Question 1

The foreign exchange market:

Accepted Answer

A)  is not located in any one place 
B)  is located in New York City 
C)  has offices in the Capitols of the five most powerful industrialized nations in the world 
D)  is located in London 
E)  is managed by the UN 
A)  is not located in any one place 
B)  is located in New York City 
C)  has offices in the Capitols of the five most powerful industrialized nations in the world 
D)  is located in London 
E)  is managed by the UN A

Question 2

The international reserve market is a market for converting the currency of one country into that of another country.

Accepted Answer

A) True 
 B)False  False

Question 3

Although a foreign exchange transaction can involve any two currencies,most transactions involve

Accepted Answer

A)  Japanese yen. 
B)  British pounds. 
C)  U.S. dollars. 
D)  French francs. 
E)  Euros. 
A)  Japanese yen. 
B)  British pounds. 
C)  U.S. dollars. 
D)  French francs. 
E)  Euros. C

Question 4

A(n)___________ market is one in which prices do not reflect all available information.

Accepted Answer

A)  efficient 
B)  inefficient 
C)  free 
D)  closed 
E)  regulated 
A)  efficient 
B)  inefficient 
C)  free 
D)  closed 
E)  regulated

Question 5

Barrick Gold used,until 2009,a(n)_______________ strategy to protect itself against changes in the price of gold.

Accepted Answer

A)  Gold swap 
B)  forward gold exchange 
C)  insurance 
D)  spot gold exchange 
E)  gold hedging 
A)  Gold swap 
B)  forward gold exchange 
C)  insurance 
D)  spot gold exchange 
E)  gold hedging

Question 6

A country's currency is said to be _____________ when the country's government allows both residents and non-residents to purchase unlimited amounts of foreign currency with it.

Accepted Answer

A)  technically convertible 
B)  freely convertible 
C)  externally convertible 
D)  nonconvertible 
E)  internally convertible 
A)  technically convertible 
B)  freely convertible 
C)  externally convertible 
D)  nonconvertible 
E)  internally convertible

Question 7

You are the manager of a company that operates internationally providing agricultural equipment that has been manufactured and assembled in Canada.You have sold your products in the United States for many years and are now looking to enter other markets.
What factors will have an impact on the value of the Canadian dollar in six months' time.Make a prediction for your company as to whether the dollar will rise or fall against other currencies such as the: U.S.dollar and the Euro.Justify your answer.

Accepted Answer

This answer requires some knowledge of c

Question 8

Small Canadian businesses will be ____________ than large Canadian businesses to be exposed to currency risk associated with the Canadian dollar.

Accepted Answer

A)  less likely 
B)  unlikely 
C)  likely 
D)  probably likely 
E)  more likely 
A)  less likely 
B)  unlikely 
C)  likely 
D)  probably likely 
E)  more likely

Question 9

Where is the foreign exchange market located? What is the nature of the market? Is the market growing or shrinking on a global basis?

Accepted Answer

The foreign exchange market is not locat

Question 10

If the law of one price were true for all goods and services,the _____________ exchange rate could be found from any individual set of prices.

Accepted Answer

A)  stability power similarity (SPS) 
B)  purchasing ability adeptness (PA
A)  
C)  buying prowess equality (BP
E)  
D)  purchasing power parity (PPP) 
E)  spot 
A)  stability power similarity (SPS) 
B)  purchasing ability adeptness (PA
A)  
C)  buying prowess equality (BP
E)  
D)  purchasing power parity (PPP) 
E)  spot

Question 11

The ______________ is less useful for predicting exchange movements between the currencies of advanced industrialized nation that have relatively small differentials in inflation rates.

