INTERNATIONAL FINANCE EXAMINATION QUESTIOONS AND CORRECT ANSWER WITH EXPLANATION GRADED A+ STUDY GUIDE

INTERNATIONAL FINANCE EXAMINATION QUESTIOONS
AND CORRECT ANSWER WITH EXPLANATION GRADED
A+ STUDY GUIDE SOUTHERN NEW HAMPSHIRE
UNIVERSITY
1. International finance deals with:
A. Financial transactions across countries
B. Local farming
C. Domestic marketing only
D. Manufacturing
Answer: A
Rationale: It focuses on cross-border financial flows.

2. Exchange rate is:
A. Price of one currency in terms of another
B. Interest rate
C. Tax rate
D. Inflation rate
Answer: A
Rationale: Currency valuation measure.

3. Foreign exchange market is where:
A. Currencies are traded
B. Stocks are manufactured
C. Goods are produced
D. Taxes are collected
Answer: A
Rationale: Currency trading occurs here.

4. Appreciation of currency means:
A. Increase in value
B. Decrease in value
C. No change
D. Inflation
Answer: A
Rationale: Currency strengthens.

,5. Depreciation means:
A. Decrease in currency value
B. Increase in value
C. Stable value
D. Profit increase
Answer: A
Rationale: Currency weakens.

6. Devaluation is:
A. Official reduction in currency value
B. Market appreciation
C. Inflation control
D. Interest increase
Answer: A
Rationale: Government action.

7. Revaluation is:
A. Official increase in currency value
B. Market depreciation
C. Loan increase
D. Tax reduction
Answer: A
Rationale: Currency strengthening by authorities.

8. Spot exchange rate is:
A. Current exchange rate
B. Future rate
C. Loan rate
D. Inflation rate
Answer: A
Rationale: Immediate settlement.

9. Forward exchange rate is:
A. Agreed future exchange rate
B. Current rate
C. Loan rate
D. Tax rate
Answer: A
Rationale: Future contract rate.

, 10. Exchange rate risk is:
A. Loss due to currency fluctuations
B. Interest risk
C. Credit risk
D. Inflation risk
Answer: A
Rationale: Currency volatility.

11. Hedging in forex is used to:
A. Reduce exchange rate risk
B. Increase risk
C. Increase taxes
D. Avoid trading
Answer: A
Rationale: Risk management tool.

12. Arbitrage in forex is:
A. Risk-free profit from price differences
B. Loss making
C. Random trading
D. Saving money
Answer: A
Rationale: Exploiting price gaps.

13. Balance of payments records:
A. All international transactions
B. Only imports
C. Only exports
D. Only loans
Answer: A
Rationale: Comprehensive account.

14. Current account includes:
A. Trade in goods and services
B. Capital investments only
C. Loans only
D. Bank reserves only
Answer: A
Rationale: Trade and income flows.