International Finance
Question Bank
Course Introduction
International Finance explores the dynamics of financial interactions between countries, focusing on the global monetary system, foreign exchange markets, international financial institutions, and cross-border investment. The course examines key topics such as exchange rate determination, international financial markets, currency risk management, balance of payments, and the impact of international trade and monetary policies on the global economy. Students will gain analytical tools and practical skills necessary to understand the complexities of international capital flows and their implications for multinational corporations, policy makers, and investors.
Recommended Textbook
International Money and Finance 8th Edition by Michael Melvin
Available Study Resources on Quizplus
13 Chapters
694 Verified Questions
694 Flashcards
Source URL: https://quizplus.com/study-set/3608
Page 2
Chapter 1: The Foreign Exchange Market
Available Study Resources on Quizplus for this Chatper
71 Verified Questions
71 Flashcards
Source URL: https://quizplus.com/quiz/71637
Sample Questions
Q1) In foreign exchange trading,arbitrage has ______ risk and speculation has ________ risk.
A) zero; zero
B) positive; positive
C) zero; positive
D) positive; zero
Answer: C
Q2) When the exchange rate changes from 0.9 euros per dollar to 1.0 euros per dollar,then
A) the euro has appreciated and the dollar has appreciated.
B) the euro has depreciated and the dollar has appreciated.
C) the euro has appreciated and the dollar has depreciated.
D) the euro has depreciated and the dollar has depreciated.
Answer: B
Q3) If First American Bank quotes bid and offer rates for the Russian ruble at $.0350-.0360,the bank would realize profits of $1,000 on the purchase and sale of 1 million rubles.
A)True
B)False Answer: True
To view all questions and flashcards with answers, click on the resource link above. Page 3
Chapter 2: International Monetary Arrangements
Available Study Resources on Quizplus for this Chatper
52 Verified Questions
52 Flashcards
Source URL: https://quizplus.com/quiz/71631
Sample Questions
Q1) An example of a fixed exchange rate was the gold standard.
A)True
B)False
Answer: True
Q2) Which of the following exchange rate systems is the least flexible?
A) Free floating
B) Managed floating.
C) Currency board
D) Fixed peg arrangement
Answer: C
Q3) Countries with floating exchange rates tend to have large,closed economies and trade largely with a single foreign country.
A)True
B)False
Answer: False
Q4) Countries use reserve currencies as an international unit of account,a medium of exchange,and a store of value.
A)True
B)False
Answer: True
To view all questions and flashcards with answers, click on the resource link above. Page 4
Chapter 3: The Balance of Payments
Available Study Resources on Quizplus for this Chatper
51 Verified Questions
51 Flashcards
Source URL: https://quizplus.com/quiz/71630
Sample Questions
Q1) If imports exceed exports,then:
A) private saving exceeds public saving.
B) private saving plus public saving exceed domestic investment.
C) private saving plus public saving minus domestic investment is negative.
D) domestic investment is negative.
Q2) Which of the following categories generally has a deficit for the U.S.?
A) Investment income
B) Unilateral transfers
C) Services
D) Balance of payments
Q3) What kind of currency exchange system will prevent the balance of payments from being automatically balanced?
A) Monetary unions
B) Fixed exchange rate
C) Floating
D) Managed floating
Q4) A trade surplus occurs when the current account is greater than the capital account.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 5
Chapter 4: Forward-Looking Market Instruments
Available Study Resources on Quizplus for this Chatper
44 Verified Questions
44 Flashcards
Source URL: https://quizplus.com/quiz/71629
Sample Questions
Q1) In the options market,a put option gives the right to sell and a call option gives the right to buy currency.
A)True
B)False
Q2) Forward premiums and discounts are quoted in annualized form because:
A) The IMF mandates this practice.
B) Unlike options contracts, forward contracts are always one year in length.
C) Purchases are balanced every fiscal year.
D) Comparisons to interest rate returns are easier.
Q3) ________ refers to buying and selling currencies to be delivered at a future date.
A) The currency swap market
B) The forward market
C) The default swap market
D) The options market
Q4) In what market are currency prices sometimes referred to as a strike price?
