MCQOPTIONS
Saved Bookmarks
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.
| 2401. |
Concerning a country’s business cycle, rapid growth of production and employment is commonly associated with: |
| A. | Large or growing trade deficits and current account deficits |
| B. | Large or growing trade deficits and current account surpluses |
| C. | Small or shrinking trade deficits and current account deficits |
| D. | Small or shrinking trade deficits and current account surpluses |
| Answer» B. Large or growing trade deficits and current account surpluses | |
| 2402. |
An example of cross-hedging is: |
| A. | find two currencies that are highly positively correlated; match the payables of the one currency to the receivables of the other currency. |
| B. | use the forward market to sell forward whatever currencies you will receive. |
| C. | use the forward market to buy forward whatever currencies you will receive. |
| D. | B and C |
| Answer» B. use the forward market to sell forward whatever currencies you will receive. | |
| 2403. |
Assume the parent of a UK-based MNC plans to completely finance the establishment of its US subsidiary with existing funds from retained earnings in UK operations. According to the text, the discount rate used in the capital budgeting analysis on this project should be most affected by: |
| A. | the cost of borrowing funds in the U.K. |
| B. | the cost of borrowing funds in the U.S. |
| C. | the parent's cost of capital. |
| D. | A and B |
| Answer» D. A and B | |
| 2404. |
The equilibrium exchange rate of pounds is $1.70. At an exchange rate of $1.72 perpound: |
| A. | U.S. demand for pounds would exceed the supply of pounds for sale and there would be a shortage of pounds in the foreign exchange market. |
| B. | U.S. demand for pounds would be less than the supply of pounds for sale and there would be a shortage of pounds in the foreign exchange market. |
| C. | U.S. demand for pounds would exceed the supply of pounds for sale and there would be a surplus of pounds in the foreign exchange market. |
| D. | U.S. demand for pounds would be less than the supply of pounds for sale and there would be a surplus of pounds in the foreign exchange market. |
| Answer» E. | |
| 2405. |
Suppose a deposit in New York earns 6 percent a year and a deposit in London earns 4 percent a year. Interest rate parity holds if the |
| A. | U.S. dollar depreciates by 2 percent a year. |
| B. | U.S. dollar appreciates by 2 percent a year. |
| C. | U.K. pound depreciates by 2 percent a year. |
| D. | None of the above answers is correct because interest rate parity requires that the interest |
| Answer» B. U.S. dollar appreciates by 2 percent a year. | |
| 2406. |
Assume that Patton Co. will receive 100,000 New Zealand dollars (NZ$) in 180 days. Today's spot rate of the NZ$ is £0.35, and the 180-day forward rate is £0.36. A call option on NZ$ exists, with an exercise price of £0.37, a premium of £0.01, and a 180-day expiration date. A put option on NZ$ exists with an exercise price of £0.36, a premium of £0.01, and a 180-day expiration date. Patton Co. has developed the following probability distribution for the spot rate in 180 days: Possible Spot Rate in 90 Days Probability £0.30 10% £0.35 60% £0.40 30% The probability that the forward hedge will result in more U.S. dollars received than the options hedge is _______ (deduct the amount paid for the premium when estimating the U.S. dollars received on the options hedge). |
| A. | 10% |
| B. | 30% |
| C. | 40% |
| D. | 70% |
| Answer» E. | |
| 2407. |
Which one of the following new issues of stock has the greatest probability of lowering its cost of equity capital? |
| A. | Microsoft in the New York markets |
| B. | Toyota on the Tokyo exchange |
| C. | Apple stock on the London exchange |
| D. | all of the above |
| Answer» D. all of the above | |
| 2408. |
Which of the following is true? A. Risk is the probability of an outturn being less than anticipated. B. An objective probability is one which can be established mathematically or from historical data. C. The discount rate may be raised or lowered to allow for the risk of a project, the extent of the risk premium being based on indisputable theory. |
| A. | B |
| B. | C |
| C. | A |
| D. | none |
| Answer» B. C | |
| 2409. |
A macro-assessment of country risk: |
| A. | is adjusted for the particular business of the firm involved. |
| B. | excludes all aspects relevant to a particular firm or project. |
| C. | A and B |
| D. | none of the above |
| Answer» C. A and B | |
| 2410. |
Which of the following is true of options? |
| A. | The writer decides whether the option will be exercised. |
| B. | The writer pays the buyer the option premium. |
| C. | The buyer decides if the option will be exercis |
| Answer» D. | |
| 2411. |
An arbitrageur in foreign exchange is a person who |
| A. | earns illegal profit by manipulating foreign exchange |
| B. | causes differences in exchange rates in different geographic markets |
