International Finance MCQs

Question. _______ is the first step in the internationalization process.
(a) License
(b) Foreign Investment
(c) Sales
(d) Export

Answer: A

Question. 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

Question. The world trade organization was formed in the year _________ with GATT as its basis.
(a) 1993
(b) 1994
(c) 1995
(d) 1996

Answer: C

Question. Geocentric staffing policy ensures best qualified people at suitable positions irrespective of their national and cultural differences.
(a) True
(b) False

Answer: A

Question. 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

Question. 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 options

Answer: C

Question. A forward contract to deliver British pounds for US dollars could be described either as ________ or ________)
(a) buying dollars forward; buying pounds forward
(b) selling pounds forward; selling dollars forward
(c) selling pounds forward; buying dollars forward
(d) selling dollars forward; buying pounds forward

Answer: C

Question. 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

Question. 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

Question. 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

Question. Ask quote is for
(a) Seller
(b) Buyer
(c) Hedger
(d) Speculator

Answer: A

Question. 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

Question. .………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

Question. 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

Question. 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

Question. 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

Question. India’s foreign exchange rate system is?
(a) Free float
(b) Managed float
(c) Fixed.
(d) Fixed target of band

Answer: B

Question. 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

Question. 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

Question. 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

Question. 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

Question. IBRD (International Bank for Reconstruction and Development) also known as
(a) Exim Bank
(b) World Bank
(c) International Monetary fund
(d) International Bank

Answer: B

Question. 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

Question. In 1944 international accord is recognized as
(a) Breton Wood Agreement
(b) Exchange Agreement
(c) International Trade
(d) Fisher Effect

Answer: A

Question. The biggest market for foreign exchange is which of the following?
(a) New York
(b) Tokyo
(c) London
(d) China

Answer: C

Question. 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 countries with negative balance of payment.

Answer: A

Question. 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

Question. 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

Question. If portable disk players made in China are imported into the United States, the Chinese manufacturer is paid with
(a) international monetary credits.
(b) dollars.
(c) yuan, the Chinese currency.
(d) euros, or any other third currency.

Answer: C

Question. 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

Question. A forward currency transaction:
(a) Is always at a premium over the spot rate
(b) Means that delivery and payment must be made within one business day (USA/Canada) or two business days after the transaction date
(c) Calls for exchange in the future of currencies at an agreed rate of exchange
(d) Sets the future date when delivery of a currency must be made at an unknown spot exchange rate

Answer: C

Question. which of the following institutions can not be included in the international finance and monetary system?
(a) WTO
(b) Bank for International Settlements
(c) IMF
(d) World Bank

Answer: A

Question. 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

Question. ______________ 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

Question. 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

Question. 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

Question. 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

Question. 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

Question. 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

Question. WTO stands for
(a) World technology association
(b) World time organization
(c) World trade organization
(d) World tourism organization

Answer: C

Question. The OECD stands for:
(a) Organization for Economic Co-operation and Development
(b) Organization for Economic Coordination and Development
(c) Organization for Environmental Cooperation and Development.
(d) Organization for Environmental Control and Development

Answer: A

Question. 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

Question. SMEs stands for:
(a) Small and Medium Entrepreneurs
(b) Small Management of Enterprises
(c) Small and Medium-sized Enterprises.
(d) Societies for Managing Exports

Answer: C

Question. 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

Question. 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

Question. 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

Question. 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

Question. 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

Question. A forward currency transaction:
(a) Is always at a premium over the spot rate
(b) Means that delivery and payment must be made within one business day (USA/Canada) or two business days after the transaction date
(c) Calls for exchange in the future of currencies at an agreed rate of exchange
(d) Sets the future date when delivery of a currency must be made at an unknown spot exchange rate

Answer: C

Question. Ultimately ………………was replaced by the …………….on 1st Jan 1995
(a) GATS, WTO
(b) WTO, GATT
(c) GATT, WTO
(d) IMF, GATT

Answer: C

Question. 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 options

Answer: A

Question. A simultaneous purchase and sale of foreign exchange for two different dates is called
(a) currency devalue
(b) currency swap
(c) currency valuation
(d) currency exchange

Answer: B

Question. 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 options

Answer: C

Question. 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

Question. 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

Question. 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

Question. 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

Question. The spot exchange rate __________.
(a) is the rate today for exchanging one currency for another for immediate delivery
(b) is the rate today for exchanging one currency for another at a specific future date
(c) is the rate today for exchanging one currency for another at a specific location on a specific future date
(d) is the rate today for exchanging one currency for another at a specific location for immediate delivery

Answer: A