Finance 4213 International Financial
Management Exam 1 Zhang OSU
UPDATED ACTUAL QUESTIONS AND
CORRECT ANSWERS
Which of the following theories identifies the non-transferability of resources as a reason for
international business? - CORRECT ANSWER Imperfect Markets theory
According to the text, a disadvantage of licensing is that: - CORRECT ANSWER it is difficult
to ensure quality control of the production process.
The most risky method(s) by which firms conduct international business is (are): - CORRECT
ANSWER The acquisitions of existing operations.
The establishment of new subsidiaries
An increase in the balance of trade deficit will place ____ pressure on the home currency value, other
things equal. - CORRECT ANSWER Downward
The primary component of the current account is the: - CORRECT ANSWER Balance of Trade
if a U.S. firm desires to avoid the risk from exchange rate fluctuations, and it is receiving 100,000
euros in 90 days, it could - CORRECT ANSWER obtain a 90-day forward sale contract on
euros.
LIBOR is - CORRECT ANSWER the interest rate commonly charged for loans between
banks.
An obligation to purchase a specific amount of currency at a specific exchange rate at a future point in
time is called a: - CORRECT ANSWER A forward Contract
, The equilibrium exchange rate of pounds is $1.70. At an exchange rate of $1.72 per pound: -
CORRECT ANSWER U.S. demand for pounds would be less than the supply of pounds for
sale and there would be a surplus of pounds in the foreign exchange market
f the U.S. and Japan engage in substantial financial flows but little trade, ____ directly influences their
exchange rate the most. If the U.S. and Switzerland engage in much trade but little financial flows,
____ directly influences their exchange rate the most. - CORRECT ANSWER interest rate
differentials; inflation and income differentials
Any event that increases the U.S. demand for euros should result in a(n) ____ in the value of the euro
with respect to ____, other things being equal - CORRECT ANSWER increase; U.S. dollar
f a country experiences high inflation relative to the U.S., its exports to the U.S. should ____, its
imports should ____, and there is ____ pressure on its currency's equilibrium value. - CORRECT
ANSWER decrease; increase; downward
f a country experiences an increase in interest rates relative to U.S. interest rates, the inflow of U.S.
funds to purchase its securities should ____, the outflow of its funds to purchase U.S. securities
should ____, and there is ____ pressure on its currency's equilibrium value - CORRECT ANSWER
increase; decrease; upward
Which of the following is probably an example of the use of forward contracts by an MNC? -
CORRECT ANSWER Hedging peso receivables by selling pesos forward
Hedging yen payables by purchasing yen forward
Hedging peso payables by purchasing pesos forward
An MNC's short-term financing decisions are satisfied in the ____ market, while its medium debt
financing decisions are satisfied in the ____ market. - CORRECT ANSWER international
money; international credit
____ is a factor that causes currency supply and demand schedules to change. - CORRECT ANSWER
Relative inflation rates
.Relative interest rates
Relative income levels
Expectations
Management Exam 1 Zhang OSU
UPDATED ACTUAL QUESTIONS AND
CORRECT ANSWERS
Which of the following theories identifies the non-transferability of resources as a reason for
international business? - CORRECT ANSWER Imperfect Markets theory
According to the text, a disadvantage of licensing is that: - CORRECT ANSWER it is difficult
to ensure quality control of the production process.
The most risky method(s) by which firms conduct international business is (are): - CORRECT
ANSWER The acquisitions of existing operations.
The establishment of new subsidiaries
An increase in the balance of trade deficit will place ____ pressure on the home currency value, other
things equal. - CORRECT ANSWER Downward
The primary component of the current account is the: - CORRECT ANSWER Balance of Trade
if a U.S. firm desires to avoid the risk from exchange rate fluctuations, and it is receiving 100,000
euros in 90 days, it could - CORRECT ANSWER obtain a 90-day forward sale contract on
euros.
LIBOR is - CORRECT ANSWER the interest rate commonly charged for loans between
banks.
An obligation to purchase a specific amount of currency at a specific exchange rate at a future point in
time is called a: - CORRECT ANSWER A forward Contract
, The equilibrium exchange rate of pounds is $1.70. At an exchange rate of $1.72 per pound: -
CORRECT ANSWER U.S. demand for pounds would be less than the supply of pounds for
sale and there would be a surplus of pounds in the foreign exchange market
f the U.S. and Japan engage in substantial financial flows but little trade, ____ directly influences their
exchange rate the most. If the U.S. and Switzerland engage in much trade but little financial flows,
____ directly influences their exchange rate the most. - CORRECT ANSWER interest rate
differentials; inflation and income differentials
Any event that increases the U.S. demand for euros should result in a(n) ____ in the value of the euro
with respect to ____, other things being equal - CORRECT ANSWER increase; U.S. dollar
f a country experiences high inflation relative to the U.S., its exports to the U.S. should ____, its
imports should ____, and there is ____ pressure on its currency's equilibrium value. - CORRECT
ANSWER decrease; increase; downward
f a country experiences an increase in interest rates relative to U.S. interest rates, the inflow of U.S.
funds to purchase its securities should ____, the outflow of its funds to purchase U.S. securities
should ____, and there is ____ pressure on its currency's equilibrium value - CORRECT ANSWER
increase; decrease; upward
Which of the following is probably an example of the use of forward contracts by an MNC? -
CORRECT ANSWER Hedging peso receivables by selling pesos forward
Hedging yen payables by purchasing yen forward
Hedging peso payables by purchasing pesos forward
An MNC's short-term financing decisions are satisfied in the ____ market, while its medium debt
financing decisions are satisfied in the ____ market. - CORRECT ANSWER international
money; international credit
____ is a factor that causes currency supply and demand schedules to change. - CORRECT ANSWER
Relative inflation rates
.Relative interest rates
Relative income levels
Expectations