| C. | simultaneously buys large amounts of a currency in one market and sell it in another market |
| D. | None of the above |
| Answer» D. None of the above | |
| 2412. |
In a forward hedge, if the forward rate is an accurate predictor of the future spot rate,the real cost of hedging payables will be: |
| A. | highly positive. |
| B. | zero. |
| C. | highly negative. |
| D. | none of the above |
| Answer» D. none of the above | |
| 2413. |
The profitability index is: |
| A. | Net present value/Initial outlay. |
| B. | Initial outlay/Gross present value. |
| C. | Gross present volume/Initial outlay. |
| D. | Gross present value/Net present value. |
| Answer» D. Gross present value/Net present value. | |
| 2414. |
A ________ provides a summary of freight charges and conveys title to the merchandise. |
| A. | letter of credit |
| B. | banker's acceptance |
| C. | bill of lading |
| D. | bill of exchange |
| Answer» D. bill of exchange | |
| 2415. |
The eurocurrency market did not develop until the late 1950s because: |
| A. | the countries of the Soviet bloc did not earn dollars in foreign trade until 1958. |
| B. | European currencies were only convertible for non-residents before 1958. |
| C. | the major European economies had not recovered sufficiently from the effects of World War II. |
| D. | US banks were not permitted to open branches outside the USA until 1958. |
| Answer» C. the major European economies had not recovered sufficiently from the effects of World War II. | |
| 2416. |
What is the Bill receivable account? |
| A. | Personal Account |
| B. | Machinery Account |
| C. | Real Account |
| D. | Nominal Account |
| Answer» D. Nominal Account | |
| 2417. |
With limited finance and a number of project proposals at hand, select that package of projects which has |
| A. | The maximum net present value |
| B. | Internal rate of return is greater than cost of capital |
| C. | Profitability index is greater than unity |
| D. | Any of the above |
| Answer» B. Internal rate of return is greater than cost of capital | |
| 2418. |
The effect of a depreciation of the domestic currency on the trade balance is likely to |
| A. | increase it in the short and long runs. |
| B. | decrease it in the short run and increase it in the long run. |
| C. | decrease it in the short and long runs. |
| D. | increase it in the short run and decrease it in the long run. |
| Answer» C. decrease it in the short and long runs. | |
| 2419. |
If purchasing power parity were to hold even in the short run, then: |
| A. | quoted nominal exchange rates should be stable over time. |
| B. | real exchange rates should tend to increase over time; |
| C. | real exchange rates should tend to decrease over time; |
| D. | real exchange rates should be stable over time; |
| Answer» E. | |
| 2420. |
When quantifying country risk: |
| A. | weights should be equally allocated among factors. 186 |
| B. | weights should be assigned to the political and financial factors according to their perceived importance. |
| C. | it is not generally necessary to construct separate ratings for political and financial risk since these will be equally weighed in the final analysis. |
| D. | the derived factors will be identical for all MNCs conducting business in that country. |
| Answer» C. it is not generally necessary to construct separate ratings for political and financial risk since these will be equally weighed in the final analysis. | |
| 2421. |
Spears Co. will receive SF1,000,000 in 30 days. Use the following information to determine the total dollar amount received (after accounting for the option premium) if the firm purchases and exercises a put option: Exercise price = $.61 Premium = $.02 Spot rate = $.60 Expected spot rate in 30 days = $.56 30 day forward rate = $.62 |
| A. | $630,000. |
| B. | $610,000. |
| C. | $600,000. |
| D. | $590,000. |
| Answer» E. | |
| 2422. |
The purchase of a currency put option would be appropriate for which of the following? |
| A. | Investors who expect to buy a foreign bond in one month. |
| B. | Corporations who expect to buy foreign currency to finance foreign subsidiaries. |
| C. | Corporations who expect to collect on a foreign account receivable in one month. |
| D. | All of the above |
| Answer» C. Corporations who expect to collect on a foreign account receivable in one month. | |
| 2423. |
Investment can be defined. |
| A. | Person’s dedication to purchasing a house or flat |
| B. | Use of capital on assets to receive returns |
| C. | Usage of money on a production process of products and services |
| D. | Net additions made to the nation’s capital stocks |
| Answer» C. Usage of money on a production process of products and services | |
| 2424. |
Assume zero transaction costs. If the 90-day forward rate of the euro is an accurate estimateof the spot rate 90 days from now, then the real cost of hedging payables will be: |
| A. | positive. |
| B. | negative. |
| C. | positive if the forward rate exhibits a premium, and negative if the forward rate exhibits a discount. |
| D. | zero. |
| Answer» E. | |
| 2425. |
