Question 1

With the help of an example, explain how a tourist participates in the foreign exchange market.

Accepted Answer

The foreign exchange market is a market

Question 2

_____ is most likely to occur when the value of the domestic currency is depreciating rapidly because of hyperinflation or when a country's economic prospects are shaky in other respects.

Accepted Answer

A)  The random walk effect 
B)  The Fisher effect 
C)  The international Fisher effect 
D)  Capital flight 
A)  The random walk effect 
B)  The Fisher effect 
C)  The international Fisher effect 
D)  Capital flight

Question 3

The Fisher effect states that:

Accepted Answer

A)  a country's "real" rate of interest is the sum of the "nominal" interest rate and the expected rate of inflation over the period for which the funds are to be lent. 
B)  there is a weak relationship between inflation rates and interest rates. 
C)  a country's "nominal" interest rate is the sum of the required "real" rate of interest and the expected rate of inflation over the period for which the funds are to be lent. 
D)  when investors are free to transfer capital between countries, "nominal" interest rates will be the same in every country. 
A)  a country's "real" rate of interest is the sum of the "nominal" interest rate and the expected rate of inflation over the period for which the funds are to be lent. 
B)  there is a weak relationship between inflation rates and interest rates. 
C)  a country's "nominal" interest rate is the sum of the required "real" rate of interest and the expected rate of inflation over the period for which the funds are to be lent. 
D)  when investors are free to transfer capital between countries, "nominal" interest rates will be the same in every country.

Question 4

An exchange rate of €1 = $1.30 indicates that:

Accepted Answer

A)  $1 is worth 1.30 euros. 
B)  one could get 1.30 euros for $1. 
C)  one euro buys 1.30 dollars. 
D)  one euro buys 0.77 dollars. 
A)  $1 is worth 1.30 euros. 
B)  one could get 1.30 euros for $1. 
C)  one euro buys 1.30 dollars. 
D)  one euro buys 0.77 dollars.

Question 5

Carry trade is non-speculative in nature.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following is one of the most important trading centers in the foreign exchange market?

Accepted Answer

A)  Beijing 
B)  Sau Paulo 
C)  Zurich 
D)  Seoul 
A)  Beijing 
B)  Sau Paulo 
C)  Zurich 
D)  Seoul

Question 7

The extent to which the income from individual transactions is affected by fluctuations in foreign exchange values is known as _____.

Accepted Answer

A)  economic exposure 
B)  financial exposure 
C)  translation exposure 
D)  transaction exposure 
A)  economic exposure 
B)  financial exposure 
C)  translation exposure 
D)  transaction exposure

Question 8

A pair of shoes costs £40 in Britain. An identical pair costs $50 in the United States when the exchange rate is £1 = $1.50. Which of the following is correct?

Accepted Answer

A)  The U.S. offers a better deal. 
B)  The deal is the same in both countries. 
C)  Britain offers a better deal. 
D)  A trader can make money by buying the shoes in Britain and selling it in the U.S. at $50. 
A)  The U.S. offers a better deal. 
B)  The deal is the same in both countries. 
C)  Britain offers a better deal. 
D)  A trader can make money by buying the shoes in Britain and selling it in the U.S. at $50.

Question 9

The _____ is a global network of banks, brokers, and foreign exchange dealers connected by electronic communications systems.

Accepted Answer

A)  foreign exchange market 
B)  united global database 
C)  global marketplace 
D)  foreign market database 
A)  foreign exchange market 
B)  united global database 
C)  global marketplace 
D)  foreign market database

Question 10

Explain the difference between fundamental analysis and technical analysis.

Accepted Answer

Fundamental analysis draws on economic t

Question 11

Discuss how firms can reduce their economic exposure.

Accepted Answer

Reducing economic exposure requires stra

Question 12

Assume that an American company today invests some of its spare cash in a Hungarian money market account that will earn 8 percent for a period of two months. Which of the following, if it happens during the next two months, would imply that the company will earn less than 8 percent on its investment?

