Question 1

During the latter part of the decade ending in 2010:

Accepted Answer

A) housing prices peaked in 2006. 
B) stock prices peaked in 2007. 
C) debt-heavy individuals and business firms default rates skyrocketed. 
D) the U.S.dollar declining rapidly against an index of major currencies. 
E) all of the above 
A) housing prices peaked in 2006. 
B) stock prices peaked in 2007. 
C) debt-heavy individuals and business firms default rates skyrocketed. 
D) the U.S.dollar declining rapidly against an index of major currencies. 
E) all of the above E

Question 2

Interest rate parity (IRP) states that the currency of a country with relatively higher interest rate will appreciate relative to the currency of a country with a relatively lower interest rate.

Accepted Answer

A) True 
 B)False  False

Question 3

The balance of payments is a summary of all economic transactions between one country and the rest of the world.

Accepted Answer

A) True 
 B)False  True

Question 4

Interest rate parity states that a country with a relatively higher expected inflation rate will have its currency depreciate relative to a country with a relatively lower inflation rate.

Accepted Answer

A) True 
 B)False

Question 5

43CNew.Holding demand constant, an decrease in supply for one currency relative to another will cause its value to depreciate relative to that currency.

Accepted Answer

A) True 
 B)False

Question 6

Economic risk is the risk associated with possible slow or negative economic growth, as well as with the likelihood of variability.

Accepted Answer

A) True 
 B)False

Question 7

An instrument requiring immediate payment is classified as a time draft.

Accepted Answer

A) True 
 B)False

Question 8

A documentary draft is accompanied, among other things, by a (n):

Accepted Answer

A) order bill of lading 
B) manifest 
C) trust receipt 
D) letter of credit 
A) order bill of lading 
B) manifest 
C) trust receipt 
D) letter of credit

Question 9

Which of the following statements is false?

Accepted Answer

A) An order bill of lading carries title to the goods being shipped. 
B) There are foreign offices of U.S.banks in foreign countries. 
C) In dealing with a foreign bank, an exporter generally works through a local subsidiary of that bank. 
D) All of the above statements are false. 
E) none of the above statements is false. 
A) An order bill of lading carries title to the goods being shipped. 
B) There are foreign offices of U.S.banks in foreign countries. 
C) In dealing with a foreign bank, an exporter generally works through a local subsidiary of that bank. 
D) All of the above statements are false. 
E) none of the above statements is false.

Question 10

A promise of future payment issued by a firm guaranteed by a bank is called a (n)

Accepted Answer

A) bill of exchange 
B) commercial letter of credit 
C) banker's acceptance 
D) documentary draft 
A) bill of exchange 
B) commercial letter of credit 
C) banker's acceptance 
D) documentary draft

Question 11

If the exchange rate in New York for British pounds sterling is quoted at 1 pound = $1.60, and in London the rate is quoted at 1 pound = $1.62, financial arbitragers might:

Accepted Answer

A) buy pounds in New York 
B) sell dollars in London 
C) simultaneously sell pounds in New York and buy dollars in London 
D) simultaneously sell pounds in New York and sell dollars in London 
E) none of the above 
A) buy pounds in New York 
B) sell dollars in London 
C) simultaneously sell pounds in New York and buy dollars in London 
D) simultaneously sell pounds in New York and sell dollars in London 
E) none of the above

Question 12

The _______ includes ALL international transactions.

Accepted Answer

A) balance of trade 
B) balance of payments 
C) current account balance 
D) capital account balance 
A) balance of trade 
B) balance of payments 
C) current account balance 
D) capital account balance

Question 13

The exchange rate is the rate at which a given unit of foreign currency is quoted in terms of:

Accepted Answer

A) commodity prices 
B) barrels of oil 
C) the foreign currency 
D) gold 
E) none of the above 
A) commodity prices 
B) barrels of oil 
C) the foreign currency 
D) gold 
E) none of the above

Question 14

Arbitrage is the simultaneous buying of securities in one market and selling them in another to make a profit from price differences in the two markets.

Accepted Answer

A) True 
 B)False

Question 15

A clean draft is accompanied by an order bill of lading along with other papers such as insurance receipts, certificates of sanitation, and consular invoices.

Accepted Answer

A) True 
 B)False

Question 16

A documentary draft is a draft that is accompanied by an order bill of lading and other documents.

Accepted Answer

A) True 
 B)False

Question 17

The Export-Import Bank:

Accepted Answer

A) makes loans and offers guarantees to foreign exporters to the United States 
B) may offer emergency credits to assist other countries to maintain their level of exports to the United States 
C) makes loans or offers guarantees when the soundness of the transaction is in doubt 
D) makes loans to domestic exporters to encourage foreign trade 
E) none of the above 
A) makes loans and offers guarantees to foreign exporters to the United States 
B) may offer emergency credits to assist other countries to maintain their level of exports to the United States 
C) makes loans or offers guarantees when the soundness of the transaction is in doubt 
D) makes loans to domestic exporters to encourage foreign trade 
E) none of the above

Question 18

A flexible exchange rate system in which currency exchange rates are determined by supply and demand has been in place since 1973.

