Question 1

What is the difference between a spot exchange rate and a forward exchange rate?

Accepted Answer

The spot exchange rate is the rate at wh

Question 2

The risk that arises from volatile changes in exchange rates is known as foreign exchange risk.

Accepted Answer

A) True 
 B)False

Question 3

Compare and contrast the Fisher Effect and the International Fisher Effect.

Accepted Answer

The Fisher Effect was put forth by Irvin

Question 4

The foreign exchange market is a market for converting the currency of one country into that of another country.

Accepted Answer

A) True 
 B)False

Question 5

Consider the role of investor psychology and bandwagon effects on how well PPP and the International Fisher Effect explain short-term movements in exchange rates.

Accepted Answer

Neither PPP nor the International Fisher

Question 6

Countries might be forced to use countertrade when a currency is:

Accepted Answer

A) freely convertible. 
B) externally convertible. 
C) internally convertible. 
D) nonconvertible. 
A) freely convertible. 
B) externally convertible. 
C) internally convertible. 
D) nonconvertible.

Question 7

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 8

When a currency is nonconvertible:

Accepted Answer

A) the country's government allows both residents and nonresidents to purchase unlimited amounts of a foreign currency with it. 
B) only nonresidents may convert it into a foreign currency without any limitations. 
C) neither residents nor nonresidents are allowed to convert it into a foreign currency. 
D) only residents may convert it internally into a foreign currency. 
A) the country's government allows both residents and nonresidents to purchase unlimited amounts of a foreign currency with it. 
B) only nonresidents may convert it into a foreign currency without any limitations. 
C) neither residents nor nonresidents are allowed to convert it into a foreign currency. 
D) only residents may convert it internally into a foreign currency.

Question 9

Arbitrage opportunities abound in the foreign exchange markets and they tend to be available for long periods of time.

Accepted Answer

A) True 
 B)False

Question 10

A currency is said to be externally convertible when:

Accepted Answer

A) the country's government allows both residents and nonresidents to purchase unlimited amounts of a foreign currency with it. 
B) only nonresidents may convert it into a foreign currency without any limitations. 
C) neither residents nor nonresidents are allowed to convert it into a foreign currency. 
D) only residents may convert it internally into a foreign currency. 
A) the country's government allows both residents and nonresidents to purchase unlimited amounts of a foreign currency with it. 
B) only nonresidents may convert it into a foreign currency without any limitations. 
C) neither residents nor nonresidents are allowed to convert it into a foreign currency. 
D) only residents may convert it internally into a foreign currency.

Question 11

The rate at which one currency is converted into another is the:

Accepted Answer

A) replacement percentage. 
B) resale rate. 
C) exchange rate. 
D) interchange ratio. 
A) replacement percentage. 
B) resale rate. 
C) exchange rate. 
D) interchange ratio.

Question 12

Capital flight 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) True 
 B)False

Question 13

Transaction exposure is the extent to which the income from individual transactions is affected by fluctuations in foreign exchange values.

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

A) Technical analysis 
B) Fundamental analysis 
C) The Fisher Effect 
D) The International Fisher Effect 
A) Technical analysis 
B) Fundamental analysis 
C) The Fisher Effect 
D) The International Fisher Effect

Question 15

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 16

A spot exchange rate is quoted for 30 days,90 days,and 180 days into the future.

Accepted Answer

A) True 
 B)False

Question 17

A currency swap is the rate at which a foreign exchange dealer converts one currency into another on a particular day.

Accepted Answer

A) True 
 B)False

Question 18

Identify the incorrect statement about the PPP theory.

Accepted Answer

A) It predicts that exchange rates are determined by relative prices. 
B) It yields accurate predictions in the short run. 
C) It best predicts exchange rate changes for countries with high rates of inflation. 
D) It assumes away transportation costs and barriers to trade. 
A) It predicts that exchange rates are determined by relative prices. 
B) It yields accurate predictions in the short run. 
C) It best predicts exchange rate changes for countries with high rates of inflation. 
D) It assumes away transportation costs and barriers to trade.

Question 19

Changes in spot exchange rates can be advantageous for an international business.

Accepted Answer

A) True 
 B)False

Question 20

Describe translation exposure.How can translation exposure be minimized?

Accepted Answer

Translation exposure is the impact of cu

What is the difference between a spot exchange rate and a forward exchange rate?

The risk that arises from volatile changes in exchange rates is known as foreign exchange risk.

Compare and contrast the Fisher Effect and the International Fisher Effect.

The foreign exchange market is a market for converting the currency of one country into that of another country.

Consider the role of investor psychology and bandwagon effects on how well PPP and the International Fisher Effect explain short-term movements in exchange rates.

Countries might be forced to use countertrade when a currency is:

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

When a currency is nonconvertible:

Arbitrage opportunities abound in the foreign exchange markets and they tend to be available for long periods of time.

A currency is said to be externally convertible when:

The rate at which one currency is converted into another is the:

Capital flight 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.

Transaction exposure is the extent to which the income from individual transactions is affected by fluctuations in foreign exchange values.

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

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

A spot exchange rate is quoted for 30 days,90 days,and 180 days into the future.

A currency swap is the rate at which a foreign exchange dealer converts one currency into another on a particular day.

Identify the incorrect statement about the PPP theory.

Changes in spot exchange rates can be advantageous for an international business.

Describe translation exposure.How can translation exposure be minimized?

Globalization

National Differences in Political Economy

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 Global Capital Market

The Strategy of International Business

The Organization of International Business

Entry Strategy and Strategic Alliances

Exporting,Importing,and Countertrade

Global Production, Outsourcing, and Logistics

Global Marketing and RD

Global Human Resource Management

Accounting in the International Business

Financial Management in the International Business

Filters

Exam 9: The Foreign Exchange Market

What is the difference between a spot exchange rate and a forward exchange rate?

The risk that arises from volatile changes in exchange rates is known as foreign exchange risk.

Compare and contrast the Fisher Effect and the International Fisher Effect.

The foreign exchange market is a market for converting the currency of one country into that of another country.

Consider the role of investor psychology and bandwagon effects on how well PPP and the International Fisher Effect explain short-term movements in exchange rates.

Countries might be forced to use countertrade when a currency is:

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

When a currency is nonconvertible:

Arbitrage opportunities abound in the foreign exchange markets and they tend to be available for long periods of time.

A currency is said to be externally convertible when:

The rate at which one currency is converted into another is the:

Capital flight 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.

Transaction exposure is the extent to which the income from individual transactions is affected by fluctuations in foreign exchange values.

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

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

A spot exchange rate is quoted for 30 days,90 days,and 180 days into the future.

A currency swap is the rate at which a foreign exchange dealer converts one currency into another on a particular day.

Identify the incorrect statement about the PPP theory.

Changes in spot exchange rates can be advantageous for an international business.

Describe translation exposure.How can translation exposure be minimized?

Globalization

National Differences in Political Economy

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 Global Capital Market

The Strategy of International Business

The Organization of International Business

Entry Strategy and Strategic Alliances

Exporting,Importing,and Countertrade

Global Production, Outsourcing, and Logistics

Global Marketing and RD

Global Human Resource Management

Accounting in the International Business

Financial Management in the International Business

Filters