Ch.21 Quiz

Instructions
Read the questions carefully.

This assessment is worth 100 points.

  1. The European Common Market was formed to promote better trade relations among major industrial nations of the world.   (5 points)

      
      

  2. The U.S. is the world's major importer and exporter, and has by far the greatest investment in foreign countries.   (5 points)

      
      

  3. An exporter is able to satisfy foreign demand for a product while avoiding long-term investment although this method is riskier than other alternatives.   (5 points)

      
      

  4. Currency exchange rates may be either floating or fixed.   (5 points)

      
      

  5. In a free market, the exchange rate between two currencies is determined by the supply of and demand for those currencies with the influence of the central bank.   (5 points)

      
      

  6. The Purchasing Power Parity Theory states that currency exchange rates tend to vary inversely with their respective purchasing powers in order to provide similar purchasing powers.   (5 points)

      
      

  7. Balance of payments is a method of keeping the foreign exchange market in equilibrium.   (5 points)

      
      

  8. Expected future value of a currency is reflected in its spot rate.   (5 points)

      
      

  9. Forward contracts tend to be created on organized exchanges like the International Money Market of the Chicago Mercantile Exchange.   (5 points)

      
      

  10. 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.   (5 points)

      
      

  11. Multinational corporations may take several forms. An exporter could be described as   (5 points)

    a.  
    b.  
    c.  
    d.  

  12. Which of the following hedging strategies is not used to minimize transaction exposure?   (5 points)

    a.  
    b.  
    c.  
    d.  

  13. The following are the prices in the foreign exchange market between the U.S. dollar and another local currency (LC).


    What was the discount or premium on 3-month forward for LC?   (5 points)

    a.  
    b.  
    c.  
    d.  

  14. Which of the following statements about foreign affiliates is (are) true?   (5 points)

    a.  
    b.  
    c.  
    d.  

  15. 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)   (5 points)

    a.  
    b.  
    c.  
    d.  

  16. Foreign business operations are more complex than domestic operations because:   (5 points)

    a.  
    b.  
    c.  
    d.  

  17. If the German mark is equal to $.46, a U.S. dollar is equal to how many German marks?   (5 points)

    a.  
    b.  
    c.  
    d.  

  18. Which of the following is not commonly used to minimize transaction exposure in foreign exchange dealings?   (5 points)

    a.  
    b.  
    c.  
    d.  

  19. The lower borrowing costs in the Eurodollar market as compared to the U.S. are often attributed to:   (5 points)

    a.  
    b.  
    c.  
    d.  

  20. Legal, political, and economic factors are most conducive which form of multinational corporation (MNC) organization?   (5 points)

    a.  
    b.  
    c.  
    d.  



Portions copyright ©2005 The McGraw-Hill Companies.
Any use is subject to the Terms of Use and Privacy Policy.
McGraw-Hill Higher Education is one of the many fine businesses of The McGraw-Hill Companies.