International Finance – Exam 1, 2026 – Study Material and Practice
Questions
Multinational Enterprise (MNE) - correct answer ✔✔ have operations in more than one country
global financial marketplace - correct answer ✔✔ links among assets, institutions, and linkages
foreign currency exchange rate - correct answer ✔✔ price of any one country's currency in
terms of another country's currency
bid rate - correct answer ✔✔ the rate at which currency traders buy (low)
offer rate - correct answer ✔✔ the rate at which currency traders sell (high)
eurocurrencies - correct answer ✔✔ domestic currencies of one country on deposit in a second
country
Eurocurrency markets serve two purposes - correct answer ✔✔ money markets device for
excess corporate liquidity and source of short-term bank loans
major linkages of global money and capital markes - correct answer ✔✔ eurocurrency market
and its interest rate "LIBOR"
theory of competitive advantage - correct answer ✔✔ a theory which states that countries
benefit from specializing in (and exporting) goods and services in which they have relative
advantage, and they benefit from importing goods and services in which they have a relative
disadvantage
, market imperfections - correct answer ✔✔ offer both opportunity and risk
Why firms become MNE's - correct answer ✔✔ market seekers, raw material seekers,
production efficiency seekers, knowledge seekers, political safety seekers
globilization process - correct answer ✔✔ the structural and managerial changes and challenges
experienced by a firm as it moves from domestic to global in operations
foreign exchange risks - correct answer ✔✔ the adverse consequences of unpredictable
changes in exchange rates
credit management risk - correct answer ✔✔ the evaluation of the credit quality of foreign
buyers and sellers is now more important than ever
2 currency regimes - correct answer ✔✔ fixed vs flexible
facets of the economy - correct answer ✔✔ inflation, unemployment, interest rate levels, trade
balances, and economic growth
fixed regime pros - correct answer ✔✔ stability in international prices and inherent anti-
inflationary nature of fixed prices
fixed rate regime cons - correct answer ✔✔ Need for central banks to maintain large quantities
of hard currencies and gold to defend the fixed rate
Fixed rates can be maintained at rates that are inconsistent with economic fundamentals
countries are affected from unemployment and inflation from other countries
not independent monetary policy
Questions
Multinational Enterprise (MNE) - correct answer ✔✔ have operations in more than one country
global financial marketplace - correct answer ✔✔ links among assets, institutions, and linkages
foreign currency exchange rate - correct answer ✔✔ price of any one country's currency in
terms of another country's currency
bid rate - correct answer ✔✔ the rate at which currency traders buy (low)
offer rate - correct answer ✔✔ the rate at which currency traders sell (high)
eurocurrencies - correct answer ✔✔ domestic currencies of one country on deposit in a second
country
Eurocurrency markets serve two purposes - correct answer ✔✔ money markets device for
excess corporate liquidity and source of short-term bank loans
major linkages of global money and capital markes - correct answer ✔✔ eurocurrency market
and its interest rate "LIBOR"
theory of competitive advantage - correct answer ✔✔ a theory which states that countries
benefit from specializing in (and exporting) goods and services in which they have relative
advantage, and they benefit from importing goods and services in which they have a relative
disadvantage
, market imperfections - correct answer ✔✔ offer both opportunity and risk
Why firms become MNE's - correct answer ✔✔ market seekers, raw material seekers,
production efficiency seekers, knowledge seekers, political safety seekers
globilization process - correct answer ✔✔ the structural and managerial changes and challenges
experienced by a firm as it moves from domestic to global in operations
foreign exchange risks - correct answer ✔✔ the adverse consequences of unpredictable
changes in exchange rates
credit management risk - correct answer ✔✔ the evaluation of the credit quality of foreign
buyers and sellers is now more important than ever
2 currency regimes - correct answer ✔✔ fixed vs flexible
facets of the economy - correct answer ✔✔ inflation, unemployment, interest rate levels, trade
balances, and economic growth
fixed regime pros - correct answer ✔✔ stability in international prices and inherent anti-
inflationary nature of fixed prices
fixed rate regime cons - correct answer ✔✔ Need for central banks to maintain large quantities
of hard currencies and gold to defend the fixed rate
Fixed rates can be maintained at rates that are inconsistent with economic fundamentals
countries are affected from unemployment and inflation from other countries
not independent monetary policy
