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.
| 2451. |
Which of the following is the most likely strategy for a UK firm that will be receiving Swiss francs in the future and desires to avoid exchange rate risk (assume the firm has no offsetting position in francs)? |
| A. | purchase a call option on francs. |
| B. | sell a futures contract on francs. |
| C. | obtain a forward contract to purchase francs forwa |
| Answer» C. obtain a forward contract to purchase francs forwa | |
| 2452. |
Assume that Kramer Co. will receive SF 800,000 in 90 days. Today's spot rate of the Swiss franc is £0.42, and the 90-day forward rate is £0.425. Kramer has developed the following probability distribution for the spot rate in 90 days: Possible Spot Rate in 90 Days Probability £0.41 10% £0.42 20% £0.43 40% £0.44 30% The probability that the forward hedge will result in more dollars received than not hedging is: |
| A. | 10%. |
| B. | 20%. |
| C. | 30%. |
| D. | 50%. |
| Answer» D. 50%. | |
| 2453. |
As foreign exchange activity has grown: |
| A. | central bank intervention has become more effective. |
| B. | central bank intervention has become more frequent. |
| C. | central bank intervention has become less effective. |
| D. | none of the above |
| Answer» D. none of the above | |
| 2454. |
The concept of Financial management is. |
| A. | Profit maximization |
| B. | All features of obtaining and using financial resources for company operations |
| C. | Organization of funds |
| D. | Effective Management of every company |
| Answer» C. Organization of funds | |
| 2455. |
According to the text: |
| A. | the cost of debt for each country is somewhat stable over time. |
| B. | the cost of debt for countries change over time, and these changes are negatively correlated. |
| C. | the cost of debt for countries change over time, and these changes are positively correlat |
| Answer» D. | |
| 2456. |
When an individual or firm in a particular country requests that a bank sell foreign exchange, the bank will probably |
| A. | call a foreign bank and arrange a purchase. |
| B. | call the central bank and arrange a purchase. |
| C. | call another bank customer with foreign exchange holdings. |
| D. | call another domestic bank and arrange a purchase. |
| Answer» B. call the central bank and arrange a purchase. | |
| 2457. |
Over time, international trade (exports plus imports) as a percentage of GDP has: |
| A. | increased for most major countries. |
| B. | decreased for most major countries. |
| C. | stayed about constant for most major countries. |
| D. | increased for about half the major countries and decreased for the others. |
| Answer» E. | |
| 2458. |
When the drawee signs the bill, it is considered as |
| A. | Accepted |
| B. | Retired |
| C. | Renewed |
| D. | Endorsed |
| Answer» B. Retired | |
| 2459. |
When the bill is noted from the notary public, it is known as? |
| A. | Noting |
| B. | Discounting |
| C. | Accepting |
| D. | None of the above |
| Answer» B. Discounting | |
| 2460. |
Recently, the UK experienced an annual balance of trade representing a __________. |
| A. | large surplus (exceeding £100 billion) |
| B. | level of zero |
| C. | small surplus |
| D. | deficit |
| Answer» E. | |
| 2461. |
If countries are highly influential upon each other, the correlations of their economic growth levels would likely be __________. A firm would benefit __________ by diversifying sales among these countries relative to another set of countries that were not influential upon each other. |
| A. | high and positive; more |
| B. | high and positive; less |
| C. | close to zero; more |
| D. | close to zero; less |
| Answer» D. close to zero; less | |
| 2462. |
Which of the following are true regarding the options markets? |
| A. | Hedgers and speculators both attempt to lower risk. |
| B. | Hedgers attempt to lower risk, while speculators attempt to make riskless profits. |
| C. | Hedgers and speculators are both necessary in order for the market to be liqu |
