FINA 4500 Final Questions with Verified Correct
Answers
Conducting international trade transactions is difficult in comparison to domestic trades.
Which of the following are false statements regarding this reality?
A. Commercial and political risks enter into the equation, which are not factors in domestic
trade.
B. It is important for a country to be competitively strong in international trade in order for its
citizens to have the goods and services they need and demand.
C. It is generally the case that the costs of international trade outweigh the benefits.
D. all of the options
C
Through its Loan Guarantee Program, Ex-Im bank helps U.S. exporters develop and expand
their overseas sales by
A. protecting them against loss should a foreign buyer default.
B. guaranteeing the loans made by private financial institutions to foreign importers.
C. providing liquidity via the purchase of notes issued by Ex-Im bank to finance the loans.
D. none of the options
B
The cost of capital is
A. the minimum rate of return an investment project must generate in order to pay its
financing costs.
B. the minimum rate of return an investment project must generate in order to pay its
financing costs plus a reasonable profit.
C. the maximum rate of return an investment project must generate in order to pay its
financing costs.
D. the maximum rate of return an investment project must generate in order to pay its
financing costs plus a reasonable profit.
, A
The primary methods of payment for foreign trades, ranked in the order of most secure to
least secure for the exporter is
A. open account, consignment, letter of credit/time draft, and cash in advance.
B. consignment, letter of credit/time draft, cash in advance, and open account.
C. cash in advance, letter of credit/time draft, consignment, and open account.
D. cash in advance, letter of credit/time draft, open account, and consignment.
C
Look at the Graph
A. Kl and Kg represent, respectively, the cost of capital under international and local capital
structures; IRR represents the internal rate of return on investment projects; Il and Ig
represent, respectively, the optimal investment outlays under the alternative capital
structures.
B. Kl and Kg represent, respectively, the cost of capital under local and international capital
structures; IRR represents the internal rate of return on investment projects; Il and Ig
represent the optimal investment outlays under the alternative capital structures. Correct
C. both of the options
D. none of the options
B
When a bank purchases a series of promissory notes from an importer in favor of an exporter
at a discount, this is called
A. accounts receivable financing.
B. asset backed commercial paper.
C. discounting.
D. forfaiting.
D
A buy-back transaction
A. is also called a bilateral clearing agreement.
B. involves a technology transfer via the sale of a manufacturing plant: as part of the terms,
the seller of the plant agrees to purchase a certain portion of the plant output.
C. involves two parties agreeing to buy a specified amount of goods or services from one
Answers
Conducting international trade transactions is difficult in comparison to domestic trades.
Which of the following are false statements regarding this reality?
A. Commercial and political risks enter into the equation, which are not factors in domestic
trade.
B. It is important for a country to be competitively strong in international trade in order for its
citizens to have the goods and services they need and demand.
C. It is generally the case that the costs of international trade outweigh the benefits.
D. all of the options
C
Through its Loan Guarantee Program, Ex-Im bank helps U.S. exporters develop and expand
their overseas sales by
A. protecting them against loss should a foreign buyer default.
B. guaranteeing the loans made by private financial institutions to foreign importers.
C. providing liquidity via the purchase of notes issued by Ex-Im bank to finance the loans.
D. none of the options
B
The cost of capital is
A. the minimum rate of return an investment project must generate in order to pay its
financing costs.
B. the minimum rate of return an investment project must generate in order to pay its
financing costs plus a reasonable profit.
C. the maximum rate of return an investment project must generate in order to pay its
financing costs.
D. the maximum rate of return an investment project must generate in order to pay its
financing costs plus a reasonable profit.
, A
The primary methods of payment for foreign trades, ranked in the order of most secure to
least secure for the exporter is
A. open account, consignment, letter of credit/time draft, and cash in advance.
B. consignment, letter of credit/time draft, cash in advance, and open account.
C. cash in advance, letter of credit/time draft, consignment, and open account.
D. cash in advance, letter of credit/time draft, open account, and consignment.
C
Look at the Graph
A. Kl and Kg represent, respectively, the cost of capital under international and local capital
structures; IRR represents the internal rate of return on investment projects; Il and Ig
represent, respectively, the optimal investment outlays under the alternative capital
structures.
B. Kl and Kg represent, respectively, the cost of capital under local and international capital
structures; IRR represents the internal rate of return on investment projects; Il and Ig
represent the optimal investment outlays under the alternative capital structures. Correct
C. both of the options
D. none of the options
B
When a bank purchases a series of promissory notes from an importer in favor of an exporter
at a discount, this is called
A. accounts receivable financing.
B. asset backed commercial paper.
C. discounting.
D. forfaiting.
D
A buy-back transaction
A. is also called a bilateral clearing agreement.
B. involves a technology transfer via the sale of a manufacturing plant: as part of the terms,
the seller of the plant agrees to purchase a certain portion of the plant output.
C. involves two parties agreeing to buy a specified amount of goods or services from one