Accepted Answer

A)  The Hungarian forint rises in value against the dollar. 
B)  Interest rates in the United States move down. 
C)  Short-term interest rates in Hungarian money markets shoot up. 
D)  The dollar appreciates against the Hungarian forint. 
A)  The Hungarian forint rises in value against the dollar. 
B)  Interest rates in the United States move down. 
C)  Short-term interest rates in Hungarian money markets shoot up. 
D)  The dollar appreciates against the Hungarian forint.

Question 13

When a country's currency is nonconvertible, a firm may turn to _____.

Accepted Answer

A)  countertrade 
B)  hedging 
C)  carry trade 
D)  dumping 
A)  countertrade 
B)  hedging 
C)  carry trade 
D)  dumping

Question 14

If the spot exchange rate is £1 = $1.50 when the market opens, and £1 = $1.48 at the end of the day, the pound has appreciated, and the dollar has depreciated.

Accepted Answer

A) True 
 B)False

Question 15

A currency is said to be freely convertible when:

Accepted Answer

A)  its exchange rate with respect to other currencies is decided by the central bank of the country. 
B)  residents alone are allowed to convert it into a foreign currency without any limitations. 
C)  neither residents nor nonresidents are allowed to convert it into a foreign currency. 
D)  both residents and nonresidents are allowed to purchase unlimited amounts of a foreign currency with it. 
A)  its exchange rate with respect to other currencies is decided by the central bank of the country. 
B)  residents alone are allowed to convert it into a foreign currency without any limitations. 
C)  neither residents nor nonresidents are allowed to convert it into a foreign currency. 
D)  both residents and nonresidents are allowed to purchase unlimited amounts of a foreign currency with it.

Question 16

A currency swap deal enables companies to insure themselves against foreign exchange risk.

Accepted Answer

A) True 
 B)False

Question 17

The international Fisher effect states that for any two countries, the spot exchange rate should change in an equal amount but in the opposite direction to the difference in nominal interest rates for the two countries.

Accepted Answer

A) True 
 B)False

Question 18

Identify the correct statement about the PPP theory.

Accepted Answer

A)  It predicts that exchange rates are determined by relative prices. 
B)  It yields accurate predictions of short-run movements in exchange rates. 
C)  It best predicts exchange rate changes for countries with low rates of inflation. 
D)  It includes transportation costs and trade tariffs. 
A)  It predicts that exchange rates are determined by relative prices. 
B)  It yields accurate predictions of short-run movements in exchange rates. 
C)  It best predicts exchange rate changes for countries with low rates of inflation. 
D)  It includes transportation costs and trade tariffs.

Question 19

A(n) _____ involves attempting to collect foreign currency receivables early when a foreign currency is expected to depreciate and paying foreign currency payables before they are due when a currency is expected to appreciate.

Accepted Answer

A)  follower strategy 
B)  interim strategy 
C)  lead strategy 
D)  lag strategy 
A)  follower strategy 
B)  interim strategy 
C)  lead strategy 
D)  lag strategy

Question 20

_____ refers to a range of barter-like agreements by which goods and services can be traded for other goods and services.

Accepted Answer

A)  Countertrade 
B)  Carry trade 
C)  Dumping 
D)  Capital flight 
A)  Countertrade 
B)  Carry trade 
C)  Dumping 
D)  Capital flight

With the help of an example, explain how a tourist participates in the foreign exchange market.

_____ is most likely to occur when the value of the domestic currency is depreciating rapidly because of hyperinflation or when a country's economic prospects are shaky in other respects.

The Fisher effect states that:

An exchange rate of €1 = $1.30 indicates that:

Carry trade is non-speculative in nature.

Which of the following is one of the most important trading centers in the foreign exchange market?

The extent to which the income from individual transactions is affected by fluctuations in foreign exchange values is known as _____.

A pair of shoes costs £40 in Britain. An identical pair costs $50 in the United States when the exchange rate is £1 = $1.50. Which of the following is correct?

