Question 1

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 2

The International Fisher Effect has proven to have substantial power at predicting short-run changes in spot exchange rates.

Accepted Answer

A) True 
 B)False

Question 3

It follows from the Fisher Effect that if the real interest rate is the same worldwide; any difference in interest rates between countries reflects differing expectations about ______.

Accepted Answer

A)  foreign exchange rates 
B)  inflation rates 
C)  unemployment rates 
D)  GDP growth rates 
A)  foreign exchange rates 
B)  inflation rates 
C)  unemployment rates 
D)  GDP growth rates

Question 4

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 5

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 6

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

Accepted Answer

A) True 
 B)False

Question 7

If the spot rate is $1 = ¥120,and the 30-day forward rate is $1 = ¥130,the dollar is selling at a discount in the forward market.

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

The most important trading centers for currencies are Zurich,Frankfurt,Paris,Hong Kong,and Sydney.

Accepted Answer

A) True 
 B)False

Question 10

Assume that the current exchange rate is €1 = $1.50.If you exchange 1,000 euros for dollars,you will receive _____.

Accepted Answer

A)  $1,000 
B)  $750 
C)  $1,500 
D)  $667 
A)  $1,000 
B)  $750 
C)  $1,500 
D)  $667

Question 11

Suppose the price of a Big Mac in New York is $3.00 and the price of a Big Mac in Paris is equivalent to $3.75 at the prevailing euro/dollar exchange rate.Using the concept of purchasing power parity,the euro is:

Accepted Answer

A)  undervalued by 25 percent against the dollar. 
B)  overvalued by 25 percent against the dollar. 
C)  appreciating relative to the dollar. 
D)  depreciating relative to the dollar. 
A)  undervalued by 25 percent against the dollar. 
B)  overvalued by 25 percent against the dollar. 
C)  appreciating relative to the dollar. 
D)  depreciating relative to the dollar.

Question 12

When two parties agree to exchange currency and execute the deal immediately,the transaction is a:

Accepted Answer

A)  futures exchange. 
B)  carry trade. 
C)  spot exchange. 
D)  forward exchange. 
A)  futures exchange. 
B)  carry trade. 
C)  spot exchange. 
D)  forward exchange.

Question 13

Assume that the law of one price holds.A shirt that retails for $120 in New York sells for £60 in London.The exchange rate between the British pound and the dollar is £1 = $1.50.Assuming away transportation costs and trade barriers,this creates a profit-making opportunity called _____.

Accepted Answer

A)  currency swap 
B)  arbitrage 
C)  carry trade 
D)  straddle 
A)  currency swap 
B)  arbitrage 
C)  carry trade 
D)  straddle

Question 14

What is the law of one price?

Accepted Answer

The law of one price states that in comp

Question 15

Transaction exposure includes obligations for the purchase or sale of goods and services at previously agreed prices and the borrowing or lending of funds in foreign currencies.

Accepted Answer

A) True 
 B)False

Question 16

Currency fluctuations can make seemingly profitable trade and investment deals unprofitable and vice versa.

Accepted Answer

A) True 
 B)False

Question 17

Discuss the failure of PPP theory to predict exchange rates accurately.What is the purchasing power puzzle?

Accepted Answer

The failure to find a strong link betwee

Question 18

There is no evidence that psychological factors play an important role in determining the expectations of market traders as to likely future exchange rates.

Accepted Answer

A) True 
 B)False

Question 19

The impact of currency exchange rates on the reported financial statements of a company is called economic exposure.

Accepted Answer

A) True 
 B)False

Question 20

Explain the difference between fundamental analysis and technical analysis.

Accepted Answer

Fundamental analysis draws on economic t

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

The International Fisher Effect has proven to have substantial power at predicting short-run changes in spot exchange rates.

It follows from the Fisher Effect that if the real interest rate is the same worldwide; any difference in interest rates between countries reflects differing expectations about ______.

A currency is said to be freely convertible when:

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

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

If the spot rate is $1 = ¥120,and the 30-day forward rate is $1 = ¥130,the dollar is selling at a discount in the forward market.

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

The most important trading centers for currencies are Zurich,Frankfurt,Paris,Hong Kong,and Sydney.

Assume that the current exchange rate is €1 = $1.50.If you exchange 1,000 euros for dollars,you will receive _____.

Suppose the price of a Big Mac in New York is $3.00 and the price of a Big Mac in Paris is equivalent to $3.75 at the prevailing euro/dollar exchange rate.Using the concept of purchasing power parity,the euro is:

When two parties agree to exchange currency and execute the deal immediately,the transaction is a:

Assume that the law of one price holds.A shirt that retails for $120 in New York sells for £60 in London.The exchange rate between the British pound and the dollar is £1 = $1.50.Assuming away transportation costs and trade barriers,this creates a profit-making opportunity called _____.

What is the law of one price?

Transaction exposure includes obligations for the purchase or sale of goods and services at previously agreed prices and the borrowing or lending of funds in foreign currencies.

Currency fluctuations can make seemingly profitable trade and investment deals unprofitable and vice versa.

Discuss the failure of PPP theory to predict exchange rates accurately.What is the purchasing power puzzle?

There is no evidence that psychological factors play an important role in determining the expectations of market traders as to likely future exchange rates.

The impact of currency exchange rates on the reported financial statements of a company is called economic exposure.

Explain the difference between fundamental analysis and technical analysis.

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

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

The International Fisher Effect has proven to have substantial power at predicting short-run changes in spot exchange rates.

It follows from the Fisher Effect that if the real interest rate is the same worldwide; any difference in interest rates between countries reflects differing expectations about ______.

A currency is said to be freely convertible when:

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

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

If the spot rate is $1 = ¥120,and the 30-day forward rate is $1 = ¥130,the dollar is selling at a discount in the forward market.

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

The most important trading centers for currencies are Zurich,Frankfurt,Paris,Hong Kong,and Sydney.

Assume that the current exchange rate is €1 = $1.50.If you exchange 1,000 euros for dollars,you will receive _____.

Suppose the price of a Big Mac in New York is $3.00 and the price of a Big Mac in Paris is equivalent to $3.75 at the prevailing euro/dollar exchange rate.Using the concept of purchasing power parity,the euro is:

When two parties agree to exchange currency and execute the deal immediately,the transaction is a:

Assume that the law of one price holds.A shirt that retails for $120 in New York sells for £60 in London.The exchange rate between the British pound and the dollar is £1 = $1.50.Assuming away transportation costs and trade barriers,this creates a profit-making opportunity called _____.

What is the law of one price?

Transaction exposure includes obligations for the purchase or sale of goods and services at previously agreed prices and the borrowing or lending of funds in foreign currencies.

Currency fluctuations can make seemingly profitable trade and investment deals unprofitable and vice versa.

Discuss the failure of PPP theory to predict exchange rates accurately.What is the purchasing power puzzle?

There is no evidence that psychological factors play an important role in determining the expectations of market traders as to likely future exchange rates.

The impact of currency exchange rates on the reported financial statements of a company is called economic exposure.

Explain the difference between fundamental analysis and technical analysis.

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