Question 1

A stronger Korean won means that Kia cars sold in Canada for dollars are recorded at a higher value when translated back into won in Korea.

Accepted Answer

A) True 
 B)False

Question 2

The _____________ 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 the nominal interest rates between the two countries.

Accepted Answer

A)  Worldwide James Effect 
B)  Universal Phillips Effect 
C)  International Fisher Effect 
D)  Global Miller Effect 
E)  Law of One Price Effect 
A)  Worldwide James Effect 
B)  Universal Phillips Effect 
C)  International Fisher Effect 
D)  Global Miller Effect 
E)  Law of One Price Effect

Question 3

The exchange rate between the British pound and the dollar is ≤	1 = $1.50 and a jacket that retails for $75 in New York sells for ≤	50 in London ($75/1.5 = ≤50). This reflects what?

Accepted Answer

A)  model of fair pricing. 
B)  law of one price. 
C)  principle of equitable pricing. 
D)  principle of consistent pricing. 
E)  purchasing power equity 
A)  model of fair pricing. 
B)  law of one price. 
C)  principle of equitable pricing. 
D)  principle of consistent pricing. 
E)  purchasing power equity

Question 4

Tourists play a major role in the foreign exchange market.

Accepted Answer

A) True 
 B)False

Question 5

One function of the foreign exchange market is to provide some insurance against the risks that arise from changes in exchange rates,commonly referred to as:

Accepted Answer

A)  foreign market hazard 
B)  global jeopardy 
C)  foreign exchange risk 
D)  commerce uncertainty 
E)  trade payment risk 
A)  foreign market hazard 
B)  global jeopardy 
C)  foreign exchange risk 
D)  commerce uncertainty 
E)  trade payment risk

Question 6

An efficient market is one in which prices reflect all available public information.

Accepted Answer

A) True 
 B)False

Question 7

According to the ______________,identical products sold in different countries must sell for the same price when their price is expressed in the same currency in competitive markets free of transportation costs and barriers to trade.

Accepted Answer

A)  model of fair pricing 
B)  law of purchasing power equity 
C)  principle of equitable pricing 
D)  principle of consistent pricing 
E)  law of one price 
A)  model of fair pricing 
B)  law of purchasing power equity 
C)  principle of equitable pricing 
D)  principle of consistent pricing 
E)  law of one price

Question 8

Currency exchange fluctuations are important for a business to understand because they can ____________________.

Accepted Answer

A)  affect profitability in an international transaction 
B)  affect pricing in a country market 
C)  affect the competitive advantage of a company 
D)  increase costs for imported goods 
E)  all of these answers are correct 
A)  affect profitability in an international transaction 
B)  affect pricing in a country market 
C)  affect the competitive advantage of a company 
D)  increase costs for imported goods 
E)  all of these answers are correct

Question 9

PPP theory predicts that changes in ______________ will result in a change in exchange rates.

Accepted Answer

A)  relative prices 
B)  interest rates 
C)  unemployment rates 
D)  statutory prices 
E)  wholesale prices 
A)  relative prices 
B)  interest rates 
C)  unemployment rates 
D)  statutory prices 
E)  wholesale prices

Question 10

Canadian businesses will normally use the ________________ in international transactions.

Accepted Answer

A)  German mark 
B)  Euro 
C)  U.S. dollar 
D)  Japanese yen 
E)  British pound 
A)  German mark 
B)  Euro 
C)  U.S. dollar 
D)  Japanese yen 
E)  British pound

Question 11

Short run exchange rate movements may be explained by ______________.

Accepted Answer

A)  the bandwagon effect 
B)  investor expectations 
C)  psychological factors 
D)  nominal interest rates 
E)  the bandwagon effect, investor expectations, and psychological factors 
A)  the bandwagon effect 
B)  investor expectations 
C)  psychological factors 
D)  nominal interest rates 
E)  the bandwagon effect, investor expectations, and psychological factors

Question 12

Fundamental analysis uses price and volume data to determine past trends,which are expected to continue into the future.

