Question 1

Which of the following refers to the extent to which the income from individual transactions is affected by fluctuations in foreign exchange values?

Accepted Answer

A)  Translation exposure 
B)  Economic exposure 
C)  Purchasing power parity 
D)  Transaction exposure 
E)  Forward exchange rate 
A)  Translation exposure 
B)  Economic exposure 
C)  Purchasing power parity 
D)  Transaction exposure 
E)  Forward exchange rate

Question 2

Which of the following is a function of the foreign exchange market?

Accepted Answer

A)  To provide some insurance against foreign exchange risk 
B)  To protect short-term cash flow from adverse changes in exchange rates 
C)  To eliminate volatile changes in exchange rates 
D)  To reduce the economic exposure of a firm 
E)  To enable companies to engage in capital flight when countertrade is not possible 
A)  To provide some insurance against foreign exchange risk 
B)  To protect short-term cash flow from adverse changes in exchange rates 
C)  To eliminate volatile changes in exchange rates 
D)  To reduce the economic exposure of a firm 
E)  To enable companies to engage in capital flight when countertrade is not possible

Question 3

Leading and lagging strategies involve accelerating payments from weak-currency to strong-currency countries and delaying inflows from strong-currency to weak-currency countries.

Accepted Answer

A) True 
 B)False

Question 4

A currency is said to be _____ when only nonresidents may convert it into a foreign currency without any limitations.

Accepted Answer

A)  externally convertible 
B)  nonconvertible 
C)  leading 
D)  freely convertible 
E)  lagging 
A)  externally convertible 
B)  nonconvertible 
C)  leading 
D)  freely convertible 
E)  lagging

Question 5

Assume that current dollar/yen spot exchange rate is $1 = ¥110.If the 30-day forward exchange is $1 = ¥105,we say the dollar is selling at a premium on the 30-day forward market.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following enables organizations to conduct international trade without having to resort to barter?

Accepted Answer

A)  Foreign exchange market 
B)  Caribbean Single Market and Economy 
C)  Auction market 
D)  Countertrade 
E)  Balance-of-Trade Equilibrium 
A)  Foreign exchange market 
B)  Caribbean Single Market and Economy 
C)  Auction market 
D)  Countertrade 
E)  Balance-of-Trade Equilibrium

Question 7

Which of the following refers to countertrade?

Accepted Answer

A)  A short-term movement of funds from one currency to another in the hopes of profiting from shifts in exchange rates 
B)  The exchange rate at which a foreign exchange dealer will convert one currency into another that particular day 
C)  Simultaneous purchase and sale of a given amount of foreign exchange for two different value dates 
D)  The purchase of securities in one market for immediate resale in another to profit from a price discrepancy 
E)  A range of barter-like agreements by which goods and services can be exchanged for other goods and services 
A)  A short-term movement of funds from one currency to another in the hopes of profiting from shifts in exchange rates 
B)  The exchange rate at which a foreign exchange dealer will convert one currency into another that particular day 
C)  Simultaneous purchase and sale of a given amount of foreign exchange for two different value dates 
D)  The purchase of securities in one market for immediate resale in another to profit from a price discrepancy 
E)  A range of barter-like agreements by which goods and services can be exchanged for other goods and services

Question 8

Describe the factors that explain the failure of the purchasing power parity theory to predict exchange rates accurately.

Accepted Answer

Several factors explain the failure of P

Question 9

Which of the following is an example of transaction exposure?

Accepted Answer

A)  Obligations for the purchase of goods at previously agreed prices 
B)  Borrowing of funds in domestic currency 
C)  Impact of currency exchange rate changes on the reported financial statements of a company 
D)  Long-term effect of changes in exchange rates 
E)  The effect of changing exchange rates on future prices, sales, and costs 
A)  Obligations for the purchase of goods at previously agreed prices 
B)  Borrowing of funds in domestic currency 
C)  Impact of currency exchange rate changes on the reported financial statements of a company 
D)  Long-term effect of changes in exchange rates 
E)  The effect of changing exchange rates on future prices, sales, and costs

Question 10

According to economic theory,interest rates reflect expectations about likely _____.

Accepted Answer

A)  spot exchange rates 
B)  unemployment rates 
C)  forward exchange rates 
D)  future inflation rates 
E)  GDP growth rates 
A)  spot exchange rates 
B)  unemployment rates 
C)  forward exchange rates 
D)  future inflation rates 
E)  GDP growth rates

Question 11

Although a foreign exchange transaction can involve any two currencies,most transactions involve dollars on one side.

