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Chapter:

30+ International finance Solved MCQs

in International Business

These multiple-choice questions (MCQs) are designed to enhance your knowledge and understanding in the following areas: Bachelor of Business Administration (BBA) , Master of Commerce (M.com) .

Chapters

Chapter: International finance
1.

Ultimately ………………was replaced by the …………….on 1st Jan 1995

A. gats, wto
B. wto, gatt
C. gatt, wto
D. imf, gatt
Answer» C. gatt, wto
2.

_______ is the first step in the internationalization process.

A. license
B. foreign investment
C. sales
D. export
Answer» A. license
3.

In the foreign exchange market, the ________ of one country is traded for the ________ of another country.

A. currency; currency
B. currency; financial instruments
C. currency; goods
D. goods; goods
Answer» A. currency; currency
4.

By definition, currency appreciation occurs when

A. the value of all currencies falls relative to gold.
B. the value of all currencies rises relative to gold.
C. the value of one currency rises relative to another currency.
D. the value of one currency falls relative to another currency
Answer» C. the value of one currency rises relative to another currency.
5.

Hedging is used by companies to:

A. decrease the variability of tax paid
B. decrease the spread between spot and forward market quotes
C. increase the variability of expected cash flows
D. decrease the variability of expected cash flows
Answer» D. decrease the variability of expected cash flows
6.

Exchange rates

A. are always fixed
B. fluctuate to equate the quantity of foreign exchange demanded with the quantity supplied
C. fluctuate to equate imports and exports
D. fluctuate to equate rates of interest in various countries
Answer» B. fluctuate to equate the quantity of foreign exchange demanded with the quantity supplied
7.

If the U.S. dollar appreciates relative to the British pound,

A. it will take fewer dollars to purchase a pound
B. it will take more dollars to purchase a pound
C. it is called a weakening of the dollar
D. both a & c
Answer» A. it will take fewer dollars to purchase a pound
8.

A floating exchange rate

A. is determined by the national governments involved
B. remains extremely stable over long periods of time
C. is determined by the actions of central banks
D. is allowed to vary according to market forces
Answer» D. is allowed to vary according to market forces
9.

In a quote exchange rate, the currency that is to be purchase with another currency is called the

A. liquid currency
B. foreign currency
C. local currency
D. base currency
Answer» D. base currency
10.

An economist will define the exchange rate between two currencies as the:

A. amount of one currency that must be paid in order to obtain one unit of another currency
B. difference between total exports and total imports within a country
C. price at which the sales and purchases of foreign goods takes place
D. ratio of import prices to export prices for a particular country
Answer» A. amount of one currency that must be paid in order to obtain one unit of another currency
11.

India is facing continuous deficit in its balance of payments. In the foreign exchange market rupee is expected to

A. depreciate.
B. appreciate.
C. show no specific tendency.
D. depreciate against currencies of the countries with positive balance of payment and appreciate against
Answer» A. depreciate.
12.

The demand for domestic currency in the foreign exchange market is indicated by the following transactions in balance of payment

A. export of goods and services
B. import of goods and services.
C. export of goods and services and capital inflows.
D. import of goods and services and capital outflows.
Answer» C. export of goods and services and capital inflows.
13.

The price at which a market maker is prepared to buy (a currency) or borrow (money) is termed as

A. spot rate
B. bid rate
C. ask price
D. forward rate
Answer» B. bid rate
14.

The __________ is especially well suited to offer hedging protection against transactions risk exposure.

A. forward market
B. spot market
C. transactions market
D. inflation-rate market
Answer» A. forward market
15.

Difference between buying and selling rates in an exchange rate is known as

A. strike price
B. spread
C. swap points
D. spot rate
Answer» B. spread
16.

Exchange rate between currency A and currency B, given the values of currencies A and B with respect to a third currency is known as

A. golden standard
B. flexible exchange rate
C. fixed exchange rate
D. cross exchange rate
Answer» D. cross exchange rate
17.

The swap arrangement where principal amounts are not exchanged, but periodical payments will be

A. currency swap
B. cross currency interest swap
C. interest rate swap.
D. non-financial swap.
Answer» C. interest rate swap.
18.

What is FEMA?

A. first exchange management act
B. foreign exchequer management act
C. foreign exchange management act
D. foreign evaluation management act
Answer» C. foreign exchange management act
19.