| Answer» D. | |
| 2463. |
Assume that Baps Corporation is considering the establishment of a subsidiary in Norway. The initial investment required by the parent is $5,000,000. If the project is undertaken, Baps would terminate the project after four years. Baps' cost of capital is 13%, and the project is of the same risk as Baps' existing projects. All cash flows generated from the project will be remitted to the parent at the end of each year. Listed below are the estimated cash flows the Norwegian subsidiary will generate over the project's lifetime in Norwegian kroner (NOK): Year 1 Year 2 Year 3 Year 4 NOK 10,000,000 NOK 15,000,000 NOK 17,000,000 NOK 20,000,000 The current exchange rate of the Norwegian kroner is $.135. Baps' exchange rate forecast for the Norwegian kroner over the project's lifetime is listed below: Year 1 Year 2 Year 3 Year 4 $.13 $.14 $.12 $.15 Baps is also uncertain regarding the cost of capital. Recently, Norway has been involved in some political turmoil. What is the net |
| A. | -$17,602.62. |
| B. | $8,000,000. |
| C. | $1,048,829. |
| D. | $645,147. |
| Answer» E. | |
| 2464. |
A firm considers an exporting project and will invoice the exports in pounds. The expected cash flows in pounds would be more difficult if the currency of the foreign country is ________. |
| A. | fixed |
| B. | volatile |
| C. | stable |
| D. | none of the above, as the firm is not exposed |
| Answer» C. stable | |
| 2465. |
Who among the following appoints the agent |
| A. | Principal |
| B. | Retailer |
| C. | Manufacturer |
| D. | Wholesaler |
| Answer» B. Retailer | |
| 2466. |
These are agents whose function is to bring the buyer and the seller into contact. |
| A. | Commission agent |
| B. | Selling agent |
| C. | Broker |
| D. | Stockist |
| Answer» D. Stockist | |
| 2467. |
To force the value of the dollar to appreciate against the pound, the Federal Reserve should: |
| A. | sell pounds for dollars in the foreign exchange market and the Bank of England should sell pounds for dollars in the foreign exchange market. |
| B. | sell dollars for pounds in the foreign exchange market and the Bank of England should sell pounds for dollars in the foreign exchange market. |
| C. | sell dollars for pounds in the foreign exchange market and the Bank of England should not intervene. |
| D. | sell dollars for pounds in the foreign exchange market and the Bank of England should sell dollars for pounds in the foreign exchange market. |
| Answer» B. sell dollars for pounds in the foreign exchange market and the Bank of England should sell pounds for dollars in the foreign exchange market. | |
| 2468. |
Assume that Baps Corporation is considering the establishment of a subsidiary in Norway. The initial investment required by the parent is $5,000,000. If the project is undertaken, Baps would terminate the project after four years. Baps' cost of capital is 13%, and the project is of the same risk as Baps' existing projects. All cash flows generated from the project will be remitted to the parent at the end of each year. Listed below are the estimated cash flows the Norwegian subsidiary will generate over the project's lifetime in Norwegian kroner (NOK): Year 1 NOK 10,000,000 Year 2 NOK 15,000,000 Year 3 NOK 17,000,000 Year 4 NOK 20,000,000 The current exchange rate of the Norwegian kroner is $.135. Baps' exchange rate forecast for the Norwegian kroner over the project's lifetime is listed below: Year 1 $.13 Year 2 $.14 Year 3 $.12 Year 4 $.15 Baps is also uncertain regarding the cost of capital. Recently, Norway has been involved in some political turmoil. What is the net p |
| A. | -$17,602.62. |
| B. | $8,000,000 |
| C. | $1,048,829. |
| D. | $645,147. |
| Answer» E. | |
| 2469. |
All else equal and under a system of floating exchange rates, if a country enters a periodof exceptionally strong growth, |
| A. | the pressure on its currency is to revalue. |
| B. | the pressure on its currency is to devalue. |