Accepted Answer

A) True 
 B)False

Question 12

What is meant by carry trade? Why is it risky? Explain with an example.

Accepted Answer

A kind of speculation that has become mo

Question 13

The foreign exchange market offers complete insurance against foreign exchange risk.

Accepted Answer

A) True 
 B)False

Question 14

The euro/dollar exchange rate is €1 = $1.20.If it costs $36 to buy a European product,the stated price of the product would be €36.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following positions is adopted by the inefficient market school of thought toward exchange rate forecasting?

Accepted Answer

A)  Forward exchange rates are the best possible predictors of future spot exchange rates. 
B)  Forward exchange rates represent market participants' collective predictions of likely spot exchange rates. 
C)  Companies cannot beat the markets because forward rates reflect all available information about likely future changes in exchange rates. 
D)  Investing in forecasting services can improve the foreign exchange market's estimate of future exchange rates. 
E)  The foreign exchange market is efficient at setting forward rates which are unbiased predictors of future spot rates. 
A)  Forward exchange rates are the best possible predictors of future spot exchange rates. 
B)  Forward exchange rates represent market participants' collective predictions of likely spot exchange rates. 
C)  Companies cannot beat the markets because forward rates reflect all available information about likely future changes in exchange rates. 
D)  Investing in forecasting services can improve the foreign exchange market's estimate of future exchange rates. 
E)  The foreign exchange market is efficient at setting forward rates which are unbiased predictors of future spot rates.

Question 16

A lag strategy involves:

Accepted Answer

A)  delaying the collection of foreign currency receivables when a foreign currency is expected to appreciate. 
B)  delaying the collection of foreign currency receivables when a foreign currency is expected to depreciate. 
C)  attempting to collect foreign currency receivables early when a foreign currency is expected to appreciate. 
D)  paying foreign currency payables (to suppliers) before they are due when a currency is expected to appreciate. 
E)  paying foreign currency payables (to suppliers) before they are due when a currency is expected to depreciate. 
A)  delaying the collection of foreign currency receivables when a foreign currency is expected to appreciate. 
B)  delaying the collection of foreign currency receivables when a foreign currency is expected to depreciate. 
C)  attempting to collect foreign currency receivables early when a foreign currency is expected to appreciate. 
D)  paying foreign currency payables (to suppliers) before they are due when a currency is expected to appreciate. 
E)  paying foreign currency payables (to suppliers) before they are due when a currency is expected to depreciate.

Question 17

Which of the following instances indicates that the dollar is selling at a premium on the 30-day forward market?

Accepted Answer

A)  When the spot exchange rate is currently $1 = ¥120 and changes to $1 = ¥130 after 30 days 
B)  When the spot exchange rate is currently $1 = ¥120 and changes to $1 = ¥110 after 30 days 
C)  When the current spot exchange rate is $1 = ¥120 and the 30-day forward rate is $1 = ¥110 after 30 days 
D)  When the current spot exchange rate is $1 = ¥120 and the 30-day forward rate is $1 = ¥130 after 30 days 
E)  When the current spot exchange rate is $1 = ¥120 and the 30-day forward rate is $1 = ¥120 
A)  When the spot exchange rate is currently $1 = ¥120 and changes to $1 = ¥130 after 30 days 
B)  When the spot exchange rate is currently $1 = ¥120 and changes to $1 = ¥110 after 30 days 
C)  When the current spot exchange rate is $1 = ¥120 and the 30-day forward rate is $1 = ¥110 after 30 days 
D)  When the current spot exchange rate is $1 = ¥120 and the 30-day forward rate is $1 = ¥130 after 30 days 
E)  When the current spot exchange rate is $1 = ¥120 and the 30-day forward rate is $1 = ¥120

Question 18

How do foreign exchange markets benefit international businesses?

Accepted Answer

International businesses have four main

Question 19

A dealer wishes to sell Thai baht for Argentine peso.Which of the following currencies is most likely to act as a vehicle currency in this transaction?

Accepted Answer

A)  Malaysian ringgit 
B)  Japanese yen 
C)  British pound 
D)  U.S. dollar 
E)  South African rand 
A)  Malaysian ringgit 
B)  Japanese yen 
C)  British pound 
D)  U.S. dollar 
E)  South African rand

Question 20

Which of the following is a step taken to manage foreign exchange risk?

