International Finance Fin 4430: Quiz Questions & Answers, fall 2026/27.

International Finance Fin 4430: Quiz Questions 1. What is globalization? a. The increasing integration of economies around the world, particularly through trade and financial flows. b. The trend towards using English as an international language. c. The increasing use of similar technologies across the world. d. The export of American culture. 2. How can a company supply its products to a foreign market? 1. Through exports. 2. By licensing local firms abroad to manufacture the company’s products 3. By setting up a joint venture with a foreign company 4. By foreign direct investment. a. 1 and 2 only. b. 2 and 3 only. c. 1, 2 and 3 only. d. All of the above. 3. What is a multinational corporation (MNC)? a. A corporation that imports goods from a number of countries. b. A corporation that has a policy of employing a range of foreign nationals. c. A corporation that produces and sells goods or services in more than one country. d. A corporation that advertises in a range of languages. 4. What percentage of global international trade is done within multinational corporations? a. More than 10% b. More than 20% c. More than 30% d. More than 50% 5. Which of the following statements about international trade is TRUE? 1. Large countries tend to trade less than small countries in terms of percentage GDP 2. Singapore trades more than China in terms of percentage GDP 3. Outsourcing services to firms based in a country different from a company’s home base is a form of trade. a. 1 only b. 1 and 3 only c. 2 and 3 onlyd. All of the above 6. What is a greenfield investment? a. When a MNC acquires farmland in a foreign country. b. When a MNC establishes new foreign operations without a local partner and without acquiring a local company. c. When a MNC follows makes environmentally sustainable investments. d. When a MNC plants trees to offset the carbon footprint of its capital equipment investments. 7. What percentage ownership typically defines foreign direct investment (FDI)? a. When a company from one country makes a significant investment that leads to at least a 5% ownership interest in a firm in another country. b. When a company from one country makes a significant investment that leads to at least a 10% ownership interest in a firm in another country. c. When a company from one country makes a significant investment that leads to at least a 15% ownership interest in a firm in another country. d. When a company from one country makes a significant investment that leads to at least a 20% ownership interest in a firm in another country. 8. What is the IMF? a. The International Monetary Fund: an international organization of the world’s richest countries, based in Washington, DC. b. The International Monetary Fund: an international organization of 190 member countries, based in Washington, DC. c. The International Macro Fund: a global macro hedge fund run by Goldman Sachs, New York. d. The International Monetary Fund: an international organization of 190 member countries, based in New York. 9. What is the main goal of the IMF? a. To act as a clearing house for international payments. b. To act as an arbitrator in trade disputes among nations. c. To regulate international capital markets. d. To ensure the stability of the international monetary and financial system.10. What is the WTO? a. The World Trade Organization: An organization based in New York that acts as a clearing house for international payments for exports and imports b. The World Tourist Organization: An organization based in Paris that promotes international tourism c. The World Trade Organization: A supra-national organization based in Geneva that helps negotiate and interpret international trade agreements among nations d. The World Traffic Organization: An organization based in Chicago that seeks ways of improving vehicle traffic circulation 11. Which of the following countries is LEAST open in terms of the proportion of its GDP that is exported and imported? a. Germany b. The UK c. The USA d. France 12. Which of the following countries is MOST open in terms of the proportion of its GDP that is exported and imported? a. Germany b. The UK c. The USA d. France 13. What is a spot exchange rate contract for most currency pairs? a. An agreement to exchange currencies at an agreed rate by close of business b. An agreement to exchange currencies at an agreed rate by close of business the next day c. An agreement to exchange currencies at an agreed rate by close of business two days later d. An agreement to exchange currencies at an agreed rate by close of business two business days later 14. Against which currencies is the spot value date for USD normally one business day later? 