MCQOPTIONS
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MCQOPTIONS
This section includes 8815 Mcqs, each offering curated multiple-choice questions to sharpen your Current Affairs knowledge and support exam preparation. Choose a topic below to get started.
| 2301. |
An increase in the U.S. demand for the euro |
| A. | causes a rise in the dollar exchange rate. |
| B. | causes the euro to appreciate. |
| C. | causes the dollar to depreciate. |
| D. | causes Euro Area goods to be relatively more expensive. |
| Answer» B. causes the euro to appreciate. | |
| 2302. |
What is the primary goal of financial management? |
| A. | To minimise the risk |
| B. | To maximise the owner’s wealth |
| C. | To maximise the return |
| D. | To raise profit |
| Answer» C. To maximise the return | |
| 2303. |
News of a potential surge in U.S. inflation and zero Chilean inflation places _______ pressure on the value of the Chilean peso. The pressure will occur _______. |
| A. | upward; only after the U.S. inflation surges |
| B. | downward; only after the U.S. inflation surges |
| C. | upward; immediately |
| D. | downward; immediately |
| Answer» D. downward; immediately | |
| 2304. |
The Bank of England may use a stimulative monetary policy with least concern aboutcausing inflation if the pound's value is expected to: |
| A. | remain stable. |
| B. | strengthen. |
| C. | weaken. |
| D. | none of the above will have an impact on inflation. |
| Answer» C. weaken. | |
| 2305. |
How does the IMF meet its primary objective? |
| A. | By promoting free international trade |
| B. | By overseeing the balance of payments, acting as a forum of world negotiation and regulating world exchange rates |
| C. | By acting as an arbitrator for the dispute settlement of world trade matters |
| D. | By aligning its primary objective with the monetary objectives of national governments |
| Answer» B. By overseeing the balance of payments, acting as a forum of world negotiation and regulating world exchange rates | |
| 2306. |
Authority which intervenes directly or indirectly in foreign exchange markets by alteringinterest rates is considered as |
| A. | central government |
| B. | centralized stocks |
| C. | central corporations |
| D. | centralized instruments |
| Answer» B. centralized stocks | |
| 2307. |
A French-based MNC has just established a subsidiary in Algeria. Shortly after the plant was built, the MNC determines that its exchange rate forecasts, which had previously indicated a slight appreciation in the Algerian dinar were probably false. Instead of a slight appreciation, the MNC now expects that the dinar will depreciate substantially due to political turmoil in Algeria. This new development would likely cause the MNC to __________ its estimate of the previously computed net present value. |
| A. | lower |
| B. | increase |
| C. | lower, but not necessarily if the MNC invests enough in Algeria to offset the decrease in NPV |
| D. | increase, but not necessarily if the MNC reduces its investment in Algeria by an offsetting amount |
| Answer» B. increase | |
| 2308. |
Which of the following are rules to use when choosing between forward contracts and currency options: |
| A. | When the quantity of a foreign-currency cash outflow is known, buy the currency forward. |
| B. | When the quantity of a foreign-currency cash outflow is unknown, buy the currency forward. |
| C. | When the quantity of a foreign-currency cash flow is partially known and partially uncertain, use a forward contract to hedge the known and unknown portions. |
| D. | When the quantity of a foreign-currency cash inflow is known, buy the currency forward. |
| Answer» B. When the quantity of a foreign-currency cash outflow is unknown, buy the currency forward. | |
| 2309. |
Rule which states that similar set of goods and services produced in various countriesshould have equal price is classified as |
| A. | law of similar mortgage rate |
| B. | law of one type manufacturing |
| C. | law of similar labor rules |
| D. | law of one price |
| Answer» E. | |
| 2310. |
Which of the following is not a method of forecasting exchange rate volatility? |
| A. | using the absolute forecast error as a percentage of the realized value. |
| B. | using the volatility of historical exchange rate movements as a forecast for the future. |
| C. | using a time series of volatility patterns in previous periods. |
| D. | deriving the exchange rate's implied standard deviation from the currency option pricing model. |
| Answer» B. using the volatility of historical exchange rate movements as a forecast for the future. | |
| 2311. |
When a foreign subsidiary is not wholly owned by the parent and a foreign project is partially |
| A. | financed with retained earnings of the parent and of the subsidiary, then: |
| B. | the parent's perspective should be used to evaluate a foreign project. |
| C. | the subsidiary's perspective should be used to evaluate a foreign project. |
| D. | the foreign project should enhance the value of both the parent and the subsidiary. |