A UK corporation has purchased currency call options to hedge a 70,000 dollar payable. The premium is £0.015 and the exercise price of the option is £0.54. If the spot rate at the time of maturity is £0.59, what is the total amount paid by the corporation if it acts rationally? |
| A. | £36,750 |
| B. | £1,050 |
| C. | £37,800 |
| D. | £38,850 |
| Answer» E. | |
| 2426. |
Magent ltd. is a UK company that has exposure to the Swiss franc (SF) and Danish kroner (DK). It has net inflows of SF 200 million and net outflows of DK 500 million. The present exchange rate of the SF is about £0.22 while the present exchange rate of the DK is £0.05. Magent ltd. has not hedged these positions. The SF and DK are highly correlated in their movements against the pound. If the pound weakens, then Magent ltd. will: |
| A. | benefit, because the pound value of its SF position exceeds the pound value of its DK position. |
| B. | benefit, because the pound value of its DK position exceeds the pound value of its SF position. |
| C. | be adversely affected, because the pound value of its SF position exceeds the pound value of its DK position. |
| D. | be adversely affected, because the pound value of its DK position exceeds the pound value of its SF position. |
| Answer» B. benefit, because the pound value of its DK position exceeds the pound value of its SF position. | |
| 2427. |
Volusia, plc is a UK-based exporting firm that expects to receive payments denominated in both euros and Canadian dollars in one month. Based on today's spot rates, the pound value of the funds to be received is estimated at £500,000 for the euros and £300,000 for the Canadian dollars. Based on data for the last fifty months, Volusia estimates the standard deviation of monthly percentage changes to be 8 percent for the euro and 3 percent for the Canadian dollar. The correlation coefficient between the euro and the Canadian dollar is 0.30. What is the portfolio standard deviation? |
| A. | 3.00%. |
| B. | 5.44%. |
| C. | 17.98%. |
| D. | none of the above |
| Answer» C. 17.98%. | |
| 2428. |
Operational techniques include: |
| A. | diversification of a company’s operations |
| B. | purchasing of currency options |
| C. | exposure netting |
| D. | both A and C |
| Answer» E. | |
| 2429. |
Which among the following is not concerned with Chambers of Commerce & Industry |
| A. | CII |
| B. | FICCI |
| C. | ICICI |
| D. | ASSOCHAM |
| Answer» D. ASSOCHAM | |
| 2430. |
An international project's NPV is _________ related to the size of the initial investment and_________ related to the project's required rate of return. |
| A. | positively; positively |
| B. | positive; negatively |
| C. | negatively; positively |
| D. | negatively; negatively |
| Answer» E. | |
| 2431. |
Which of the following is not true regarding host government attitudes towards foreigndirect investment (FDI)? |
| A. | Host governments may offer incentives to MNCs in the form of subsidies in certain circumstances. |
| B. | Host governments generally perceive FDI as a remedy to eliminate a country's political problems. |
| C. | The ability of a host government to attract FDI is dependent on the country's markets and resources. |
| D. | Some types of FDI will be more attractive to some governments than to others. |
| Answer» C. The ability of a host government to attract FDI is dependent on the country's markets and resources. | |
| 2432. |
Which of the following is not true regarding letters of credit? |
| A. | They are issued by banks on behalf of the importer promising to pay the exporter. |
| B. | A revocable letter of credit can be cancelled or revoked at any time without prior notification to the beneficiary. |
| C. | They guarantee that the goods shipped are the goods purchas |
| Answer» D. | |
| 2433. |
European currency options can be exercised _______; American currency options canbe exercised _______. |
| A. | any time up to the expiration date; any time up to the expiration date |
| B. | any time up to the expiration date; only on the expiration date |
| C. | only on the expiration date; only on the expiration date |
| D. | only on the expiration date; any time up to the expiration date |
| Answer» E. | |
| 2434. |
All of the following statements are explanations of the reason for short-term capital transfers from Country X to Country Y EXCEPT |
| A. | Political instability in Country X |
| B. | Lower interest rates in Country X |
| C. | Lower interest rates in Country Y |
| D. | Country X has made it known that it is considering devaluation of its currency |
| Answer» D. Country X has made it known that it is considering devaluation of its currency | |
| 2435. |
Which of the following is not true regarding a target's previous cash flows? |
| A. | They may serve as an initial base from which future cash flows may be estimated after accounting for other factors. |
| B. | It may be easier to estimate the cash flows to be generated by a target than to estimate the cash flows to be generated from a new foreign subsidiary. |
