Question 1

Canada is the world's major importer and exporter, and has by far the greatest investment in foreign countries.

Accepted Answer

A) True 
 B)False

Question 2

Due to such problems as the accumulated federal debt and the lingering balance of payments deficit, interest rates in Canada have remained high to satisfy foreign investors.

Accepted Answer

A) True 
 B)False

Question 3

The purchasing power parity theory of exchange rates suggests that exchange rates will adjust until the cost of equivalent goods is approximately equal in each country.

Accepted Answer

A) True 
 B)False

Question 4

A long-term debt issue sold simultaneously in several different national capital markets, but denominated in a currency different than the nation of that issue is called a(an)

Accepted Answer

A)   world bond.
B)   international capital bond.
C)   floating bond.
D)   eurobond.E) All of the above
F) B) and D) D

Question 5

A particular country's pattern of importing more than is being exported is likely to

Accepted Answer

A)   depress that country's currency.
B)   depress other countries' currencies.
C)   increase the value of that country's currency.
D)   more than one of the other answers is trueE) A) and B)
F) A) and C)

Question 6

Eurodollars are

Accepted Answer

A)   Canadian dollars deposited in foreign banks.
B)   foreign dollars deposited in Canadian banks.
C)   investments of common market countries.
D)   none of the other answers are correctE) C) and D)
F) A) and C)

Question 7

In recent years, fully owned foreign subsidiaries are experiencing increased political pressure from foreign governments.

Accepted Answer

A) True 
 B)False

Question 8

You are leaving Mexico and have 3,500 pesos to change into dollars. The exchange rate is now 10 pesos to the dollar. How many dollars will you receive?

Accepted Answer

A)   $ 35.
B)   $ 350.00
C)   $150.00
D)   Not enough information to tellE) All of the above
F) None of the above

Question 9

When a bank issues a letter of credit the bank absorbs ALL of the credit risk to the exporter.

Accepted Answer

A) True 
 B)False

Question 10

A portfolio of international stocks in comparison to purely Canadian stocks generally shows

Accepted Answer

A)   lower percentage risk for a given number of stocks.
B)   higher percentage risk for a given number of stocks.
C)   the same percentage risk for a given number of stocks.
D)   lower percentage return for a given number of stocks.E) A) and B)
F) A) and D)

Question 11

The most widely used currency in the Eurobond market is the euro.

Accepted Answer

A) True 
 B)False

Question 12

Currency exchange rates may be either floating or fixed.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following statements about foreign affiliates is (are)  true?

Accepted Answer

A)   in general, foreign affiliates are more profitable than domestic businesses
B)   foreign affiliates usually lower the portfolio risk of the parent company
C)   foreign affiliates may have a significant positive impact on the host company's economic growth, employment, trade, and balance of payments
D)   all of the other answers are trueE) B) and C)
F) None of the above

Question 14

Which of the following kinds of risk are NOT uniquely associated with MNCs?

Accepted Answer

A)   transaction risk.
B)   business risk
C)   political risk
D)   translation riskE) None of the above
F) All of the above

Question 15

Assume that you had dollar quotes for the Japanese yen and the British pound. If you want to know the yen/pound exchange rate, you would rely on

Accepted Answer

A)   forward rates.
B)   cross rates.
C)   spot rates.
D)   hedge ratios.E) B) and C)
F) C) and D)

Question 16

The Export Development Corporation (EDC)

Accepted Answer

A)   loans money to multinational firms.
B)   does feasibility studies for multinational firms.
C)   sells insurance policies to qualified multinational firms.
D)   none of the other answers are correctE) B) and C)
F) A) and C) C

Question 17

Investors and firms who diversify their Canadian portfolios by buying foreign stocks or investing in foreign subsidiaries take on a much higher level of risk than if they had invested in domestic stocks or companies.

Accepted Answer

A) True 
 B)False

Question 18

A particular country's pattern of exporting more than is being imported is likely to

Accepted Answer

A)   have no effect on that country's currency.
B)   depress other countries' currencies.
C)   decrease the value of that country's currency.
D)   more than one of the other answers is trueE) C) and D)
F) A) and D) B

Question 19

Which of the following factors will not increase the value of a currency in foreign markets?

Accepted Answer

A)   high interest rates
B)   high inflation
C)   positive balance of payments
D)   strong stock market rallyE) C) and D)
F) A) and D)

Question 20

Multinational corporations may take several forms. An exporter could be described as

Accepted Answer

A)   an MNC which produces a product within its own borders, but sells in a foreign market.
B)   the least risky political arrangement.
C)   an MNC willing to commit itself to a long-term foreign investment.
D)   more than one of the other answers are trueE) B) and C)
F) B) and D)

Exam 21: International Financial Management

Canada is the world's major importer and exporter, and has by far the greatest investment in foreign countries.

Correct AnswerverifiedShow Answer

Due to such problems as the accumulated federal debt and the lingering balance of payments deficit, interest rates in Canada have remained high to satisfy foreign investors.

Correct AnswerverifiedShow Answer

The purchasing power parity theory of exchange rates suggests that exchange rates will adjust until the cost of equivalent goods is approximately equal in each country.

Correct AnswerverifiedShow Answer

A long-term debt issue sold simultaneously in several different national capital markets, but denominated in a currency different than the nation of that issue is called a(an)

Correct AnswerverifiedD

A particular country's pattern of importing more than is being exported is likely to

Correct AnswerverifiedShow Answer

Eurodollars are

Correct AnswerverifiedShow Answer

In recent years, fully owned foreign subsidiaries are experiencing increased political pressure from foreign governments.

Correct AnswerverifiedShow Answer

You are leaving Mexico and have 3,500 pesos to change into dollars. The exchange rate is now 10 pesos to the dollar. How many dollars will you receive?

Correct AnswerverifiedShow Answer

When a bank issues a letter of credit the bank absorbs ALL of the credit risk to the exporter.

Correct AnswerverifiedShow Answer

A portfolio of international stocks in comparison to purely Canadian stocks generally shows

Correct AnswerverifiedShow Answer

The most widely used currency in the Eurobond market is the euro.

Correct AnswerverifiedShow Answer

Currency exchange rates may be either floating or fixed.

Correct AnswerverifiedShow Answer

Which of the following statements about foreign affiliates is (are) true?

Correct AnswerverifiedShow Answer

Which of the following kinds of risk are NOT uniquely associated with MNCs?

Correct AnswerverifiedShow Answer

Assume that you had dollar quotes for the Japanese yen and the British pound. If you want to know the yen/pound exchange rate, you would rely on

Correct AnswerverifiedShow Answer

The Export Development Corporation (EDC)

Correct AnswerverifiedC

Investors and firms who diversify their Canadian portfolios by buying foreign stocks or investing in foreign subsidiaries take on a much higher level of risk than if they had invested in domestic stocks or companies.

Correct AnswerverifiedShow Answer

A particular country's pattern of exporting more than is being imported is likely to

Correct AnswerverifiedB

Which of the following factors will not increase the value of a currency in foreign markets?

Correct AnswerverifiedShow Answer

Multinational corporations may take several forms. An exporter could be described as

Correct AnswerverifiedShow Answer

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D

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C

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B

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