Multinational Financial Management – Chapter 3, 2026 – Study
Material and Practice Questions
Bretton Woods System - ANS✔✔ The main features: relatively fixed exchange rates of individual
currencies in terms of the U.S. dollar and the convertibility of the dollar into gold for foreign
official institutions
international monetary system - ANS✔✔ set of policies, institutions, practices, regulations, and
mechanisms that determine the rate at which one currency is exchanged for another
trilemma - ANS✔✔ 1. A stable exchange rate
2. An independent monetary policy
3. Capital market integration
free float (clean float) - ANS✔✔ adjust current and expected future currency needs in response
to changes in economic parameters
managed (dirty float) - ANS✔✔ central bank intervention to smooth out exchange rate
fluctuations
smoothing out daily fluctuations - ANS✔✔ attempt to preserve an orderly pattern of exchange
rate changes
leaning against the wind - ANS✔✔ designed to moderate or prevent abrupt short- and medium-
term fluctuations brought about by random events
unofficial pegging - ANS✔✔ resists any upward or downward exchange rate movements
Material and Practice Questions
Bretton Woods System - ANS✔✔ The main features: relatively fixed exchange rates of individual
currencies in terms of the U.S. dollar and the convertibility of the dollar into gold for foreign
official institutions
international monetary system - ANS✔✔ set of policies, institutions, practices, regulations, and
mechanisms that determine the rate at which one currency is exchanged for another
trilemma - ANS✔✔ 1. A stable exchange rate
2. An independent monetary policy
3. Capital market integration
free float (clean float) - ANS✔✔ adjust current and expected future currency needs in response
to changes in economic parameters
managed (dirty float) - ANS✔✔ central bank intervention to smooth out exchange rate
fluctuations
smoothing out daily fluctuations - ANS✔✔ attempt to preserve an orderly pattern of exchange
rate changes
leaning against the wind - ANS✔✔ designed to moderate or prevent abrupt short- and medium-
term fluctuations brought about by random events
unofficial pegging - ANS✔✔ resists any upward or downward exchange rate movements