| C. | They are always good indicators of future cash flows. |
| D. | All of the above are true. |
| Answer» D. All of the above are true. | |
| 2436. |
Two important practical differences between the monetary/non-monetary method and thecurrent rate method of translation is found in their treatment of: |
| A. | Fixed assets and owner's equity |
| B. | Issued share capital and retained earnings |
| C. | Inventories and fixed assets |
| D. | Monetary assets |
| Answer» D. Monetary assets | |
| 2437. |
The potential effect of exchange rate fluctuations on foreign direct investment is expressedas _____ exposure. |
| A. | translation |
| B. | transaction |
| C. | conversion |
| D. | economic |
| Answer» E. | |
| 2438. |
Assume zero transaction costs. If the 90-day forward rate of the euro is an accurate estimate of the spot rate 90 days from now, then the real cost of hedging payables will be: |
| A. | positive. |
| B. | negative. |
| C. | positive if the forward rate exhibits a premium, and negative if the forward rate exhibits a discount. |
| D. | zero. |
| Answer» E. | |
| 2439. |
Which of the following statements about sensitivity analysis is false? |
| A. | Sensitivity analysis allows the decision maker to direct search effort by highlighting variables which, when they change by a small percentage, have a large impact on NPV. |
| B. | Sensitivity analysis can be used to highlight variables of greatest significance to NPV, which then allows monitoring in the implementation phase and the drawing up of contingency plans. |
| C. | Sensitivity analysis allows decision makers to be more informed about project sensitivities, to know what room they have for judgemental error and decide whether they are prepared to accept the risks. |
| D. | Sensitivity analysis permits the decision maker to change all the variables simultaneously and thereby examine a project in various different circumstance |
| Answer» E. | |
| 2440. |
When computing the weighted average cost of capital, the weighting should be proportionalbased on the ______ rather than the _____ value of the firm. |
| A. | book, market |
| B. | hypothetical, book |
| C. | market, analyst's |
| D. | market, book |
| Answer» E. | |
| 2441. |
A firms expects to receive $20,000 from domestic operations and 20,000 British pounds (£) from a business in England. If the pound's value is $1.25, the expected total dollar cash flows are: |
| A. | $40,000 |
| B. | $36,000 |
| C. | $45,000 |
| D. | $20,000 |
| Answer» D. $20,000 | |
| 2442. |
Which of the following does not obey the mean-variance rule? |
| A. | Project X will be preferred to project Y if the standard deviation on X and Y is the same, but the expected return on Y is lower. |
| B. | Project X will be preferred to project Y if the expected return on X exceeds that of Y and the variance is equal to or less than that of Y. |
| C. | Project X will be preferred to project Y if the expected return on X and Y is the same, but Y has a higher standard deviation. |
| D. | Project X will be preferred to project Y if the variance of X is higher than Y and the expected return is lower than Y. |
| Answer» E. | |
| 2443. |
If the value of exports for a country is $35,500,000 and the value of imports is $35,000,000, the balance of trade can be described as |
| A. | in surplus but unfavorable |
| B. | showing a gain in real goods but in deficit |
| C. | in deficit and favorable |
| D. | in surplus, favorable and +$500,000 |
| Answer» E. | |
| 2444. |
When a firm perceives that a foreign currency is ________, the firm may attempt direct foreign investment in that country, as the initial outlay should be relatively _______. |
| A. | overvalued; high |
| B. | overvalued; low |
| C. | undervalued; high |
| D. | undervalued; low |
| Answer» E. | |
| 2445. |
What is retiring a bill under rebate means? |
| A. | Making a payment of the bill before the due date |
| B. | Dishonoring of a bill |
| C. | Making a payment of the bill after the due date |
| D. | All of the above |
| Answer» B. Dishonoring of a bill | |
| 2446. |
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 | |
| 2447. |
Assume the bid rate of a Swiss franc is £0.42 while the ask rate is £0.45 at Bank X. Assume the bid rate of the Swiss franc is £0.40 while the ask rate is £0.41 at Bank Y. 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. | £24,340 |
| B. | £125,000 |
| C. | £150,000 |
| D. | £12,550 |
| Answer» B. £125,000 | |
| 2448. |
What are the three additional days known as that a drawer gives to the drawee forpayment |
| A. | Conditional days |
| B. | Additional days |
| C. | Days of grace |
| D. | Days of rebate |
| Answer» D. Days of rebate | |
| 2449. |
International Monetary Fund is classified as |
| A. | intergovernmental organization |
| B. | international organization |
| C. | interregional organization |
| D. | One state organization |
| Answer» D. One state organization | |
| 2450. |
A General Agreement on Tariffs and Trade (GATT) accord in 1993 called for: |
| A. | increased trade restrictions outside of North America. |
| Answer» E. | |