| Answer» D. the foreign project should enhance the value of both the parent and the subsidiary. | |
| 2312. |
Foghat Co. has 1,000,000 euros as receivables due in 30 days, and is certain that the euro will epreciate substantially over time. Assuming that the firm is correct, the ideal strategy is to: |
| A. | sell euros forward. |
| B. | write euro currency put options. |
| C. | purchase euro currency call options. |
| D. | purchase euros forward. |
| Answer» B. write euro currency put options. | |
| 2313. |
Following is (are) the method(s) for adjustment of risks |
| A. | Risk-adjusted Discounting Rate |
| B. | Risk Equivalence Coefficient Method |
| C. | Both (A) and (B) |
| D. | None of the above |
| Answer» D. None of the above | |
| 2314. |
Suppose that the Japanese yen is selling at a forward discount in the forward-exchange market. This implies that most likely |
| A. | this currency has low exchange-rate risk. |
| B. | this currency is gaining strength in relation to the dollar. |
| C. | interest rates are higher in Japan than in the United States. |
| D. | interest rates are declining in Japan. |
| Answer» D. interest rates are declining in Japan. | |
| 2315. |
______________ is (are) income received by investors on foreign investments infinancial assets (securities). |
| A. | Portfolio income |
| B. | Unilateral transfers |
| C. | Direct foreign income |
| D. | Factor income |
| Answer» E. | |
| 2316. |
Which of the following would probably not cause the stock price of a foreign target to decrease? |
| A. | Its expected cash flows decline. |
| B. | General stock market conditions in the foreign country are deteriorating. |
| C. | Investors anticipate that the target will be acquir |
| Answer» D. | |
| 2317. |
Assume a U.S. firm initiates direct foreign investment in the U.K.. If the British pound is expected to appreciate against the dollar, the dollar value of earnings remitted to the parent should _______. The parent may request that the subsidiary _______ in order to benefit from the expectation about the pound. |
| A. | increase; postpone remitting earnings until the pound strengthens |
| B. | decrease; postpone remitting earnings until the pound strengthens |
| C. | decrease; remit earnings immediately before the pound strengthens |
| D. | increase; remit earnings immediately before the pound strengthens |
| Answer» B. decrease; postpone remitting earnings until the pound strengthens | |
| 2318. |
Which of the following operations benefits from depreciation of the firm's local currency? |
| A. | borrowing in a foreign country and converting the funds to the local currency prior to the depreciation. |
| B. | purchasing foreign supplies. |
| C. | investing in foreign bank accounts denominated in foreign currencies prior to depreciation of the local currency. |
| D. | A and B |
| Answer» D. A and B | |
| 2319. |
Given the following interest rates on different currencies, which of the following is true? Sterling 6 percent. Euro 3.5 percent. Dollar 6.25 percent. Yen 0.5 percent. |
| A. | The dollar must be at a forward premium to the yen because a very high percentage of world trade is carried out in dollars. |
| B. | The yen must be at a forward premium to the euro because one can borrow yen much more cheaply than euro. |
| C. | The euro must be at a forward premium to sterling because no one believes that the euro can continue to fall in value. |
| D. | The dollar must be at a forward premium to the yen because no one would be willing to hold yen at such a low rate of interest. |
| Answer» C. The euro must be at a forward premium to sterling because no one believes that the euro can continue to fall in value. | |
| 2320. |
The North American Free Trade Agreement (NAFTA) increased restrictions on: |
| A. | trade between Canada and Mexico. |
| B. | trade between Canada and the U.S. |
| C. | direct foreign investment in Mexico by U.S. firms. |
| D. | none of the above. |
| Answer» E. | |
| 2321. |
A firm may incorporate a country risk rating into the capital budgeting analysis by: |
| A. | adjusting the NPV upward if the country risk rating has fallen (implying increased risk) below a benchmark level. |
| B. | adjusting the discount rate upward as the country risk rating decreases (implying increased risk). |
| C. | A and B |
| D. | none of the above |
| Answer» C. A and B | |
| 2322. |
Capital structure weights are based on the: |
| A. | market values of a firm's debt and equity. |
| B. | market value of a firm's equity and the face value of its debt. |
| C. | initial issue values of a firm's debt and equity. |
| D. | book value of a firm's debt and equity. |
| Answer» B. market value of a firm's equity and the face value of its debt. | |
| 2323. |
If an MNC sells a product in a foreign country and imports partially manufactured components needed for production to that country from the U.S., then the local economy's inflation will have: |
| A. | a more pronounced impact on revenues than on costs. |
| B. | a less pronounced impact on revenues than on costs. |
| C. | the same impact on revenues as on costs. |
