International Business and Money Summary (all-
inclusive) Questions and Answers 2023
The extent to which the income from individual transactions is affected by fluctuations in foreign
exchange values is known as _______ exposure. - -transaction
-Assume that the interest rate on borrowing in japan is 1 percent, while the interest rate on
deposits in Australian banks is 5 percent. A trader borrows in yen and then converts the money
into Australian dollars and deposits it in an Australian bank to make 4 percent margin. Which
type of trade is this an example of? - -Carry Trade
-Which of the following is one of the mot important trading centers in the foreign exchange
market? - -Zurich
-An ___ is one in which prices do not reflect all available information. - -inefficient market
-Which of the following refers to the simultaneous purchase and sale of a given amount of
foreign exchange for two different value dates? - -currency swap
-Purchasing power parity theory states that given relatively efficient markets, the price of a
"basket of goods" should be - -roughly equivalent in each country
-The _____ is the rate at which a foreign exchange dealer converts one currency into another
currency on a particular day. - -spot exchange rate
-The ____ school of thought argues that forward exchange rates do the best possible job of
forecasting future spot rates and therefore investing in forecasting services would be a waste of
money. - -efficient market
-An American company today invests some of its spare cash in a Hungarian money market
account that will earn 8 percent for two months. - -The dollar appreciates against the Hungarian
forint
-Which of the following involves borrowing in one currency where interest rates are low, and
then using the proceeds to invest in another currency where the interest rates are high. - -carry
trade
-Governments allows convertibility to preserve their foreign exchange reserves. - -False
-Currency fluctuations can make seemingly profitable trade and investment deals unprofitable
and vice versa. - -True
-Transaction exposure includes obligations for the purchase or sale of goods and services at
previously agreed prices and the borrowing or lending off funds in foreign currencies. - -True
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-The efficient market school argues that investing in exchange rate forecasting services would be
a waste of money. - -True
-The most important trading centers for currencies are Zurich, Frankfurt, Paris, Hong Kong, and
Sydney. - -False
-To minimize the risk of an unanticipated change in exchange rates, a company can protect itself
by entering into a forward exchange contract. - -True
-If the spot rate is $1 = $120, and the 30-day forward rate is $1 = x130, the dollar is selling at a
discount in the forward market. - -False
-Carry trade is non speculative in nature - -False
-The impact of currency exchange rates on the reported financial statements of a company is
called economic exposure. - -False
-The International Fisher Effect states that for any two countries, the spot exchange rate should
change in an equal amount but in the opposite direction to the difference in nominal interest rates
between the two countries. - -True
-Arbitrage opportunities in foreign exchange markets tend to be small and disappear quickly. - -
True
-When Krista traveled from the US to England, she had to change her money from dollars into
pounds. Krista was participating in the currency exchange market. - -True
-If the spot exchange rate is 1 = $1.50 when the market opens, and 1 = $1.48 at the end of the
day, the pound was appreciated, and the dollar has depreciated. - -False
-The PPP theory is a strong predictor of short-run movements in exchange rates covering time
spans of five years or less. - -False
-If the demand for the dollars outstrips its supply and if the supply of Japanese yen is greater than
the demand for it, what will happen? - -The dollar will appreciate against the yen.
-The International Fisher Effect has - -not proven to be a good predictor of short-run changes in
sport exchange rates
-It follows from the Fisher Effect that if the real interest rate is the same worldwide, any
difference in interest rates between countries reflects differing expectations about - -inflation
rates
-When two parties agree to exchange currency and execute the deal immediately, the transaction
is a - -spot exchangePowered by TCPDF (www.tcpdf.org)
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inclusive) Questions and Answers 2023
The extent to which the income from individual transactions is affected by fluctuations in foreign
exchange values is known as _______ exposure. - -transaction
-Assume that the interest rate on borrowing in japan is 1 percent, while the interest rate on
deposits in Australian banks is 5 percent. A trader borrows in yen and then converts the money
into Australian dollars and deposits it in an Australian bank to make 4 percent margin. Which
type of trade is this an example of? - -Carry Trade
-Which of the following is one of the mot important trading centers in the foreign exchange
market? - -Zurich
-An ___ is one in which prices do not reflect all available information. - -inefficient market
-Which of the following refers to the simultaneous purchase and sale of a given amount of
foreign exchange for two different value dates? - -currency swap
-Purchasing power parity theory states that given relatively efficient markets, the price of a
"basket of goods" should be - -roughly equivalent in each country
-The _____ is the rate at which a foreign exchange dealer converts one currency into another
currency on a particular day. - -spot exchange rate
-The ____ school of thought argues that forward exchange rates do the best possible job of
forecasting future spot rates and therefore investing in forecasting services would be a waste of
money. - -efficient market
-An American company today invests some of its spare cash in a Hungarian money market
account that will earn 8 percent for two months. - -The dollar appreciates against the Hungarian
forint
-Which of the following involves borrowing in one currency where interest rates are low, and
then using the proceeds to invest in another currency where the interest rates are high. - -carry
trade
-Governments allows convertibility to preserve their foreign exchange reserves. - -False
-Currency fluctuations can make seemingly profitable trade and investment deals unprofitable
and vice versa. - -True
-Transaction exposure includes obligations for the purchase or sale of goods and services at
previously agreed prices and the borrowing or lending off funds in foreign currencies. - -True
1 / 2
-The efficient market school argues that investing in exchange rate forecasting services would be
a waste of money. - -True
-The most important trading centers for currencies are Zurich, Frankfurt, Paris, Hong Kong, and
Sydney. - -False
-To minimize the risk of an unanticipated change in exchange rates, a company can protect itself
by entering into a forward exchange contract. - -True
-If the spot rate is $1 = $120, and the 30-day forward rate is $1 = x130, the dollar is selling at a
discount in the forward market. - -False
-Carry trade is non speculative in nature - -False
-The impact of currency exchange rates on the reported financial statements of a company is
called economic exposure. - -False
-The International Fisher Effect states that for any two countries, the spot exchange rate should
change in an equal amount but in the opposite direction to the difference in nominal interest rates
between the two countries. - -True
-Arbitrage opportunities in foreign exchange markets tend to be small and disappear quickly. - -
True
-When Krista traveled from the US to England, she had to change her money from dollars into
pounds. Krista was participating in the currency exchange market. - -True
-If the spot exchange rate is 1 = $1.50 when the market opens, and 1 = $1.48 at the end of the
day, the pound was appreciated, and the dollar has depreciated. - -False
-The PPP theory is a strong predictor of short-run movements in exchange rates covering time
spans of five years or less. - -False
-If the demand for the dollars outstrips its supply and if the supply of Japanese yen is greater than
the demand for it, what will happen? - -The dollar will appreciate against the yen.
-The International Fisher Effect has - -not proven to be a good predictor of short-run changes in
sport exchange rates
-It follows from the Fisher Effect that if the real interest rate is the same worldwide, any
difference in interest rates between countries reflects differing expectations about - -inflation
rates
-When two parties agree to exchange currency and execute the deal immediately, the transaction
is a - -spot exchangePowered by TCPDF (www.tcpdf.org)
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