Accepted Answer

A) True 
 B)False

Question 19

Under the system of flexible exchange rates that began in 1943, exchange rates are determined by the actual process of supply and demand in the foreign exchange market.

Accepted Answer

A) True 
 B)False

Question 20

A nation with a relatively lower inflation rate than other countries will have a relatively stronger currency holding other factors constant.

Accepted Answer

A) True 
 B)False

During the latter part of the decade ending in 2010:

Interest rate parity (IRP) states that the currency of a country with relatively higher interest rate will appreciate relative to the currency of a country with a relatively lower interest rate.

The balance of payments is a summary of all economic transactions between one country and the rest of the world.

Interest rate parity states that a country with a relatively higher expected inflation rate will have its currency depreciate relative to a country with a relatively lower inflation rate.

43CNew.Holding demand constant, an decrease in supply for one currency relative to another will cause its value to depreciate relative to that currency.

Economic risk is the risk associated with possible slow or negative economic growth, as well as with the likelihood of variability.

An instrument requiring immediate payment is classified as a time draft.

A documentary draft is accompanied, among other things, by a (n):

Which of the following statements is false?

A promise of future payment issued by a firm guaranteed by a bank is called a (n)

If the exchange rate in New York for British pounds sterling is quoted at 1 pound = $1.60, and in London the rate is quoted at 1 pound = $1.62, financial arbitragers might:

The _______ includes ALL international transactions.

The exchange rate is the rate at which a given unit of foreign currency is quoted in terms of:

Arbitrage is the simultaneous buying of securities in one market and selling them in another to make a profit from price differences in the two markets.

A clean draft is accompanied by an order bill of lading along with other papers such as insurance receipts, certificates of sanitation, and consular invoices.

A documentary draft is a draft that is accompanied by an order bill of lading and other documents.

The Export-Import Bank:

A flexible exchange rate system in which currency exchange rates are determined by supply and demand has been in place since 1973.

Under the system of flexible exchange rates that began in 1943, exchange rates are determined by the actual process of supply and demand in the foreign exchange market.

A nation with a relatively lower inflation rate than other countries will have a relatively stronger currency holding other factors constant.

The Financial Environment

Money and the Monetary System

Banks and Other Financial Institutions

Federal Reserve System

Policy Makers and the Money Supply

Savings and Investment Process

Interest Rates

Time Value of Money

Bonds and Stocks: Characteristics and Valuation

Securities Markets

Financial Return and Risk Concepts

Business Organization and Financial Data

Financial Analysis and Long-Term Financial Planning

Managing Working Capital

Short-Term Business Financing

Capital Budgeting Analysis

Capital Structure and the Cost of Capital

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Exam 6: International Finance and Trade

During the latter part of the decade ending in 2010:

Interest rate parity (IRP) states that the currency of a country with relatively higher interest rate will appreciate relative to the currency of a country with a relatively lower interest rate.

The balance of payments is a summary of all economic transactions between one country and the rest of the world.

Interest rate parity states that a country with a relatively higher expected inflation rate will have its currency depreciate relative to a country with a relatively lower inflation rate.

43CNew.Holding demand constant, an decrease in supply for one currency relative to another will cause its value to depreciate relative to that currency.

Economic risk is the risk associated with possible slow or negative economic growth, as well as with the likelihood of variability.

An instrument requiring immediate payment is classified as a time draft.

A documentary draft is accompanied, among other things, by a (n):

Which of the following statements is false?

A promise of future payment issued by a firm guaranteed by a bank is called a (n)

If the exchange rate in New York for British pounds sterling is quoted at 1 pound = $1.60, and in London the rate is quoted at 1 pound = $1.62, financial arbitragers might:

The _______ includes ALL international transactions.

The exchange rate is the rate at which a given unit of foreign currency is quoted in terms of:

Arbitrage is the simultaneous buying of securities in one market and selling them in another to make a profit from price differences in the two markets.

A clean draft is accompanied by an order bill of lading along with other papers such as insurance receipts, certificates of sanitation, and consular invoices.

A documentary draft is a draft that is accompanied by an order bill of lading and other documents.

The Export-Import Bank:

A flexible exchange rate system in which currency exchange rates are determined by supply and demand has been in place since 1973.

Under the system of flexible exchange rates that began in 1943, exchange rates are determined by the actual process of supply and demand in the foreign exchange market.

A nation with a relatively lower inflation rate than other countries will have a relatively stronger currency holding other factors constant.

The Financial Environment

Money and the Monetary System

Banks and Other Financial Institutions

Federal Reserve System

Policy Makers and the Money Supply

Savings and Investment Process

Interest Rates

Time Value of Money

Bonds and Stocks: Characteristics and Valuation

Securities Markets

Financial Return and Risk Concepts

Business Organization and Financial Data

Financial Analysis and Long-Term Financial Planning

Managing Working Capital

Short-Term Business Financing

Capital Budgeting Analysis

Capital Structure and the Cost of Capital

Filters