The _____ is a global network of banks, brokers, and foreign exchange dealers connected by electronic communications systems.

Explain the difference between fundamental analysis and technical analysis.

Discuss how firms can reduce their economic exposure.

When a country's currency is nonconvertible, a firm may turn to _____.

If the spot exchange rate is £1 = $1.50 when the market opens, and £1 = $1.48 at the end of the day, the pound has appreciated, and the dollar has depreciated.

A currency is said to be freely convertible when:

A currency swap deal enables companies to insure themselves against foreign exchange risk.

The international Fisher effect states that for any two countries, the spot exchange rate should change in an equal amount but in the opposite direction to the difference in nominal interest rates for the two countries.

Identify the correct statement about the PPP theory.

A(n) _____ involves attempting to collect foreign currency receivables early when a foreign currency is expected to depreciate and paying foreign currency payables before they are due when a currency is expected to appreciate.

_____ refers to a range of barter-like agreements by which goods and services can be traded for other goods and services.

Globalization

National Differences in Political Economy, and Legal Systems

National Differences in Economic Development

Differences in Culture

Ethics, Corporate Social Responsibility, and Sustainability

International Trade Theory

Government Policy and International Trade

Foreign Direct Investment

Regional Trade Pacts Give the Mexican Auto Industry an Edge

The International Monetary System

The Global Capital Market

The Strategy of International Business

The Organization of International Business

Entry Strategy and Strategic Alliances

Exporting, Importing, and Countertrade

Global Production and Supply Chain Management

Global Marketing and RD

Global Human Resource Management

Accounting and Finance in the International Business

Filters

Exam 10: The Foreign Exchange Market

With the help of an example, explain how a tourist participates in the foreign exchange market.

_____ is most likely to occur when the value of the domestic currency is depreciating rapidly because of hyperinflation or when a country's economic prospects are shaky in other respects.

The Fisher effect states that:

An exchange rate of €1 = $1.30 indicates that:

Carry trade is non-speculative in nature.

Which of the following is one of the most important trading centers in the foreign exchange market?

The extent to which the income from individual transactions is affected by fluctuations in foreign exchange values is known as _____.

A pair of shoes costs £40 in Britain. An identical pair costs $50 in the United States when the exchange rate is £1 = $1.50. Which of the following is correct?

The _____ is a global network of banks, brokers, and foreign exchange dealers connected by electronic communications systems.

Explain the difference between fundamental analysis and technical analysis.

Discuss how firms can reduce their economic exposure.

When a country's currency is nonconvertible, a firm may turn to _____.

If the spot exchange rate is £1 = $1.50 when the market opens, and £1 = $1.48 at the end of the day, the pound has appreciated, and the dollar has depreciated.

A currency is said to be freely convertible when:

A currency swap deal enables companies to insure themselves against foreign exchange risk.

The international Fisher effect states that for any two countries, the spot exchange rate should change in an equal amount but in the opposite direction to the difference in nominal interest rates for the two countries.

Identify the correct statement about the PPP theory.

A(n) _____ involves attempting to collect foreign currency receivables early when a foreign currency is expected to depreciate and paying foreign currency payables before they are due when a currency is expected to appreciate.

_____ refers to a range of barter-like agreements by which goods and services can be traded for other goods and services.

Globalization

National Differences in Political Economy, and Legal Systems

National Differences in Economic Development

Differences in Culture

Ethics, Corporate Social Responsibility, and Sustainability

International Trade Theory

Government Policy and International Trade

Foreign Direct Investment

Regional Trade Pacts Give the Mexican Auto Industry an Edge

The International Monetary System

The Global Capital Market

The Strategy of International Business

The Organization of International Business

Entry Strategy and Strategic Alliances

Exporting, Importing, and Countertrade

Global Production and Supply Chain Management

Global Marketing and RD

Global Human Resource Management

Accounting and Finance in the International Business

Filters