1. MXN 2. GBP 3. CAD 4. JPY a. 1 and 2 only. b. 1 and 3 only. c. 1, 2 and 3 only. d. All of the above.15. Which city is the major centre for FX trading in terms of daily volume of transactions? a. New York b. London c. Tokyo d. Hong Kong 16. What percentage of global FX turnover goes through London? a. Between 20% and 25% b. Between 25% and 30% c. Between 30% and 35% d. More than 35% 17. What is the ISO symbol for the South African currency? a. SAP b. ZAP c. SAR d. ZAR 18. How is the Swedish-Norwegian FX rate expressed using ISO symbols? a. SWE-NOR b. SEK-NOK c. SWK-NOK d. SEK-NOR 19. What percentage of FX transactions use USD as the vehicle currency? a. Nearly 70% b. Nearly 80% c. Nearly 90% d. Nearly 100% 20. What is Herstatt risk? a. The risk that a financial institution will go bankrupt. b. The risk that a financial institution may not deliver the currency on one side of an FX transaction. c. The risk that a financial institution assumes when trading in securitised loans. d. The risk that a financial institution will deliver currency to the wrong counterparty in an FX transaction.21. Why would you expect cross rates to be consistent with USD FX rates? a. Because cross rates are calculated using USD rates b. Because otherwise there will be profitable triangular arbitrage opportunity c. Because cross rates and USD FX rates are linked through interest rates d. Because otherwise traders would only use USD FX rates 22. Which FX rate is sometimes referred to as cable? a. CAD-USD b. MXN-USD c. USD-GBP d. USD-EUR 23. As a cable trader at Chase NY, you estimate that the conditional distribution of the dollar-sterling exchange rate 30 days ahead is as depicted in the diagram. What probability do you attach to the spot rate being USD 1.47/GBP or less in 30 days time? a. About 25% b. About 16% c. About 50% d. About 32%24. Which of the following is an FX swap? a. The purchase of one currency against the sale of another currency at an agreed rate at an agreed date in the future. b. The swapping of cash flows associated with bonds denominated in different currencies. c. The simultaneous purchase and sale, spot and forward, of one currency against another. d. An arbitrage between bonds denominated in different currencies. 25. What percentage of daily turnover of the global FX market do FX swaps account for? a. About 2% b. About 15% c. About 28% d. About 50% 26. Swap points are: a. Basis pips that must be added/subtracted to/from the current spot bid/ask price to yield the bid/ask forward price b. The amount you multiply the current spot bid/ask price to yield the bid/ask forward price c. Only used for major USD exchange rates d. Are the same for all maturities 27. If the first number in a swap points quotation is bigger than the second, then: a. The trader has made a mistake b. You must add the swap points to the spot rate to get the forward rate c. You must subtract the swap points from the spot rate to get the forward rate d. You must multiply the spot rate by the swap points to get the forward rate 28. Suppose the spot USD-GBP rate is 1.2510-15 and the one-year swap points are 16/15. What is the one-year USD-GBP forward rate? a. 1.2526 -30 b. 1.2494-1.2500 c. 1.2522-32 d. 1.2426-329. Suppose the spot USD-GBP rate is 1.2510-15 and the one-year swap points are 16/15. Then: 1. The pound is at a one-year discount to the dollar 2. The dollar is at a one-year discount to the pound 3. The pound is at a one-year premium to the dollar 4. The dollar is at a one-year premium to the pound a. 1 and 4 only b. 2 and 3 only c. 1 only d. 2 only 30. Suppose the spot USD-GBP rate is 1.2510-15 and the one-year swap points are 16/15. What must be true?: a. The one-year USD interest rate is higher than the one-year GBP interest rate. b. The one-year USD interest rate is lower than the one-year GBP interest rate. c. USD interest rates are higher than GBP interest rates at all maturities. d. USD interest rates are lower than GBP interest rates at all maturities. 31. A hedge fund is a. A fund used to hedge foreign exchange risk. b. An investment fund similar to a mutual fund except that is is lightly regulated. c. A lightly regulated, short-long investment fund. d. Another term for the International Monetary Fund. 32. The ‘meteor shower effect’ is when a. Asset market volatility is transmitted regionally. b. Asset market volatility is transmitted through currency markets. c. Asset market volatility is affected by the sun. d. Asset market volatility is transmitted globally.33. As a cable trader at Chase NY, you estimate that the conditional distribution of spot cable 30 days ahead is as depicted in the diagram. What probability do you attach to the spot rate being USD 1.65/GBP or more in 30 days time? a. About 2.5% b. About 5% c. About 16% d. About 32% 34. If currency A has higher interest rates than currency B at a given maturity, then, in the forward FX market: a. Currency A is always at a premium to currency B b. Currency A is always