______________ involve the exchange of currency the second day after the date on which the two foreign exchange traders agree to the transaction.

A. spot transactions
B. outright forward transactions
C. fx swaps
D. reverse transactions
Answer» A. spot transactions
20.

Outright forward transactions involve the exchange of currency beyond three days at a fixed exchange rate, known as the:

A. spot rate.
B. forward rate
C. fx swap rate.
D. reverse transaction rate
Answer» B. forward rate
21.

The biggest market for foreign exchange is which of the following?

A. new york
B. tokyo
C. london
D. china
Answer» C. london
22.

The ______________ is the price at which the trader is willing to buy foreign currency.

A. offer
B. bid
C. spread
D. cross rate
Answer» B. bid
23.

Which of the following is the price at which the trader is willing to sell foreign currency?

A. bid
B. spread
C. offer
D. cross rate
Answer» C. offer
24.

.………is only a legal agreement and it is not an institution, but ….. is a permanent institution.

A. gatt, wto
B. wto, gatt
C. wto, imf
D. imf, gatt
Answer» A. gatt, wto
25.

The WTO was established to implement the final act of Uruguay Round agreement of ……

A. mfa
B. gatt
C. trip’s
D. uno
Answer» B. gatt
26.

WTO stands for

A. world technology association
B. world time organization
C. world trade organization
D. world tourism organization
Answer» C. world trade organization
27.

What is the name of the international organization that fosters monetary and financial cooperation and serves as a bank for central banks?

A. wto
B. eu
C. world bank
D. bank for international settlements
Answer» D. bank for international settlements
28.

Which of the following are institutional banks that provide financial support and professional advice for developing countries?

A. multilateral development banks
B. central banks
C. investment banks
D. barclays bank
Answer» A. multilateral development banks
29.

In the foreign exchange market, the ________ of one country is traded for the ________ of another country.

A. currency; currency
B. currency; financial instruments
C. currency; goods
D. goods; goods
Answer» B. currency; financial instruments
30.

Which of the following examples definitely illustrates a depreciation of the U.S. dollar?

A. the dollar exchanges for 1 pound and then exchanges for 1.2 pounds.
B. the dollar exchanges for 250 yen and then exchanges for 275 francs.
C. the dollar exchanges for 100 francs and then exchanges for 120 yen.
D. the dollar exchanges for 120 francs and then exchanges for 100 francs
Answer» D. the dollar exchanges for 120 francs and then exchanges for 100 francs
31.

Interest rate swaps are usually possible because international financial markets in different countries are

A. efficient
B. perfect
C. imperfect
D. both a & b
Answer» C. imperfect
32.

The exchange rate is the

A. total yearly amount of money changed from one country’s currency to another country’s currency
B. total monetary value of exports minus imports
C. amount of country’s currency which can exchanged for one ounce of gold
D. price of one country’s currency in terms of another country’s currency
Answer» D. price of one country’s currency in terms of another country’s currency
33.

A speculator in foreign exchange is a person who

A. buys foreign currency, hoping to profit by selling it a a higher exchange rate at some later date
B. earns illegal profit by manipulation foreign exchange
C. causes differences in exchange rates in different geographic markets
D. none of the above
Answer» A. buys foreign currency, hoping to profit by selling it a a higher exchange rate at some later date
34.

Under a gold standard,

A. a nation’s currency can be traded for gold at a fixed rate
B. a nation’s central bank or monetary authority has absolute control over its money supply
C. new discoveries of gold have no effect on money supply or prices
D. a & b
Answer» A. a nation’s currency can be traded for gold at a fixed rate
35.

The Bretton Woods accord

A. of 1879 created the gold standard as the basis of international finance
B. of 1914 formulated a new international monetary system after the collapse of the gold standard
C. of 1944 formulated a new international monetary system after the collapse of the gold standard
D. none of the above
Answer» C. of 1944 formulated a new international monetary system after the collapse of the gold standard
36.

The current system of international finance is a

A. gold standard
B. fixed exchange rate system
C. floating exchange rate system
D. managed float exchange rate system
Answer» D. managed float exchange rate system
37.

Ask quote is for

A. seller
B. buyer
C. hedger
D. speculator
Answer» A. seller
38.

A simultaneous purchase and sale of foreign exchange for two different dates is called

A. currency devalues
B. currency swap
C. currency valuation
D. currency exchange
Answer» B. currency swap

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