Accepted Answer

A) True 
 B)False

Question 13

Although the _____________ offers some insurance against foreign exchange risk,it cannot provide complete insurance.

Accepted Answer

A)  foreign exchange market 
B)  the Euro 
C)  World Bank 
D)  foreign currency exchange 
E)  the CDC 
A)  foreign exchange market 
B)  the Euro 
C)  World Bank 
D)  foreign currency exchange 
E)  the CDC

Question 14

The PPP theory tells us that a country with a high inflation rate will see:

Accepted Answer

A)  a depreciation in its currency exchange rate 
B)  an appreciation in its currency exchange rate 
C)  no change in its currency exchange rate as a result of the inflation rate 
D)  economic stability as a result of high inflation 
E)  price rises to match neighbouring country prices 
A)  a depreciation in its currency exchange rate 
B)  an appreciation in its currency exchange rate 
C)  no change in its currency exchange rate as a result of the inflation rate 
D)  economic stability as a result of high inflation 
E)  price rises to match neighbouring country prices

Question 15

If the prices differed in London and New York and a dealer spent $1 million to purchase ×125 million,then sold that ×125 immediately for $1.046666 million,the trader would earn a profit of $46,666 on the transaction.This is accomplished through

Accepted Answer

A)  arbitrage. 
B)  skimming. 
C)  FDI. 
D)  pre exchange agreements. 
E)  buying low and selling high. 
A)  arbitrage. 
B)  skimming. 
C)  FDI. 
D)  pre exchange agreements. 
E)  buying low and selling high.

Question 16

An importer enters into a 60 day forward exchange rate for converting dollars into yuan.The spot exchange rate is 5.28 yuan for 1 dollar.The forward exchange rate is 5.27 yuan for 1 dollar.How many yuan would the importer get for 50,000 dollars?

Accepted Answer

A)  264,000 
B)  364,000 
C)  364,500 
D)  353,500 
E)  263,500 
A)  264,000 
B)  364,000 
C)  364,500 
D)  353,500 
E)  263,500

Question 17

Calculate the forward exchange rate using the following information.Spot exchange rate is $1.45 for 1 Euro.The nominal interest rate in Canada is 6 percent and the nominal interest rate in Europe is 4%.

Accepted Answer

A)  1.44 
B)  1.43 
C)  1.45 
D)  1.41 
E)  1.42 
A)  1.44 
B)  1.43 
C)  1.45 
D)  1.41 
E)  1.42

Question 18

In an _____________ market,forward exchange rates will not be the best possible predictors of future spot exchange rates.

Accepted Answer

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

Question 19

The International Fisher Effect states that for any two countries,the _____________ exchange rate should change in an equal amount but in the opposite direction to the difference in the nominal interest rates between the two countries.

Accepted Answer

A)  reciprocal 
B)  spot 
C)  forward 
D)  inward 
E)  future 
A)  reciprocal 
B)  spot 
C)  forward 
D)  inward 
E)  future

Question 20

_____________ occurs when an investor purchases securities in one market for immediate resale in another.

Accepted Answer

A)  Hedge fund 
B)  Foreign direct investment 
C)  Foreign exchange risk 
D)  Arbitrage 
E)  Financial gain 
A)  Hedge fund 
B)  Foreign direct investment 
C)  Foreign exchange risk 
D)  Arbitrage 
E)  Financial gain

A stronger Korean won means that Kia cars sold in Canada for dollars are recorded at a higher value when translated back into won in Korea.

The _____________ 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 the nominal interest rates between the two countries.

The exchange rate between the British pound and the dollar is ≤ 1 = $1.50 and a jacket that retails for $75 in New York sells for ≤ 50 in London ($75/1.5 = ≤50). This reflects what?

Tourists play a major role in the foreign exchange market.