| C. | the pressure on its currency is to depreciate. |
| D. | the pressure on its currency is to appreciate. |
| Answer» B. the pressure on its currency is to devalue. | |
| 2470. |
Theory which considers change in exchange rate with fluctuations in inflation rates isclassified as |
| A. | liquidated power parity |
| B. | purchasing power parity |
| C. | selling power parity |
| D. | volatile power parity |
| Answer» C. selling power parity | |
| 2471. |
The currency of country X is pegged to the currency of country Y. Assume that county Y'scurrency depreciates against the currency of country Z. It is likely that country X will export _______ to country Z and import _______ from country Z. |
| A. | more; more |
| B. | more; less |
| C. | less; less |
| D. | less; more |
| Answer» D. less; more | |
| 2472. |
Subsidiary A of Mega plc has net inflows in Australian dollars of A$1,000,000, while Subsidiary B has net outflows in Australian dollars of A$1,500,000. The expected exchange rate of the Australian dollar is £0.30. What is the net inflow or outflow as measured in pounds? |
| A. | £150,000 outflow. |
| B. | £150,000 inflow |
| C. | £1,666,000 inflow. |
| D. | £1,666,000 outflow. |
| Answer» B. £150,000 inflow | |
| 2473. |
Based on the text, it should be obvious that markets are__________ in reality, and consequently, monopolistic advantages _________ be exploited. |
| A. | Perfect; may possibly |
| B. | Perfect; cannot |
| C. | Imperfect; may possibly |
| D. | Imperfect; cannot |
| Answer» D. Imperfect; cannot | |
| 2474. |
Which of the following best explains the fact that interest rates on the euro are lower than those on the pound? Inflationary expectations are higher in the UK than in the eurozone. |
| A. | British markets are offshore from mainland Europe. |
| B. | Unemployment is higher in the eurozone than in the UK. |
| C. | Bond prices are lower in the UK than in the eurozone. |
| D. | The euro is a weaker currency than sterling. |
| Answer» B. Unemployment is higher in the eurozone than in the UK. | |
| 2475. |
This retail business acts as a universal supplier of a wide variety of products. |
| A. | Multiple shop |
| B. | Mail order Business |
| C. | Tele-shopping |
| D. | Departmental store |
| Answer» E. | |
| 2476. |
A bill of exchange includes. |
| A. | An order to pay |
| B. | A request to pay |
| C. | A promise to pay |
| D. | All the above |
| Answer» B. A request to pay | |
| 2477. |
If inflation in New Zealand suddenly increased while euro area inflation stayed the same, there would be: |
| A. | an inward shift in the demand schedule for NZ$ and an outward shift in the supply schedule for NZ$. |
| B. | an outward shift in the demand schedule for NZ$ and an inward shift in the supply schedule for NZ$. |
| C. | an outward shift in the demand schedule for NZ$ and an outward shift in the supply schedule for NZ$. |
| D. | an inward shift in the demand schedule for NZ$ and an inward shift in the supply schedule for NZ$. |
| Answer» B. an outward shift in the demand schedule for NZ$ and an inward shift in the supply schedule for NZ$. | |
| 2478. |
The biggest disadvantage of a fixed exchange rate is the |
| A. | increased probability of high inflation. |
| B. | tradeoff between supporting the exchange rate and adjusting the trade balance. |
| C. | tradeoff between supporting the exchange rate and maintaining full employment. |
| D. | increased probability of a trade deficit. |
| Answer» B. tradeoff between supporting the exchange rate and adjusting the trade balance. | |
| 2479. |
Assume the following information regarding UK and European annualized interest rates: Currency Lending Rate Borrowing Rate UK pound (£) 6.73% 7.20% Euro (€) 6.80% 7.28% Milly Bank can borrow either £20 million or €20 million. The current spot rate of the euro is £0.75. Furthermore, Milly Bank expects the spot rate of the euro to be £0.76 in 90 days. What is Milly Bank’s pound profit from speculating if the spot rate of the euro is indeed £0.76 in 90 days? |
