreciate in the 60-day forward market against the Japanese yen,it would be selling at a premium.

Security investments have little impact on the BOP's financial account.

The net of services exports and imports is called the ______.

The law of one price is the underlying principle of the ______ theory.

Which of the following represents the top trading partner of the United States?