One function of the foreign exchange market is to provide some insurance against the risks that arise from changes in exchange rates,commonly referred to as:

An efficient market is one in which prices reflect all available public information.

According to the ______________,identical products sold in different countries must sell for the same price when their price is expressed in the same currency in competitive markets free of transportation costs and barriers to trade.

Currency exchange fluctuations are important for a business to understand because they can ____________________.

PPP theory predicts that changes in ______________ will result in a change in exchange rates.

Canadian businesses will normally use the ________________ in international transactions.

Short run exchange rate movements may be explained by ______________.

Fundamental analysis uses price and volume data to determine past trends,which are expected to continue into the future.

Although the _____________ offers some insurance against foreign exchange risk,it cannot provide complete insurance.

The PPP theory tells us that a country with a high inflation rate will see:

If the prices differed in London and New York and a dealer spent $1 million to purchase ×125 million,then sold that ×125 immediately for $1.046666 million,the trader would earn a profit of $46,666 on the transaction.This is accomplished through

An importer enters into a 60 day forward exchange rate for converting dollars into yuan.The spot exchange rate is 5.28 yuan for 1 dollar.The forward exchange rate is 5.27 yuan for 1 dollar.How many yuan would the importer get for 50,000 dollars?

Calculate the forward exchange rate using the following information.Spot exchange rate is $1.45 for 1 Euro.The nominal interest rate in Canada is 6 percent and the nominal interest rate in Europe is 4%.

In an _____________ market,forward exchange rates will not be the best possible predictors of future spot exchange rates.

The International Fisher Effect states that for any two countries,the _____________ exchange rate should change in an equal amount but in the opposite direction to the difference in the nominal interest rates between the two countries.

_____________ occurs when an investor purchases securities in one market for immediate resale in another.

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

A stronger Korean won means that Kia cars sold in Canada for dollars are recorded at a higher value when translated back into won in Korea.

The _____________ 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 the nominal interest rates between the two countries.

The exchange rate between the British pound and the dollar is ≤ 1 = $1.50 and a jacket that retails for $75 in New York sells for ≤ 50 in London ($75/1.5 = ≤50). This reflects what?

Tourists play a major role in the foreign exchange market.

One function of the foreign exchange market is to provide some insurance against the risks that arise from changes in exchange rates,commonly referred to as:

An efficient market is one in which prices reflect all available public information.

According to the ______________,identical products sold in different countries must sell for the same price when their price is expressed in the same currency in competitive markets free of transportation costs and barriers to trade.

Currency exchange fluctuations are important for a business to understand because they can ____________________.

PPP theory predicts that changes in ______________ will result in a change in exchange rates.

Canadian businesses will normally use the ________________ in international transactions.

Short run exchange rate movements may be explained by ______________.

Fundamental analysis uses price and volume data to determine past trends,which are expected to continue into the future.

Although the _____________ offers some insurance against foreign exchange risk,it cannot provide complete insurance.

The PPP theory tells us that a country with a high inflation rate will see:

If the prices differed in London and New York and a dealer spent $1 million to purchase ×125 million,then sold that ×125 immediately for $1.046666 million,the trader would earn a profit of $46,666 on the transaction.This is accomplished through

An importer enters into a 60 day forward exchange rate for converting dollars into yuan.The spot exchange rate is 5.28 yuan for 1 dollar.The forward exchange rate is 5.27 yuan for 1 dollar.How many yuan would the importer get for 50,000 dollars?

Calculate the forward exchange rate using the following information.Spot exchange rate is $1.45 for 1 Euro.The nominal interest rate in Canada is 6 percent and the nominal interest rate in Europe is 4%.

In an _____________ market,forward exchange rates will not be the best possible predictors of future spot exchange rates.

The International Fisher Effect states that for any two countries,the _____________ exchange rate should change in an equal amount but in the opposite direction to the difference in the nominal interest rates between the two countries.

_____________ occurs when an investor purchases securities in one market for immediate resale in another.

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