at a discount to currency B c. Currency A is at a premium to currency B at that maturity d. Currency A is at a discount to currency B at that maturity 35. Suppose the spot USD-GBP rate is 1.2710-15 and the one-year swap points are 16/15. Then the one-year forward rate is: a. 1.2726-1.2730 b. 1.2694-1.2700 c. 1.2694-1.2730 d. 1.2710-1.2715 36. Suppose the spot JPY-USD rate is 147.30-40 and the 30-day swap points are 40/45. Then the 30-day forward rate is: a. 146.90-95 b. 147.70-85 c. 146.90-147.10 d. 147.30-4037. Where are the headquarters of the IMF located? a. New York b. Washington DC c. Geneva d. London 38. As of April 2022, average global daily turnover in the FX market was around: a. $10 trillion per day b. $20 trillion per day c. $7.5 trillion per day d. $5 trillion per day 39. Spot FX transactions account for what percentage of FX global daily turnover? a. About 50% b. About 40% c. About 30% d. About 15% 40. FX swap transactions account for what percentage of FX global daily turnover? a. About 50% b. About 40% c. About 30% d. About 15% 41. Outright forward FX transactions account for what percentage of FX global daily turnover? a. About 50% b. About 40% c. About 30% d. About 15% 42. You call a trader at UBS to get quotes for the British pound for the spot, 30-day, 60- day, 90-day and 180-day forward rates. Your UBS counterpart states, “We trade sterling at $1.2715-20, 45/40, 82/79, 125/115, 150/135.” a. The dollar is at a premium to the pound at these maturities b. The dollar is at a discount to the pound at these maturities c. The 30-day forward rate is 1.2760-75 d. The 60-day forward rate is 1.. Two conditions for a group of countries to be an optimum currency area are: a. Same languages and similar industrial structure b. Joined by land and high labor mobility c. High labor mobility and similar industrial structure d. Similar industrial structure and joined by land 44. If a group of regions is not an optimum currency area when combined, then a single currency can be maintained by: a. Intervening in the foreign exchange market b. A system of fiscal federalism c. Having different interest rates for each region d. Adopting a target zone 45. Fiscal federalism across an area means: a. There is no local income tax b. There is high unemployment c. Economic boom regions within the area automatically pay higher taxes and the money is automatically transferred to recession regions d. Recession regions automatically pay higher taxes and the money is automatically transferred to boom regions 46. If the Fed intervenes to support the domestic currency by selling $1bn of foreign currency reserves and does not sterilize, then the US money supply will: a. Not be affected b. Will rise by $1bn c. Will fall by $1bn d. Will fall by more than $1bn 47. If the Fed intervenes to support the domestic currency by selling $1bn of foreign currency reserves, it can fully sterilize the intervention by a. Selling $1bn of US government bonds b. Buying $1bn of US government bonds c. Selling about $(1/12)bn of US government bonds d. Buying about $(1/12)bn US government bonds 48. The most widely held reserve currency is a. USD b. GBP c. EUR d. JPY49. In which of these country pairs is neither country a member of the EMU? a. Norway and France b. Sweden and Greece c. Britain and Norway d. Switzerland and Germany 50. The headquarters of the European Central Bank are located in: a. London b. Paris c. Frankfurt d. Geneva 51. Which of these pairs of countries are NOT members of the EMU? a. Norway and France b. Sweden and Greece c. Britain and Norway d. Switzerland and Germany 52. If covered interest parity holds between two currencies at a given maturity, then… a. it must hold at all maturities b. the spot rate is equal to the forward rate c. the return to investing in each currency is the same d. the return from investing in one currency is equal to the covered return from investing in the other currency 53. Which of these factors might lead to deviations from covered interest parity? a. Political risk b. Exchange controls c. Extreme market volatility d. All of the above 54. A synthetic forward: a. is the same as an FX swap b. involves borrowing and lending currencies to replicate the cash flow of an outright forward FX transaction c. is the same as a spot transaction d. does not involve the FX market 55. As a Japanese importer, you must pay $350,000 in 90 days. What downside exchange rate risk do you face? a. Exposure to weakening of the yen against the dollarb. Exposure to weakening of the dollar against the yen c. There is no exchange rate risk d. Exposure to strengthening of the yen against the dollar 56. As a Japanese importer, you must pay $350,000 in 90 days. Your risk exposure in yen terms is: a. A maximum of ¥1,000,000,000 b. Unbounded c. Unknown d. Inescapable 57. As a British exporter, you will receive €500,000 in 180 