| A. | £251,200 |
| B. | £251,386 |
| C. | £541,324 |
| D. | £561,813 |
| Answer» B. £251,386 | |
| 2480. |
The exchange rate mechanism (ERM) crisis in 1992 represents the __________ in German interest rates that caused other European interest rates to __________, and resulted in less aggregate spending. |
| A. | increase; increase |
| B. | increase; decrease |
| C. | decrease; decrease |
| D. | decrease; increase |
| Answer» B. increase; decrease | |
| 2481. |
The impact of blocked funds on the net present value of a foreign project will be greater ifinterest rates are _______ in the host country and there are _______ investment opportunities in the host country. |
| A. | very high; limited |
| B. | very low; limited |
| C. | very low; numerous. |
| D. | very high; numerous |
| Answer» C. very low; numerous. | |
| 2482. |
If a country experiences high inflation relative to the UK, its exports to the UK should _______________, its imports should ___________, and there is __________ pressure on its currency's equilibrium value. |
| A. | decrease; increase; upward |
| B. | decrease; decrease; upward |
| C. | increase; decrease; downward |
| D. | decrease; increase; downward |
| Answer» D. decrease; increase; downward | |
| 2483. |
Assume that Parker Company will receive SF 200,000 in 360 days. Assume the following interest rates: UK Switzerland 360-day borrowing rate 7% 5% 360-day deposit rate 6% 4% Assume the forward rate of the Swiss franc is £0.44 and the spot rate of the Swiss franc is £0.42. If Parker Company uses a money market hedge, what equivalent amount could it receive in 360 days? |
| A. | £101,904 |
| B. | £101,923 |
| C. | £88,769 |
| D. | £84,919 |
| Answer» E. | |
| 2484. |
Assume the Canadian dollar is equal to £0.51 and the Peruvian Sol is equal to £0.16. The value of the Peruvian Sol in Canadian dollars is: |
| A. | about .3621 Canadian dollars. |
| B. | about 2.36 Canadian dollars. |
| C. | about .3137 Canadian dollars. |
| D. | about 2.51 Canadian dollars. |
| Answer» D. about 2.51 Canadian dollars. | |
| 2485. |
Diz ltd. is a UK-based MNC with net cash inflows of euros and net cash inflows of Swiss francs. These two currencies are highly correlated in their movements against the dollar. Yanta ltd is a UK-based MNC that has the same level of net cash flows in these currencies as Diz ltd except that its euros represent net cash outflows. Which firm has a higher exposure to exchange rate risk? |
| A. | Diz ltd |
| B. | Yanta ltd |
| C. | the firms have about the same level of exposure. |
| D. | neither firm has any exposure. |
| Answer» B. Yanta ltd | |
| 2486. |
Translation exposure reflects: |
| A. | the exposure of a firm's ongoing international transactions to exchange rate fluctuations. |
| B. | the exposure of a firm's local currency value to transactions between foreign exchange traders. |
| C. | the exposure of a firm's financial statements to exchange rate fluctuations. |
| D. | the exposure of a firm's cash flows to exchange rate fluctuations. |
| Answer» D. the exposure of a firm's cash flows to exchange rate fluctuations. | |
| 2487. |
Which of the following is not a forecasting technique mentioned in your text? |
| A. | accounting-based forecasting. |
| B. | fundamental forecasting. |
| C. | technical forecasting. |
| D. | market-based forecasting. |
| Answer» B. fundamental forecasting. | |
| 2488. |
A firm that buys foreign exchange in order to take advantage of higher foreign interestrates is |
| A. | speculating. |
| B. | demonstrating purchasing power parity. |
| C. | engaging in interest rate arbitrage. |
| D. | responding to fluctuations in the business cycle. |
| Answer» C. engaging in interest rate arbitrage. | |
| 2489. |
The euro is: |
| A. | a currency, the value of which is determined by demand and supply. |
| B. | the currency of EU member countries. |
| C. | a weighted average of the currencies of EU member countries. |