Accepted Answer

A)  tolerant market 
B)  efficiency theory 
C)  PPP theory 
D)  closed market 
E)  supply and demand mechanism 
A)  tolerant market 
B)  efficiency theory 
C)  PPP theory 
D)  closed market 
E)  supply and demand mechanism

Question 12

Most economic theories suggest that three import factors have an important impact on future exchange rate movements in a country's currency.These factors are

Accepted Answer

A)  the country's price inflation, its interest rate, and its market philosophy. 
B)  the country's rate of GNP, its unemployment rate, and its economic policy. 
C)  the country's participation in the World Trade Organization, its monetary policy, and its market philosophy. 
D)  the country's rate of economic growth, its participation in the World Trade Organization, and its economy policy. 
E)  the country's economic policy, its trade balance, and its national deficits. 
A)  the country's price inflation, its interest rate, and its market philosophy. 
B)  the country's rate of GNP, its unemployment rate, and its economic policy. 
C)  the country's participation in the World Trade Organization, its monetary policy, and its market philosophy. 
D)  the country's rate of economic growth, its participation in the World Trade Organization, and its economy policy. 
E)  the country's economic policy, its trade balance, and its national deficits.

Question 13

Theoretically,a country in which price inflation is running wild should expect to see its currency depreciate against that of countries in which inflation rates are lower refers to

Accepted Answer

A)  buying purchase power. 
B)  purchasing power parity. 
C)  power similarities. 
D)  comparative advantage. 
E)  national competitive disadvantage. 
A)  buying purchase power. 
B)  purchasing power parity. 
C)  power similarities. 
D)  comparative advantage. 
E)  national competitive disadvantage.

Question 14

You are the manager of a company that operates internationally providing agricultural equipment that has been manufactured and assembled in Canada.You have sold your products in the United States for many years and are now looking to enter other markets.
The Canadian dollar has been falling against the US dollar,but has held steady against other currencies.You have been asked by the CEO of your firm to prepare a marketing plan for entering EU countries.One of the key elements of your marketing plan is to price your product in Euros.What are the pros and cons of this currency strategy?

Accepted Answer

The student may answer that the movement

Question 15

A ______________ exchange occurs when two parties agree to exchange currency and execute the deal at some specific date in the future.

Accepted Answer

A)  reverse 
B)  spot 
C)  hedge 
D)  forward 
E)  futures 
A)  reverse 
B)  spot 
C)  hedge 
D)  forward 
E)  futures

Question 16

The ______________ is the rate at which the market converts one currency into another.

Accepted Answer

A)  international conversion factor 
B)  world barter factor 
C)  foreign exchange rate 
D)  global replacement percentage 
E)  discount rate 
A)  international conversion factor 
B)  world barter factor 
C)  foreign exchange rate 
D)  global replacement percentage 
E)  discount rate

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

______________ draws on economic theory to construct sophisticated econometric models for predicting exchange rate movements.

Accepted Answer

A)  Principal investigation 
B)  Fundamental analysis 
C)  Primary evaluation 
D)  Technical analysis 
E)  Economic analysis 
A)  Principal investigation 
B)  Fundamental analysis 
C)  Primary evaluation 
D)  Technical analysis 
E)  Economic analysis

Question 19

You are the manager of a company that operates internationally providing agricultural equipment that has been manufactured and assembled in Canada.You have sold your products in the United States for many years and are now looking to enter other markets.
Your company has decided to enter the Argentinean market.You have decided to use two wholesalers,who will distribute to the retail market.The potential size of the market is $10,000,000 USD per year.However,both of your wholesalers will not assume the risk of invoices charging USD and they want at least 60 days before paying.They argue that they will have to give their retailers 60 days to pay and their retailers will only pay them in pesos.Argentina has just come out of a currency crisis and your Canadian bank has warned you of possible severe currency fluctuations.What payment and currency strategy will you suggest to your senior management?

Accepted Answer

If you agree to the payment strategy the

Question 20

Which of the following statements is true?

Accepted Answer

A)  The existence of the foreign exchange market has removed all forms of foreign exchange risk for business organizations. 
B)  Despite the existence of the foreign exchange market, firms do suffer losses because of unpredicted changes in exchange rates, although these occasions are rare. 
C)  The foreign exchange market eliminates very little foreign exchange risk. 
D)  The foreign exchange market is characterized by large numbers of speculators who increase the foreign exchange risk for firms 
E)  Despite the existence of the foreign exchange market, it is not unusual for international businesses to suffer losses because of unpredicted changes in exchange rates. 
A)  The existence of the foreign exchange market has removed all forms of foreign exchange risk for business organizations. 
B)  Despite the existence of the foreign exchange market, firms do suffer losses because of unpredicted changes in exchange rates, although these occasions are rare. 
C)  The foreign exchange market eliminates very little foreign exchange risk. 
D)  The foreign exchange market is characterized by large numbers of speculators who increase the foreign exchange risk for firms 
E)  Despite the existence of the foreign exchange market, it is not unusual for international businesses to suffer losses because of unpredicted changes in exchange rates.

