Top 250+ Solved International Financial Management MCQ Questions Answer
Q. Recently, the UK experienced an annual balance of trade representing a __________.
a. large surplus (exceeding £100 billion)
b. level of zero
c. small surplus
d. deficit
Q. An increase in the current account deficit will place _______ pressure on the homecurrency value, other things equal.
a. upward
b. downward
c. no
d. upward or downward (depending on the size of the deficit)
Q. The North American Free Trade Agreement (NAFTA) increased restrictions on:
a. trade between Canada and Mexico.
b. trade between Canada and the U.S.
c. direct foreign investment in Mexico by U.S. firms.
d. none of the above.
Q. The primary component of the current account is the:
a. balance of trade.
b. balance of capital market flows.
c. balance of money market flows.
d. unilateral transfers.
Q. When a foreign subsidiary is not wholly owned by the parent and a foreign project is partially financed with retained earnings of the parent and of the subsidiary, then:
a. the parent's perspective should be used to evaluate a foreign project.
b. the subsidiary's perspective should be used to evaluate a foreign project.
c. the foreign project should enhance the value of both the parent and the subsidiary.
d. none of the above
Q. An international project's NPV is _________ related to the size of the initial investment and_________ related to the project's required rate of return.
a. positively; positively
b. positive; negatively
c. negatively; positively
d. negatively; negatively
Q. If an MNC sells a product in a foreign country and imports partially manufactured components needed for production to that country from the U.S., then the local economy's inflation will have:
a. a more pronounced impact on revenues than on costs.
b. a less pronounced impact on revenues than on costs.
c. the same impact on revenues as on costs.
d. none of the above
Q. The forward market is especially well-suited to offer hedging protection against
a. translation risk exposure.
b. transactions risk exposure.
c. political risk exposure.
d. taxation.
Q. Suppose that the Japanese yen is selling at a forward discount in the forward-exchange market. This implies that most likely
a. this currency has low exchange-rate risk.
b. this currency is gaining strength in relation to the dollar.
c. interest rates are higher in Japan than in the United States.
d. interest rates are declining in Japan.
Q. Hedging is used by companies to:
a. Decrease the variability of tax paid
b. Decrease the spread between spot and forward market quotes
c. Increase the variability of expected cash flows
d. Decrease the variability of expected cash flows
Q. Which of the following is true of foreign exchange markets?
a. The futures market is mainly used by hedgers while the forward market is mainly used for speculating.
b. The futures market and the forward market are mainly used for hedging.
c. The futures market is mainly used by speculators while the forward market is mainly used for hedging.
d. The futures market and the forward market are mainly used for speculating.
Q. Exchange rates
a. are always fixed
b. fluctuate to equate the quantity of foreign exchange demanded with the quantity supplied
c. fluctuate to equate imports and exports
d. fluctuate to equate rates of interest in various countries
Q. An arbitrageur in foreign exchange is a person who
a. earns illegal profit by manipulating foreign exchange
b. causes differences in exchange rates in different geographic markets
c. simultaneously buys large amounts of a currency in one market and sell it in another market
d. None of the above
Q. A speculator in foreign exchange is a person who
a. buys foreign currency, hoping to profit by selling it a a higher exchange rate at some later date
b. earns illegal profit by manipulation foreign exchange
c. causes differences in exchange rates in different geographic markets
d. None of the above
Q. A floating exchange rate
a. is determined by the national governments involved
b. remains extremely stable over long periods of time
c. is determined by the actions of central banks
d. is allowed to vary according to market forces