| D. | a currency that is only traded offshore. |
| Answer» B. the currency of EU member countries. | |
| 2490. |
Assume a UK firm uses a forward contract to hedge all of its translation exposure. Also assume that the firm underestimated what its foreign earnings would be. Assume that the foreign currency depreciated over the year. The firm would generate a translation _______, which would be _______ than the gain generated by the forward contract. |
| A. | loss; smaller |
| B. | gain; larger |
| C. | loss; larger |
| D. | gain; smaller |
| Answer» D. gain; smaller | |
| 2491. |
Multinational firms face exposure to many different types of international risk. Which of the following is not a type of exposure? |
| A. | diversifiable risk |
| B. | political risk |
| C. | foreign economies |
| D. | exchange rate movements |
| Answer» D. exchange rate movements | |
| 2492. |
A eurocurrency is: |
| A. | a bank deposit held in a country that does not issue that currency in which the deposit is denominated. |
| B. | the currency of European Economic and Monetary Union - called the 'euro' for short. |
| C. | a bank deposit in a non-European currency held in Europe. |
| D. | a bank deposit in a European currency held outside of Europe. the currency of the European Union. |
| Answer» D. a bank deposit in a European currency held outside of Europe. the currency of the European Union. | |
| 2493. |
Who draws a bill of exchange? |
| A. | Creditor |
| B. | Debtor |
| C. | Holder |
| D. | None of the above |
| Answer» D. None of the above | |
| 2494. |
The spot rate for the Singapore dollar is £0.320. The 30-day forward rate is £0.325.The forward rate contains an annualized __________ of ___________%. |
| A. | discount; -18.75 |
| B. | premium; 18.75 |
| C. | discount; -18.46 |
| D. | premium; 18.46 |
| Answer» C. discount; -18.46 | |
| 2495. |
MNC Corporation has a beta of 2.0. The risk-free rate of interest is 5%, and the return on the stock market overall is expected to be 13%. What is the required rate of return on MNC stock? |
| A. | 21%. |
| B. | 41%. |
| C. | 16%. |
| D. | 13%. |
| Answer» B. 41%. | |
| 2496. |
Based on interest rate parity, the larger the degree by which the foreign interest rate exceeds the UK interest rate, the: |
| A. | larger will be the forward discount of the foreign currency. |
| B. | larger will be the forward premium of the foreign currency. |
| C. | smaller will be the forward premium of the foreign currency. |
| D. | smaller will be the forward discount of the foreign currency. |
| Answer» B. larger will be the forward premium of the foreign currency. | |
| 2497. |
Conditional currency options are: |
| A. | options that do not require premiums. |
| B. | options where the premiums are canceled if a trigger level is reached. |
| C. | options that allow the buyer to decide what currency the option will be settled in. |
| D. | none of the above |
| Answer» C. options that allow the buyer to decide what currency the option will be settled in. | |
| 2498. |
CAPM stands for. |
| A. | Capital asset pricing model. |
| B. | Capital amount printing model. |
| C. | Capital amount pricing model. |
| D. | Capital asset printing model. |
| Answer» B. Capital amount printing model. | |
| 2499. |
All else equal, if Euro Area raises its interest rates, |
| A. | the dollar depreciates. |
| B. | the U.S. demand for euros increases. |
| C. | the Euro Area supply of euros increases. |
| D. | Both A and B. |
| Answer» C. the Euro Area supply of euros increases. | |
| 2500. |
When the foreign exchange market opens in the UK each morning, the opening exchange rate quotations will be based on the: |
| A. | closing prices in the U.S. during the previous day. |
| B. | closing prices in Canada during the previous day. |
| C. | prevailing prices in locations where the foreign exchange markets have been open. |
| D. | officially set by central banks before the U.S. market opens. |
| Answer» D. officially set by central banks before the U.S. market opens. | |