The foreign exchange market:

The international reserve market is a market for converting the currency of one country into that of another country.

Although a foreign exchange transaction can involve any two currencies,most transactions involve

A(n)___________ market is one in which prices do not reflect all available information.

Barrick Gold used,until 2009,a(n)_______________ strategy to protect itself against changes in the price of gold.

A country's currency is said to be _____________ when the country's government allows both residents and non-residents to purchase unlimited amounts of foreign currency with it.

Small Canadian businesses will be ____________ than large Canadian businesses to be exposed to currency risk associated with the Canadian dollar.

Where is the foreign exchange market located? What is the nature of the market? Is the market growing or shrinking on a global basis?

If the law of one price were true for all goods and services,the _____________ exchange rate could be found from any individual set of prices.

The ______________ is less useful for predicting exchange movements between the currencies of advanced industrialized nation that have relatively small differentials in inflation rates.

Most economic theories suggest that three import factors have an important impact on future exchange rate movements in a country's currency.These factors are

Theoretically,a country in which price inflation is running wild should expect to see its currency depreciate against that of countries in which inflation rates are lower refers to

A ______________ exchange occurs when two parties agree to exchange currency and execute the deal at some specific date in the future.

The ______________ is the rate at which the market converts one currency into another.

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

______________ draws on economic theory to construct sophisticated econometric models for predicting exchange rate movements.

Which of the following statements is true?

Globalization

Country Differences in Political Economy

The Cultural Environment

Ethics in International Business

International Trade Theories

The Political Economy of International Trade

Foreign Direct Investment

Regional Economic Integration

The Global Monetary System

Global Strategy

Entering Foreign Markets

Exporting,Importing,and Countertrade

Global Marketing and Randd

Global Manufacturing and Materials Management

Global Human Resource Management

Filters

Exam 9: The Foreign Exchange Market

The foreign exchange market:

The international reserve market is a market for converting the currency of one country into that of another country.

Although a foreign exchange transaction can involve any two currencies,most transactions involve

A(n)___________ market is one in which prices do not reflect all available information.

Barrick Gold used,until 2009,a(n)_______________ strategy to protect itself against changes in the price of gold.

A country's currency is said to be _____________ when the country's government allows both residents and non-residents to purchase unlimited amounts of foreign currency with it.

Small Canadian businesses will be ____________ than large Canadian businesses to be exposed to currency risk associated with the Canadian dollar.

Where is the foreign exchange market located? What is the nature of the market? Is the market growing or shrinking on a global basis?

If the law of one price were true for all goods and services,the _____________ exchange rate could be found from any individual set of prices.

The ______________ is less useful for predicting exchange movements between the currencies of advanced industrialized nation that have relatively small differentials in inflation rates.

Most economic theories suggest that three import factors have an important impact on future exchange rate movements in a country's currency.These factors are

Theoretically,a country in which price inflation is running wild should expect to see its currency depreciate against that of countries in which inflation rates are lower refers to

A ______________ exchange occurs when two parties agree to exchange currency and execute the deal at some specific date in the future.

The ______________ is the rate at which the market converts one currency into another.

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

______________ draws on economic theory to construct sophisticated econometric models for predicting exchange rate movements.

Which of the following statements is true?

Globalization

Country Differences in Political Economy

The Cultural Environment

Ethics in International Business

International Trade Theories

The Political Economy of International Trade

Foreign Direct Investment

Regional Economic Integration

The Global Monetary System

Global Strategy

Entering Foreign Markets

Exporting,Importing,and Countertrade

Global Marketing and Randd

Global Manufacturing and Materials Management

Global Human Resource Management

Filters