| D. | none of the above |
| Answer» B. a less pronounced impact on revenues than on costs. | |
| 2324. |
Kalons ltd. is a UK-based MNC that frequently imports raw materials from Canada. Kalons is typically invoiced for these goods in Canadian dollars and is concerned that the Canadian dollar will appreciate in the near future. Which of the following is not an appropriate hedging technique under these circumstances? |
| A. | purchase Canadian dollars forward. |
| B. | purchase Canadian dollar futures contracts. |
| C. | purchase Canadian dollar put options. |
| D. | purchase Canadian dollar call options. |
| Answer» D. purchase Canadian dollar call options. | |
| 2325. |
Which of the following is not one of the steps for currency exposure management: |
| A. | forecast the degree of exposure |
| B. | develop a reporting system to monitor exposure and exchange rate movements |
| C. | buying additional foreign subsidiaries |
| D. | assign responsibility for hedging exposure |
| Answer» D. assign responsibility for hedging exposure | |
| 2326. |
Which bill is drawn and accepted in the same country? |
| A. | Trade Bill |
| B. | Foreign Bill |
| C. | Inland Bill |
| D. | Accommodation Bill |
| Answer» D. Accommodation Bill | |
| 2327. |
Under a gold standard, countries should |
| A. | keep the supply of their domestic money constant. |
| B. | keep the supply of their domestic money fixed in proportion to their gold holdings. |
| C. | keep the supply of foreign exchange less than their domestic money supply. |
| D. | restrict the demand for foreign goods. |
| Answer» D. restrict the demand for foreign goods. | |
| 2328. |
Which of the following exchange rate policies uses a target exchange rate, but allows the target to change? |
| A. | fixed exchange rate |
| B. | flexible exchange rate |
| C. | crawling peg |
| D. | moving target |
| Answer» D. moving target | |
| 2329. |
Assume the bid rate of an Australian dollar is £0.40 while the ask rate is £0.42 at Bank Q. Assume the bid rate of an Australian dollar is £0.415 while the ask rate is £0.419 at Bank V. Given this information, what would be your gain if you use £1,000,000 and execute locational arbitrage? That is, how much will you end up with over and above the £1,000,000 you started with? |
| A. | £10,003 |
| B. | £12,063 |
| C. | £14,441 |
| D. | £0 |
| Answer» E. | |
| 2330. |
The relationship between the money rate of return, m, the real rate of return, h, and the inflation rate, i, is expressed in which of the following formulae? |
| A. | h = 1 + i / 1 + m |
| B. | m = h + i |
| C. | (1 + m) = (1 + h)i |
| D. | 1 + h = (1 + m) / (1 + i) |
| Answer» E. | |
| 2331. |
Which one of the following areas is NOT a way companies often respond to exchange raterisk when they alter their product strategy? |
| A. | shifting the firm's manufacturing base to another country |
| B. | the timing of new-product introduction |
| C. | changing the size of its product line |
| D. | product innovation with advanced technology |
| Answer» D. product innovation with advanced technology | |
| 2332. |
An effective way for an MNC to assess its economic exposure is to look at the firm's: |
| A. | income statement. |
| B. | retained earnings. |
| C. | liquidity. |
| D. | level of stockholder's equity. |
| Answer» B. retained earnings. | |
| 2333. |
The burden of a current account deficit would be the least if a nation uses what it borrowsto finance: |
| A. | Unemployment compensation benefits |
| B. | Social Security benefits |
| C. | Expenditures on food and recreation |
| D. | Investment on plant and equipment |
| Answer» E. | |
| 2334. |
What kind of acceptance is known as when the bill is accepted without any condition? |
| A. | Qualified acceptance |
| B. | Conditional acceptance |
| C. | Blank acceptance |
| D. | General acceptance |
| Answer» E. | |
| 2335. |
Which of the following would probably not cause the stock price of a foreign target todecrease? |
| A. | Its expected cash flows decline. |
| B. | General stock market conditions in the foreign country are deteriorating. |
| C. | Investors anticipate that the target will be acquir |
| Answer» D. | |
| 2336. |
Other things being equal, firms from a particular home country will engage in more international acquisitions if they expect foreign currencies to _______ against their home currency, and if their cost of capital is relatively _______. |
| A. | appreciate; low |
| B. | appreciate; high |
| C. | depreciate; high |
| D. | depreciate; low |
| Answer» B. appreciate; high | |
| 2337. |
One argument for why subsidiaries should be wholly-owned by the parent is that: |
| A. | the potential conflict of interests between the MNC's managers and shareholders is avoided. |
| B. | the potential conflict of interests between the MNC's majority shareholders and minority shareholders is avoided. |
| C. | the potential conflict of interests between the MNC's existing creditors is avoid |
| Answer» C. the potential conflict of interests between the MNC's existing creditors is avoid | |
| 2338. |
