41. International business does not result in the following
A. innovation is encouraged.
B. international cooperation is encouraged.
C. imports are rendered cheap.
D. consumption is minimized.
Answer
D. consumption is minimized.
42. By having business in different countries, a firm reduces
A. credit risk.
B. political risk.
C. financial risk.
D. business risk.
Answer
B. political risk.
International finance
43. Ultimately ___ was replaced by the ___ on 1st Jan 1995
A. gats, wto
B. wto, gatt
C. gatt, wto
D. imf, gatt
Answer
C. gatt, wto
44. ___ is the first step in the internationalization process.
A. license
B. foreign investment
C. sales
D. export
Answer
A. license
45. In the foreign exchange market, the ___ of one country is traded for the ___ of anothercountry.
A. currency; currency
B. currency; financial instruments
C. currency; goods
D. goods; goods
Answer
A. currency; currency
46. By definition, currency appreciation occurs when
A. the value of all currencies falls relative to gold.
B. the value of all currencies rises relative to gold.
C. the value of one currency rises relative to another currency.
D. the value of one currency falls relative to another currency
Answer
C. the value of one currency rises relative to another currency.
47. Hedging is used by companies to:
A. decrease the variability of tax paid
B. decrease the spread between spot and forward market quotes
C. increase the variability of expected cash flows
D. decrease the variability of expected cash flows
Answer
D. decrease the variability of expected cash flows
48. Exchange rates
A. are always fixed
B. fluctuate to equate the quantity of foreign exchange demanded with the quantity supplied
C. fluctuate to equate imports and exports
D. fluctuate to equate rates of interest in various countries
Answer
B. fluctuate to equate the quantity of foreign exchange demanded with the quantity supplied
49. If the U.S. dollar appreciates relative to the British pound,
A. it will take fewer dollars to purchase a pound
B. it will take more dollars to purchase a pound
C. it is called a weakening of the dollar
D. both a & c
Answer
A. it will take fewer dollars to purchase a pound
50. A floating exchange rate
A. is determined by the national governments involved
B. remains extremely stable over long periods of time
C. is determined by the actions of central banks
D. is allowed to vary according to market forces
Answer
D. is allowed to vary according to market forces
51. In a quote exchange rate, the currency that is to be purchase with another currency is called the
A. liquid currency
B. foreign currency
C. local currency
D. base currency
Answer
D. base currency
52. An economist will define the exchange rate between two currencies as the:
A. amount of one currency that must be paid in order to obtain one unit of another currency
B. difference between total exports and total imports within a country
C. price at which the sales and purchases of foreign goods takes place
D. ratio of import prices to export prices for a particular country
Answer
A. amount of one currency that must be paid in order to obtain one unit of another currency
53. India is facing continuous deficit in its balance of payments. In the foreign exchange marketrupee is expected to
A. depreciate.
B. appreciate.
C. show no specific tendency.
D. depreciate against currencies of the countries with positive balance of payment and appreciate against
Answer
A. depreciate.
54. The demand for domestic currency in the foreign exchange market is indicated by the followingtransactions in balance of payment
A. export of goods and services
B. import of goods and services.
C. export of goods and services and capital inflows.
D. import of goods and services and capital outflows.
Answer
C. export of goods and services and capital inflows.
55. The price at which a market maker is prepared to buy (a currency) or borrow (money) is termed as
A. spot rate
B. bid rate
C. ask price
D. forward rate
Answer
B. bid rate
56. The ___ is especially well suited to offer hedging protection against transactions risk exposure.
A. forward market
B. spot market
C. transactions market
D. inflation-rate market
Answer
A. forward market
57. Difference between buying and selling rates in an exchange rate is known as
A. strike price
B. spread
C. swap points
D. spot rate
Answer
B. spread
58. Exchange rate between currency A and currency B, given the values of currencies A and B with respect toa third currency is known as
A. golden standard
B. flexible exchange rate
C. fixed exchange rate
D. cross exchange rate
Answer
D. cross exchange rate
59. The swap arrangement where principal amounts are not exchanged, but periodical payments will be
A. currency swap
B. cross currency interest swap
C. interest rate swap.
D. non-financial swap.
Answer
C. interest rate swap.
60. What is FEMA?
A. first exchange management act
B. foreign exchequer management act
C. foreign exchange management act
D. d)foreign evaluation management act
Answer
C. foreign exchange management act
61. ___ involve the exchange of currency the second day after the date on which the twoforeign exchange traders agree to the transaction.
