Question 1

The interplay between interest rate differentials and exchange rates such that each adjusts until the foreign exchange market and the money market reach equilibrium is called the

Accepted Answer

A)   Purchasing Power Parity Theory.
B)   Balance of Payments.
C)   Current Capital Theory.
D)   none of the other answers are correctE) B) and D)
F) C) and D)

Question 2

A foreign exchange rate is the rate at which a foreign currency changes relative to the dollar.

Accepted Answer

A) True 
 B)False

Question 3

A foreign affiliate lowers the portfolio risk of its parent company because the foreign and domestic economies tend to be fairly similar.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following statements is not true?

Accepted Answer

A)   the currency of Japan is described in yens
B)   the currency of Mexico is described in pesos
C)   the currency of Italy is described in euros
D)   the currency of Denmark is described in randsE) B) and D)
F) All of the above

Question 5

Translation exposure occurs because of changes in foreign exchange rates.

Accepted Answer

A) True 
 B)False

Question 6

For a Canadian company, foreign business operations are more complex because the

Accepted Answer

A)   host country's economy may be different from the domestic economy.
B)   rules of taxation are different.
C)   structure and operations of financial markets vary.
D)   all of the other answers are correctE) All of the above
F) None of the above

Question 7

List and discuss the 3 risks of international financial management.

Accepted Answer

The three risks of international financi...

Question 8

A fully owned foreign subsidiary is a form of MNC in which

Accepted Answer

A)   a local entrepreneur buys the firm in that foreign country.
B)   the MNC owns and operates the firm by itself.
C)   the foreign government gives its full cooperation.
D)   none of the other answers are trueE) A) and B)
F) None of the above

Question 9

A large portion of the massive Canadian federal budget deficits incurred during the late 1980s and early 1990s were financed by foreign investors.

Accepted Answer

A) True 
 B)False

Question 10

Legal, political, and economic factors are most conducive to which form of multinational corporation (MNC)  organization?

Accepted Answer

A)   exporter/importer
B)   licensing agreements
C)   joint ventures
D)   fully-owned foreign subsidiariesE) B) and C)
F) A) and D)

Question 11

The lending rate for borrowers in the Eurodollar market is based on the prime lending rate.

Accepted Answer

A) True 
 B)False

Question 12

A multinational corporation may be defined as

Accepted Answer

A)   a company which owns property in a foreign country.
B)   a company which hires foreign labourers.
C)   a company which carries on some business activity outside of its own national borders.
D)   more than one of the other answers are correctE) A) and B)
F) A) and C)

Question 13

List and discuss in detail the main factors that influence exchange rates.

Accepted Answer

The present international monetary syste...

Question 14

In a licensing agreement, the multinational corporation will very likely

Accepted Answer

A)   be able to compete with the local domestic manufacturers.
B)   experience import restrictions imposed by the foreign government.
C)   allow a foreign firm to use its technology in exchange for a fee.
D)   none of the other answers are trueE) A) and B)
F) All of the above

Question 15

Expected future value of a currency is reflected in its spot rate.

Accepted Answer

A) True 
 B)False

Question 16

If in 2002, the Canadian dollar's exchange rate with the Sudanese dinar was .0069 dollars per dinar and in 2005, the exchange rate was .0062 dollars per dinar, it would indicate that in the period from 2002 to 2005, the dollar

Accepted Answer

A)   strengthened against the dinar.
B)   weakened against the dinar.
C)   was unrelated to the value of the dinar.
D)   the answer cannot be determined without knowing the number of dinars needed to buy a dollarE) None of the above
F) A) and D)

Question 17

The belief that shifts in exchange rates result from increasing or decreasing demand for a country's exports (or the corresponding opposite movements in supply of a country's imports)  form the basis for the

Accepted Answer

A)   purchasing power theory of exchange rates.
B)   interest rate parity theory of exchange rates.
C)   balance of payments theory of exchange rates.
D)   government intervention theory of exchange rates.E) B) and C)
F) B) and D)

Question 18

Which of the following statements about forward exchange rates is false?

Accepted Answer

A)   they reduce uncertainty about future value of currencies
B)   they reflect expectations about the future value of currencies
C)   they are usually slightly lower than the spot rate
D)   all of the other answers are trueE) B) and C)
F) A) and D)

Question 19

When Country A's currency strengthens against Country B's, citizens of Country A will

Accepted Answer

A)   pay less to buy Country B's products.
B)   pay more to buy Country B's products.
C)   pay more to buy domestically produced products.
D)   not be affected by the change in their currency's value.E) B) and D)
F) All of the above

Question 20

The Chinese renminbi is selling for $0.1652 and the British pound is selling for $1.6581. The cross rate between the renminbi and the pound is

Accepted Answer

A)   10.04.
B)   0.1004.
C)   9.96.
D)   0.0996.E) B) and C)
F) A) and C)

Exam 21: International Financial Management

List and discuss in detail the main factors that influence exchange rates.

Correct AnswerverifiedThe present international monetary syste...View AnswerShow Answer

The interplay between interest rate differentials and exchange rates such that each adjusts until the foreign exchange market and the money market reach equilibrium is called the

Correct AnswerverifiedShow Answer

Translation exposure occurs because of changes in foreign exchange rates.

Correct AnswerverifiedShow Answer

A foreign affiliate lowers the portfolio risk of its parent company because the foreign and domestic economies tend to be fairly similar.

Correct AnswerverifiedShow Answer

When Country A's currency strengthens against Country B's, citizens of Country A will

Correct AnswerverifiedShow Answer

List and discuss the 3 risks of international financial management.

Correct AnswerverifiedThe three risks of international financi...View AnswerShow Answer

In a licensing agreement, the multinational corporation will very likely

Correct AnswerverifiedShow Answer

The belief that shifts in exchange rates result from increasing or decreasing demand for a country's exports (or the corresponding opposite movements in supply of a country's imports) form the basis for the

Correct AnswerverifiedShow Answer

For a Canadian company, foreign business operations are more complex because the

Correct AnswerverifiedShow Answer

A large portion of the massive Canadian federal budget deficits incurred during the late 1980s and early 1990s were financed by foreign investors.

Correct AnswerverifiedShow Answer

If in 2002, the Canadian dollar's exchange rate with the Sudanese dinar was .0069 dollars per dinar and in 2005, the exchange rate was .0062 dollars per dinar, it would indicate that in the period from 2002 to 2005, the dollar

Correct AnswerverifiedShow Answer

The Chinese renminbi is selling for $0.1652 and the British pound is selling for $1.6581. The cross rate between the renminbi and the pound is

Correct AnswerverifiedShow Answer

A foreign exchange rate is the rate at which a foreign currency changes relative to the dollar.

Correct AnswerverifiedShow Answer

Expected future value of a currency is reflected in its spot rate.

Correct AnswerverifiedShow Answer

Which of the following statements about forward exchange rates is false?

Correct AnswerverifiedShow Answer

A fully owned foreign subsidiary is a form of MNC in which

Correct AnswerverifiedShow Answer

A multinational corporation may be defined as

Correct AnswerverifiedShow Answer

Which of the following statements is not true?

Correct AnswerverifiedShow Answer

Legal, political, and economic factors are most conducive to which form of multinational corporation (MNC) organization?

Correct AnswerverifiedShow Answer

The lending rate for borrowers in the Eurodollar market is based on the prime lending rate.

Correct AnswerverifiedShow Answer

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The present international monetary syste...
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The three risks of international financi...
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