Top 250+ Solved International Financial Management MCQ Questions Answer
Q. Which of the following institutions is the most important participant in foreign currency markets?
a. A retail customer
b. A commercial bank
c. A foreign exchange broker
d. A central bank
Q. An increase in the U.S. demand for the euro
a. causes a rise in the dollar exchange rate.
b. causes the euro to appreciate.
c. causes the dollar to depreciate.
d. causes Euro Area goods to be relatively more expensive.
Q. Which of the following would NOT be a cause for an increased American demand for the euros?
a. The United States having lower interest rates than the Euro Area
b. Increased American demand for Euro Area goods
c. The expectation by speculators that the value of the euro is edging up
d. More economic expansion in the United States
Q. Which of the following is NOT one of the determinants of the gains of adopting a singlecurrency?
a. A well-synchronized business cycle involving all member countries
b. The possibility of factors of production to freely move across borders
c. The willingness and ability of member countries to design policies to address regional imbalances that may develop
d. Widening the common market by allowing other countries to join
Q. Which of the following forecasting techniques would best represent the use of today's forward exchange rate to forecast the future exchange rate?
a. fundamental forecasting.
b. technical forecasting.
c. market-based forecasting.
d. mixed forecasting.
Q. If a particular currency is consistently declining substantially over time, then a market- based forecast will usually have:
a. underestimated the future exchange rates over time.
b. overestimated the future exchange rates over time.
c. forecasted future exchange rates accurately.
d. forecasted future exchange rates inaccurately but without any bias toward consistent underestimating or overestimating.
Q. Which of the following is true according to the text?
a. Forecasts in recent years have been very accurate.
b. Use of the absolute forecast error as a percent of the realized value is a good measure to use in detecting a forecast bias.
c. Forecasting errors are smaller when focused on longer term periods.
d. None of the above.
Q. Which of the following is not a forecasting technique mentioned in your text?
a. accounting-based forecasting.
b. fundamental forecasting.
c. technical forecasting.
d. market-based forecasting.
Q. Which of the following is not a method of forecasting exchange rate volatility?
a. using the absolute forecast error as a percentage of the realized value.
b. using the volatility of historical exchange rate movements as a forecast for the future.
c. using a time series of volatility patterns in previous periods.
d. deriving the exchange rate's implied standard deviation from the currency option pricing model.
Q. Assume the Canadian dollar is equal to £0.51 and the Peruvian Sol is equal to £0.16. The value of the Peruvian Sol in Canadian dollars is:
a. about .3621 Canadian dollars.
b. about 2.36 Canadian dollars.
c. about .3137 Canadian dollars.
d. about 2.51 Canadian dollars.
Q. When the foreign exchange market opens in the UK each morning, the opening exchange rate quotations will be based on the:
a. closing prices in the U.S. during the previous day.
b. closing prices in Canada during the previous day.
c. prevailing prices in locations where the foreign exchange markets have been open.
d. officially set by central banks before the U.S. market opens.
Q. The equilibrium exchange rate of pounds is $1.70. At an exchange rate of $1.72 per pound:
a. U.S. demand for pounds would exceed the supply of pounds for sale and there would be a shortage of pounds in the foreign exchange market.
b. U.S. demand for pounds would be less than the supply of pounds for sale and there would be a shortage of pounds in the foreign exchange market.
c. U.S. demand for pounds would exceed the supply of pounds for sale and there would be a surplus of pounds in the foreign exchange market.
d. U.S. demand for pounds would be less than the supply of pounds for sale and there would be a surplus of pounds in the foreign exchange market.
Q. If inflation in New Zealand suddenly increased while euro area inflation stayed the same, there would be:
a. an inward shift in the demand schedule for NZ$ and an outward shift in the supply schedule for NZ$.
b. an outward shift in the demand schedule for NZ$ and an inward shift in the supply schedule for NZ$.
c. an outward shift in the demand schedule for NZ$ and an outward shift in the supply schedule for NZ$.
d. an inward shift in the demand schedule for NZ$ and an inward shift in the supply schedule for NZ$.
Q. If portable disk players made in China are imported into the United States, the Chinese manufacturer is paid with
a. international monetary credits.
b. dollars.
c. yuan, the Chinese currency.
d. euros, or any other third currency.