days. What downside exchange rate risk do you face? a. Exposure to weakening of the pound against the euro b. Exposure to strengthening of the euro against the pound c. There is no exchange rate risk d. Exposure to strengthening of the pound against the euro 58. As a British exporter, you will receive €500,000 in 180 days. Your risk exposure in sterling terms is: a. Bounded at the sterling value of the goods b. Unbounded c. Unknown d. Inescapable 59. What is the purchasing power of money? a. The amount of capital that can be purchased with a given amount of that money b. The amount of goods and services that can be purchased with a given amount of that money c. The amount of traded goods that can be purchased with a given amount of that money d. The amount of foreign currency that can be purchased with a given amount of that currency 60. The purchasing power of a currency is also known as a. The real value of the currency b. The nominal value of the currency c. The level of the currency d. The external value of the currency 61. What do economists mean by the law of one price (LOOP)? a. All goods should have the same price b. It is more efficent to have one price for all goods c. All goods should have the same price internationally d. Similar traded goods should have the same price when expressed in a common currency62. If the price level is P and the money supply is M, then purchasing power can be represented by a. P b. P/M c. 1/P d. M/P 63. If S is the foreign price of domestic currency, a depreciation of the domestic currency is represented by: a. An increase in S b. A decrease in S 64. If S is the foreign price of domestic currency, P is the domestic price level, and P* is the foreign price level, which of the following is the PPP condition? a. S = P/P* b. S=P*/P c. S= P*- P d. S= P – P* 65. If S P/P*, the domestic currency is: a. Overvalued b. Undervalued c. At fair value d. Indeterminate 66. If UK one-year interest rates are 7% and US one-year interest rates are 4%, and real the marginal product of capital is the same in both economies, then: a. Inflation will be 3% higher in the UK than in the US in the coming year b. Inflation will be 3% higher in the US than in the UK in the coming year c. Inflation is expected to be 3% higher in the UK than in the US in the coming year d. Inflation is expected to be 3% higher in the US than in the UK in the coming year 67. If productivity is lower in the UK than in Switzerland, then a. Wages will tend to be higher in the UK than in Switzerland when expressed in a common currency at the current CHF/GBP exchange rate b. Wages will tend to be higher in Switzerland than in the UK when expressed in a common currency at the current CHF/GBP exchange rate c. Wages will tend to be approximately the same in both countries at the current FX rate d. Impossible to say any of these without more data68. If productivity is lower in the UK than in Switzerland, then a. The cost of services will tend to be higher in the UK than in Switzerland when expressed in a common currency at the current CHF/GBP exchange rate b. The cost of services will tend to be higher in Switzerland than in the UK when expressed in a common currency at the current CHF/GBP exchange rate c. The cost of services will tend to be approximately the same in both countries at the current FX rate d. Impossible to say any of these without more data 69. If productivity is lower in the UK than in Switzerland, then a. The LOOP cannot hold among tradable goods between the UK and Switzerland b. The LOOP can still hold among tradable goods between the UK and Switzerland c. The LOOP cannot hold among non-tradablew between the UK and Switzerland d. Impossible to say any of these without more data 70. If there is a sudden increase in the money supply in a country, then a. Interest rates will tend to fall and the currency will depreciate in the FX market b. Prices will immediately rise and the currency will depreciate in the FX market c. Interest rates will tend to rise and the currency will appreciate in the FX market d. Interest rates are unlikely to be affected and so there will be no impact on the FX rate 71. If there is a sudden increase in the money supply in a country, then a. Interest rates will tend to fall immediately and then rise slowly to their previous level b. Interest rates will tend to rise immediately and then fall slowly to their previous level c. Interest rates will tend to fall immediately and then rise slowly but not back to their previous level d. Interest rates are unlikely to be affected 72. Suppose all the international parity conditions held. If UK 12-month interest rates are 3% higher than US interest rates a. The USD is expected to depreciate by 3% b. The USD is expected to appreciate by 3% c. The USD is at a 3% 12-month forward discount to the GBP d. The GBP is at a 3% 12-month forward premium