Accepted Answer

A)  Firms should focus solely on managing transaction and translation exposures. 
B)  Forecasting future exchange rate movements should be avoided as it is speculative. 
C)  Firms need to develop strategies for dealing with economic exposure. 
D)  Firms should avoid central control of exposure. 
E)  Firms should not distinguish between transaction and translation exposure and economic exposure. 
A)  Firms should focus solely on managing transaction and translation exposures. 
B)  Forecasting future exchange rate movements should be avoided as it is speculative. 
C)  Firms need to develop strategies for dealing with economic exposure. 
D)  Firms should avoid central control of exposure. 
E)  Firms should not distinguish between transaction and translation exposure and economic exposure.

Which of the following refers to the extent to which the income from individual transactions is affected by fluctuations in foreign exchange values?

Which of the following is a function of the foreign exchange market?

Leading and lagging strategies involve accelerating payments from weak-currency to strong-currency countries and delaying inflows from strong-currency to weak-currency countries.

A currency is said to be _____ when only nonresidents may convert it into a foreign currency without any limitations.

Assume that current dollar/yen spot exchange rate is $1 = ¥110.If the 30-day forward exchange is $1 = ¥105,we say the dollar is selling at a premium on the 30-day forward market.

Which of the following enables organizations to conduct international trade without having to resort to barter?

Which of the following refers to countertrade?

Describe the factors that explain the failure of the purchasing power parity theory to predict exchange rates accurately.

Which of the following is an example of transaction exposure?

According to economic theory,interest rates reflect expectations about likely _____.

Although a foreign exchange transaction can involve any two currencies,most transactions involve dollars on one side.

What is meant by carry trade? Why is it risky? Explain with an example.

The foreign exchange market offers complete insurance against foreign exchange risk.

The euro/dollar exchange rate is €1 = $1.20.If it costs $36 to buy a European product,the stated price of the product would be €36.

Which of the following positions is adopted by the inefficient market school of thought toward exchange rate forecasting?

A lag strategy involves:

Which of the following instances indicates that the dollar is selling at a premium on the 30-day forward market?

How do foreign exchange markets benefit international businesses?

A dealer wishes to sell Thai baht for Argentine peso.Which of the following currencies is most likely to act as a vehicle currency in this transaction?

Which of the following is a step taken to manage foreign exchange risk?

Globalization

National Differences in Political Economy

Political Economy and Economic Development

National Differences in Culture

Ethics in International Business

International Trade Theory

The Political Economy of International Trade

Foreign Direct Investment

Regional Economic Integration

The International Monetary System

The Strategy of International Business

Entering Foreign Markets

Exporting, Importing, and Countertrade

Global Production, Outsourcing, and Logistics

Global Marketing and R-D

Global Human Resource Management

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Exam 10: The Foreign Exchange Market

Which of the following refers to the extent to which the income from individual transactions is affected by fluctuations in foreign exchange values?

Which of the following is a function of the foreign exchange market?

Leading and lagging strategies involve accelerating payments from weak-currency to strong-currency countries and delaying inflows from strong-currency to weak-currency countries.

A currency is said to be _____ when only nonresidents may convert it into a foreign currency without any limitations.

Assume that current dollar/yen spot exchange rate is $1 = ¥110.If the 30-day forward exchange is $1 = ¥105,we say the dollar is selling at a premium on the 30-day forward market.

Which of the following enables organizations to conduct international trade without having to resort to barter?

Which of the following refers to countertrade?

Describe the factors that explain the failure of the purchasing power parity theory to predict exchange rates accurately.

Which of the following is an example of transaction exposure?

According to economic theory,interest rates reflect expectations about likely _____.

Although a foreign exchange transaction can involve any two currencies,most transactions involve dollars on one side.

What is meant by carry trade? Why is it risky? Explain with an example.

The foreign exchange market offers complete insurance against foreign exchange risk.

The euro/dollar exchange rate is €1 = $1.20.If it costs $36 to buy a European product,the stated price of the product would be €36.

Which of the following positions is adopted by the inefficient market school of thought toward exchange rate forecasting?

A lag strategy involves:

Which of the following instances indicates that the dollar is selling at a premium on the 30-day forward market?

How do foreign exchange markets benefit international businesses?

A dealer wishes to sell Thai baht for Argentine peso.Which of the following currencies is most likely to act as a vehicle currency in this transaction?

Which of the following is a step taken to manage foreign exchange risk?

Globalization

National Differences in Political Economy

Political Economy and Economic Development

National Differences in Culture

Ethics in International Business

International Trade Theory

The Political Economy of International Trade

Foreign Direct Investment

Regional Economic Integration

The International Monetary System

The Strategy of International Business

Entering Foreign Markets

Exporting, Importing, and Countertrade

Global Production, Outsourcing, and Logistics

Global Marketing and R-D

Global Human Resource Management

Filters