A) Forward market
B) Swap market
C) Futures market
D) Options market
To view all questions and flashcards with answers, click on the resource link above. Page 6
Chapter 6: Exchange Rates, interest Rates, and Interest
Parity
Available Study Resources on Quizplus for this Chatper
64 Verified Questions
64 Flashcards
Source URL: https://quizplus.com/quiz/71628
Sample Questions
Q1) Pegging exchange rates at fixed levels by buying and selling to maintain the fixed rate by the central bank means that domestic and foreign currency interest rates will have to adjust to parity levels.
A)True
B)False
Q2) If the U.S.and the U.K.have identical term structures of interest rates,we would expect:
A) the pound to appreciate against the dollar.
B) the pound to depreciate against the dollar.
C) no change in the exchange rate between two currencies.
D) there is not enough information to forecast the direction of the exchange rate.
Q3) Suppose that the one-year U.S.interest rate is 4% and the equivalent one-year U.K.interest rate is 6%.According to the covered interest rate parity,there is a ________ on the British pound.
A) 2% forward discount
B) 2% forward premium
C) 10% forward discount
D) 10% forward premium
To view all questions and flashcards with answers, click on the resource link above.
Page 7
Chapter 7: Prices and Exchange Rates: Purchasing Power
Parity
Available Study Resources on Quizplus for this Chatper
49 Verified Questions
49 Flashcards
Source URL: https://quizplus.com/quiz/71627
Sample Questions
Q1) Assume that the United States faces a 5 percent inflation rate while the U.K has a 7 percent inflation rate.According to the relative PPP,the dollar would be expected to:
A) appreciate by 2 percent against the British pound
B) depreciate by 2 percent against the British pound
C) appreciate by 12 percent against the British pound
D) depreciate by 12 percent against the British pound
Q2) Purchasing power parity PPP explains the relationship between interest rates and product price changes.
A)True
B)False
Q3) If a currency has appreciated more than the price differential between two countries as implied by PPP,then a currency is overvalued.
A)True
B)False
Q4) High-inflation countries rarely see purchasing power parity hold over time because of relative price changes.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 8
Chapter 8: Foreign Exchange Risk and Forecasting
Available Study Resources on Quizplus for this Chatper
52 Verified Questions
52 Flashcards
Source URL: https://quizplus.com/quiz/71626
Sample Questions
Q1) Which forecasting technique uses a fundamental-based model with information that is thought to be important to changes in exchange rates?
A) Structural
B) Hedging
C) Atheoretical
D) Flow
Q2) Which of the following best describes translation exposure?
A) Operating banks in a remote location with an uncommon language
B) Accounting exposure from translating interest rates from different regions
C) Translating financial statements from one currency to another
D) Creating more than one offshore branch
Q3) Risk premium equals to:
A) expected premium minus forward premium.
B) expected premium plus forward premium.
C) forward premium minus expected premium.
D) exchange rate premium plus forward premium.
Q4) The degree to which a firm is affected by exchange rate changes is known as currency risk.
A)True
B)False
Page 9
To view all questions and flashcards with answers, click on the resource link above.
Chapter 9: Financial Management of the Multinational Firm
Available Study Resources on Quizplus for this Chatper
50 Verified Questions
50 Flashcards
Source URL: https://quizplus.com/quiz/71625
Sample Questions
Q1) By using netting,firms are able to minimize:
A) Labor costs
B) Penalty payments
C) Transaction costs
D) Transfer prices
Q2) Centralization of cash management allows the parent to offset subsidiary payables and receivables in a process called:
A) Internalizing
B) Outsourcing
C) Risk shifting
D) Netting
Q3) Refer to Table 9.1.The net present value NPV of this project in U.S.dollar is estimated at:
A) $2.86 million
B) $3.65 million
C) $4.56 million
D) - $9.21 million
To view all questions and flashcards with answers, click on the resource link above. Page 10
Chapter 10: International Portfolio Investment
Available Study Resources on Quizplus for this Chatper
56 Verified Questions
56 Flashcards
Source URL: https://quizplus.com/quiz/71636
Sample Questions
Q1) Consider the following variances of different stocks all with the same expected returns.Which stock represents the riskiest choice?
