International Financial Management MCQs and Notes

A

Admin • 36.93K Points
Coach

Q 1. The World Bank's Multilateral Investment Guarantee Agency (MIGA):

(A) offers various forms of export insurance.

(B) offers various forms of import insurance.

(C) offers various forms of exchange rate risk insurance.

(D) provides loans to developing countries.

S

Shiva Ram • 30.44K Points
Instructor I

Q 2. Suppose the exchange rates between the United States and Euro Area are in long-run equilibrium as defined by the idea of purchasing power parity. If the law of one price holds perfectly, then differences between U.S. and Euro Area rates of inflation would

(A) have no effect on nominal exchange rates.

(B) be completely offset by changes in the real exchange rate.

(C) be completely offset by changes in the nominal exchange rate.

(D) violate the conditions for the law of one price.

R

Ranjeet • 34.60K Points
Instructor I

Q 3. An Austrian firm that buys foreign exchange because its managers expect the euro to depreciate is

(A) increasing the supply of foreign exchange.

(B) increasing the demand for foreign exchange.

(C) speculating.

(D) Both A and B.

V

Vijay Sangwan • 28.62K Points
Instructor II

Q 4. All else equal, if Euro Area raises its interest rates,

(A) the dollar depreciates.

(B) the U.S. demand for euros increases.

(C) the Euro Area supply of euros increases.

(D) Both A and B.

P

Praveen Singh • 36.71K Points
Coach

Q 5. All else equal and under a system of floating exchange rates, if a country enters a period of exceptionally strong growth,

(A) the pressure on its currency is to revalue.

(B) the pressure on its currency is to devalue.

(C) the pressure on its currency is to depreciate.

(D) the pressure on its currency is to appreciate.

V

Vijay Sangwan • 28.62K Points
Instructor II

Q 6. Covered interest arbitrage involves both

(A) the purchase of a foreign asset and a forward contract in the market for foreign exchange.

(B) the purchase of a domestic asset and a spot contract in the market for foreign exchange.

(C) the sale of a foreign asset and the purchase of a forward contract in the market for foreign exchange.

(D) the sale of domestic stocks and the purchase of foreign bonds.

V

Vinay • 28.75K Points
Instructor II

Q 7. In order to protect against foreign exchange risk, firms can use

(A) the spot market for foreign exchange.

(B) interest rate arbitrage.

(C) purchasing power parity.

(D) the forward market for foreign exchange.

V

Vinay • 28.75K Points
Instructor II

Q 8. When an individual or firm in a particular country requests that a bank sell foreign exchange, the bank will probably

(A) call a foreign bank and arrange a purchase.

(B) call the central bank and arrange a purchase.

(C) call another bank customer with foreign exchange holdings.

(D) call another domestic bank and arrange a purchase.

S

Shiva Ram • 30.44K Points
Instructor I

Q 9. A firm that buys foreign exchange in order to take advantage of higher foreign interest rates is

(A) speculating.

(B) demonstrating purchasing power parity.

(C) engaging in interest rate arbitrage.

(D) responding to fluctuations in the business cycle.

R

Rakesh Kumar • 28.44K Points
Instructor II

Q 10. Reducing a current account deficit requires a country to:

(A) Increase private saving relative to investment

(B) Increase private consumption relative to saving

(C) Increase private investment relative to consumption

(D) Increase private investment relative to saving