Consider an exporter that sells its accounts receivables off to another firm that becomes responsible for obtaining cash from the various importers. This reflects: |
| A. | accounts receivable financing. |
| B. | consignment. |
| C. | factoring. |
| D. | a letter of credit. |
| Answer» D. a letter of credit. | |
| 2339. |
Consider an MNC that is exposed to the Taiwan dollar (TWD) and the Egyptian pound (EGP). 25% of the MNC's funds are Taiwan dollars and 75% are pounds. The standard deviation of exchange movements is 7% for Taiwan dollars and 5% forpounds. The correlation coefficient between movements in the value of the Taiwan dollar and the pound is .7. Based on this information, the standard deviation of this two-currency portfolio is approximately: |
| A. | 5.13%. |
| B. | 2.63%. |
| C. | 4.33%. |
| D. | 5.55% |
| Answer» B. 2.63%. | |
| 2340. |
From 1944 to 1971, the exchange rate between any two currencies was typically: |
| A. | fixed within narrow boundaries. |
| B. | floating, but subject to central bank intervention. |
| C. | floating, and not subject to central bank intervention. |
| D. | nonexistent; that is currencies were not exchanged, but gold was used to pay for all foreign transactions. |
| Answer» B. floating, but subject to central bank intervention. | |
| 2341. |
When a foreign subsidiary is not wholly owned by the parent and a foreign project is partially financed with retained earnings of the parent and of the subsidiary, then: |
| A. | the parent's perspective should be used to evaluate a foreign project. |
| B. | the subsidiary's perspective should be used to evaluate a foreign project. |
| C. | the foreign project should enhance the value of both the parent and the subsidiary. |
| D. | none of the above |
| Answer» D. none of the above | |
| 2342. |
In balance of payments accounting, a credit entry for the home country is |
| A. | an international transaction in which foreigners make payments to residents of the home country |
| B. | one in which residents of the home country make payments for foreigners |
| C. | one which results from an import of goods into the home country |
| D. | one which results from an outflow of capital from the home country to a foreign country |
| Answer» B. one in which residents of the home country make payments for foreigners | |
| 2343. |
Consider an exporter that is willing to send goods to the importer without a guaranteed payment by the bank. The bank provides a loan to the exporter that is backed by the value of the exported goods. This reflects:. |
| A. | accounts receivable financing. |
| B. | forfaiting. |
| C. | factoring. |
| D. | a letter of credit. |
| Answer» B. forfaiting. | |
| 2344. |
Which of the following is true of foreign exchange markets? |
| A. | The futures market is mainly used by hedgers while the forward market is mainly used for speculating. |
| B. | The futures market and the forward market are mainly used for hedging. |
| C. | The futures market is mainly used by speculators while the forward market is mainly used for hedging. |
| D. | The futures market and the forward market are mainly used for speculating. |
| Answer» D. The futures market and the forward market are mainly used for speculating. | |
| 2345. |
The capital asset pricing theory is based on the premise that: |
| A. | only unsystematic variability in cash flows is relevant. |
| B. | only systematic variability in cash flows is relevant. |
| C. | both systematic and unsystematic variability in cash flows are relevant. |
| D. | neither systematic nor unsystematic variability in cash flows is relevant. |
| Answer» C. both systematic and unsystematic variability in cash flows are relevant. | |
| 2346. |
To the extent that individual economies are ______ each other, net cash flows from a portfolio of subsidiaries should exhibit ______ variability, which may reduce the probability of bankruptcy. |
| A. | dependent on; less |
| B. | independent of; less |
| C. | dependent on; more |
| D. | independent of; more |
| Answer» D. independent of; more | |
| 2347. |
Who among these can check the price fluctuations in the market by holding back thegoods when prices fall and releasing the goods when prices rise |
| A. | Agent |
| B. | Mercantile agent |
| C. | Wholesaler |
| D. | Retailer |
| Answer» D. Retailer | |
| 2348. |
Purchasing goods from a foreign country is called |
| A. | Import |
| B. | Entrepot |
| C. | Export |
| D. | Re-Export |
| Answer» B. Entrepot | |
| 2349. |
A project may be regarded as high risk project when |
| A. | It has smaller variance of outcome but a high initial investment |
| B. | It has larger variance of outcome and high initial investment |
| C. | It has smaller variance of outcome and a low initial investment |
| D. | It has larger variance of outcome and low initial investment |
| Answer» B. It has larger variance of outcome and high initial investment | |
| 2350. |
The lower a project's beta, the _______ is the project's _________ risk. |
| A. | lower; systematic |
| B. | lower; unsystematic |
| C. | higher; systematic |
| D. | higher; unsystematic |
| Answer» B. lower; unsystematic | |