A. spot transactions
B. outright forward transactions
C. fx swaps
D. reverse transactions
Answer
A. spot transactions
62. Outright forward transactions involve the exchange of currency beyond three days at a fixed exchangerate, known as the:
A. spot rate.
B. forward rate
C. fx swap rate.
D. reverse transaction rate
Answer
B. forward rate
63. The biggest market for foreign exchange is which of the following?
A. new york
B. tokyo
C. london
D. china
Answer
C. london
64. The ___ is the price at which the trader is willing to buy foreign currency.
A. offer
B. bid
C. spread
D. cross rate
Answer
B. bid
65. Which of the following is the price at which the trader is willing to sell foreign currency?
A. bid
B. spread
C. offer
D. cross rate
Answer
C. offer
66. . ___ is only a legal agreement and it is not an institution, but ___ is a permanent institution.
A. gatt, wto
B. wto, gatt
C. wto, imf
D. imf, gatt
Answer
A. gatt, wto
67. The WTO was established to implement the final act of Uruguay Round agreement of ___
A. mfa
B. gatt
C. trip’s
D. uno
Answer
B. gatt
68. WTO stands for
A. world technology association
B. world time organization
C. world trade organization
D. world tourism organization
Answer
C. world trade organization
69. What is the name of the international organization that fosters monetary and financial cooperationand serves as a bank for central banks?
A. wto
B. eu
C. world bank
D. bank for international settlements
Answer
D. bank for international settlements
70. Which of the following are institutional banks that provide financial support and professional advicefor developing countries?
A. a) multilateral development banks
B. b) central banks
C. c) investment banks
D. d) barclays bank
Answer
A. a) multilateral development banks
71. In the foreign exchange market, the ___ of one country is traded for the ___ of anothercountry.
A. currency; currency
B. currency; financial instruments
C. currency; goods
D. goods; goods
Answer
B. currency; financial instruments
72. Which of the following examples definitely illustrates a depreciation of the U.S. dollar?
A. the dollar exchanges for 1 pound and then exchanges for 1.2 pounds.
B. the dollar exchanges for 250 yen and then exchanges for 275 francs.
C. the dollar exchanges for 100 francs and then exchanges for 120 yen.
D. the dollar exchanges for 120 francs and then exchanges for 100 francs
Answer
D. the dollar exchanges for 120 francs and then exchanges for 100 francs
73. Interest rate swaps are usually possible because international financial markets in different countriesare
A. efficient
B. perfect
C. imperfect
D. both a & b
Answer
C. imperfect
74. The exchange rate is the
A. total yearly amount of money changed from one country’s currency to another country’s currency
B. total monetary value of exports minus imports
C. amount of country’s currency which can exchanged for one ounce of gold
D. price of one country’s currency in terms of another country’s currency
Answer
D. price of one country’s currency in terms of another country’s currency
75. A speculator in foreign exchange is a person who
A. buys foreign currency, hoping to profit by selling it a a higher exchange rate at some later date
B. earns illegal profit by manipulation foreign exchange
C. causes differences in exchange rates in different geographic markets
D. none of the above
Answer
A. buys foreign currency, hoping to profit by selling it a a higher exchange rate at some later date
76. Under a gold standard,
A. a nation’s currency can be traded for gold at a fixed rate
B. a nation’s central bank or monetary authority has absolute control over its money supply
C. new discoveries of gold have no effect on money supply or prices
D. a & b
Answer
A. a nation’s currency can be traded for gold at a fixed rate
77. The Bretton Woods accord
A. of 1879 created the gold standard as the basis of international finance
B. of 1914 formulated a new international monetary system after the collapse of the gold standard
C. of 1944 formulated a new international monetary system after the collapse of the gold standard
D. none of the above
Answer
C. of 1944 formulated a new international monetary system after the collapse of the gold standard
78. The current system of international finance is a
A. gold standard
B. fixed exchange rate system
C. floating exchange rate system
D. managed float exchange rate system
Answer
D. managed float exchange rate system
79. Ask quote is for
A. seller
B. buyer
C. hedger
D. speculator
Answer
A. seller
80. A simultaneous purchase and sale of foreign exchange for two different dates is called
A. currency devalues
B. currency swap
C. currency valuation
D. currency exchange
Answer
B. currency swap
Regional Economic Grouping