to the USD73. Which of the following is an example of a filter rule? a. Sell the currency if it falls 3% below its most recent high, buy if it rises 3% above its most recent low b. Buy the currency if it falls 3% below its most recent high, sell if it rises 3% above its most recent low c. Sell the currency if it breaks out of its trading range d. Sell the currency if it forms a head-and-shoulders pattern 74. What is an interest rate swap? a. An arbitrage operation using spot and forward rates and interest rates in different currencies b. An agreement that allows a MNC to change the nature of its debt from a one currency to another currency . c. A speculative strategy using spot and exchange rate forecasts and interest rates in different currencies. d. An agreement that allows a MNC to change the nature of its debt from a fixed interest rate to a floating interest rate or from a floating interest rate to a fixed interest rate. 75. What is a credit default swap? a. An insurance contract to protect against default on a specific bond or loan issued by a corporation or sovereign entity. b. A derivative contract to hedge against currency transaction risk. c. An insurance contract to protect against movements in interest rates. d. A derivative contract to hedge against currency volatility. 76. What is a currency swap? a. The simultaneous purchase and sale, spot and forward, of one currency against another. b. An agreement between two parties to exchange the cash flows of two long-term bonds denominated in different currencies. c. The purchase of one currency against another at an agreed rate at an agreed future date. d. The exchange of fixed for floating interest payments on dollar-denominated debt. 77. The swap desk at Goldman Sachs is quoting the following rates on 5-year currency swaps versus 6-month dollar LIBOR: US dollars: 5.75% bid and 5.85% offered;.... UK pounds: 6.25% bid and 6.35% offered. Which of the following is true? a. GS pays sterling interest at 6.25% b. GS receives sterling interest at 6.25% c. GS pays dollar interest at 5.85% d. GS pays sterling interest at 5.85%78. The 5-year U.S. Treasury bonds yield to maturity is 6.95%. State Street quotes 5-year interest rate swaps against dollar LIBOR at 30-40 on the 5-year T-Bond yield. Which of the following is true? a. SS receives fixed interest at 7.25% in return for floating rate dollar LIBOR b. SS pays fixed interest at 7.25% in return for floating rate dollar LIBOR c. SS pays fixed interest at 6.95% in return for floating rate dollar LIBOR+35 basis points d. SS receives fixed interest at 6.95% in return for floating rate dollar LIBOR+45 basis points 79. An FX futures contract can: a. Have a maturity date any number of days ahead, by agreement b. Only have maturity dates 30, 60, 90, 180 or 360 days ahead c. Only have a set maturity date for each month d. Only be traded in Chicago 80. An FX futures rate contract... a. is the same as a forward rate contract b. requires a margin account c. can be for any amount of USD d. accounts for nearly 50% of daily global FX market turnover 81. An FX futures rate contract a. Will only be offered in set amounts for set maturity dates b. Is fully customisable c. Is only available for USD FX rates d. Accounts for around 15% of global daily FX market turnover 82. The code 6EZ6 denotes what? a. The USD-GBP December 2026 futures contract on the CME b. The USD-EUR December 2026 futures contract on the NYSE c. The USD-EUR December 2026 futures contract on LIFFE d. The USD-EUR December 2026 futures contract on the CME83. Which of the following codes denotes the January 2026 USD-GBP futures contract on the CME? a. 6BZ5 b. 6E26 c. 6BF6 d. 6BZ6 84. Basis risk arises when a. The interest rate moves by more than 10 basis points b. There is a possibility that a counterparty will default on payment c. The futures rate at maturity does not match the spot rate which forms part of a futures rate hedge d. Forward rates are used instead of FX futures contracts 85. Basis risk may arise because a. The underlying FX cash flows may not match exactly the maturity date of the futures contract b. The futures contract is related to the forward rate c. The FX futures contract can only be expressed in USD d. The FX futures contract is inherently risky 86. If S is the spot rate and K the strike price of a put option, then the option is in the money when a. SK b. S=K c. SK d. Volatility increases 87. If S is the spot rate, the intrinsic value of a call option with strike K is a. Max[K-S, 0] b. Max[S-K, 0] c. Min[K-S, 0] d. Min[S-K, 0] 88. The premium payable on a call option with strike K: a. Goes up as K goes up b. Goes down as K goes up c. Depends only on the spot rate 89. The premium payable on a put option with strike K: a. Goes up as market volatilty goes up b. Goes down as market volatilty goes up c. Depends only on the strike price