A) Stock A: 0.03
B) Stock B: 0.25
C) Stock C: 0.005
D) Stock D: 0.22
Q2) When a country moves from segmented capital market to globalized capital market,a firm located in this country can achieve:
A) lower cost of capital
B) greater availability of capital
C) lower risk premium on domestic assets
D) All of the above are correct.
Q3) See Table 10.1.If your portfolio includes a combination of 20% Asset A and 80% Asset B,then your expected return is:
A) 16.8 %
B) 18 %
C) 19.2 %
D) 24 %
To view all questions and flashcards with answers, click on the resource link above.
11
Chapter 12: Determinants of the Balance of Trade
Available Study Resources on Quizplus for this Chatper
50 Verified Questions
50 Flashcards
Source URL: https://quizplus.com/quiz/71635
Sample Questions
Q1) Assume that the U.S.demand for imports is perfectly inelastic.If the dollar is devalued then the total import value in dollars will:
A) Increase
B) Decrease
C) Stay the same
D) Uncertain
Q2) The elasticity approach to the balance of trade:
A) focuses on the effects of changing relative prices of domestic and foreign goods on the balance of trade.
B) indicates that the elasticity of demand for exports is always perfectly inelastic. C) assumes a flexible exchange rate regime.
D) All of the above are correct.
Q3) Suppose the dollar is devalued.If an export contract is written in dollars,then the value of U.S.exports:
A) Decrease
B) Increase
C) Stay the same
D) Not possible to answer with the given information
To view all questions and flashcards with answers, click on the resource link above.
12
Chapter 13: The Is-Lm-Bp Approach
Available Study Resources on Quizplus for this Chatper
54 Verified Questions
54 Flashcards
Source URL: https://quizplus.com/quiz/71634
Sample Questions
Q1) When the leakages are ________ the injections,then the value of income received from producing goods and services will equal to total spending.
A) Greater than
B) Less than
C) Equal to
D) The sum of
Q2) Which of the following factors shifts the LM curve to the left?
A) An increase in money supply
B) An decrease in money supply
C) An increase in government spending
D) A depreciation of domestic currency
Q3) The ________ represents all the points where money supplied is equal to money demanded.
A) IS curve
B) LM curve
C) BP curve
D) None of the above
Q4) "The BP curve could be vertical,if capital is perfectly mobile."
A)True
B)False
Page 13
To view all questions and flashcards with answers, click on the resource link above.
Chapter 14: The Monetary Approach
Available Study Resources on Quizplus for this Chatper
53 Verified Questions
53 Flashcards
Source URL: https://quizplus.com/quiz/71633
Sample Questions
Q1) The monetary approach is derived from the assumptions that:
A) money demand equals money supply.
B) money demand is a fixed proportion of the domestic price level times real income.
C) the law of one price holds.
D) All of the above are correct.
Q2) According to the monetary approach,when a monetary disequilibrium exists,either ____________ or _____________ has to adjust depending on the type of exchange rate system.
A) the balance of payments; domestic production
B) the balance of payments; exchange rate value
C) domestic production; exchange rate value
D) domestic production; foreign inflation rate
Q3) The MABP emphasizes money demand and money supply as determinants of:
A) The balance of payments under the fixed exchange rate.
B) The balance of payments under the floating exchange rate.
C) Exchange rate movements
D) Capital flows
To view all questions and flashcards with answers, click on the resource link above.
14
Chapter 15: Extensions to the Monetary Approach of Exchange Rate Determination
Available Study Resources on Quizplus for this Chatper
48 Verified Questions
48 Flashcards
Source URL: https://quizplus.com/quiz/71632
Sample Questions
Q1) Since news is unexpected and catches people off-guard,
A) it is easy to forecast the future exchange rate.
B) it causes exchange rates to fluctuate substantially.
C) it causes prices of goods and services to vary more than exchange rates.
D) it has no effect on exchange rates.
Q2) When citizens anticipate a country to experience trade deficits in the near future,the domestic currency would:
A) Appreciate immediately
B) Appreciate only in the future
C) Depreciate immediately
D) Depreciate only in the future
Q3) "In the trade balance approach,if people anticipate a country to experience trade deficit in the near future,the expectations will cause the country's currency to appreciate now."
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
15