Top 250+ Solved International Financial Management MCQ Questions Answer
Q. In the foreign exchange market, the ________ of one country is traded for the ________ of another country.
a. currency; currency
b. currency; financial instruments
c. currency; goods
d. goods; goods
Q. Which of the following examples definitely illustrates a depreciation of the U.S. dollar?
a. The dollar exchanges for 1 pound and then exchanges for 1.2 pounds.
b. The dollar exchanges for 250 yen and then exchanges for 275 francs.
c. The dollar exchanges for 100 francs and then exchanges for 120 yen.
d. The dollar exchanges for 120 francs and then exchanges for 100 francs
Q. If U.S. inflation suddenly increased while European inflation stayed the same, there wouldbe:
a. an increased U.S. demand for Euros and an increased supply of Euros for sale.
b. a decreased U.S. demand for Euros and an increased supply of Euros for sale.
c. a decreased U.S. demand for Euros and a decreased supply of Euros for sale.
d. an increased U.S. demand for Euros and a decreased supply of Euros for sale.
Q. Kalons ltd. is a UK-based MNC that frequently imports raw materials from Canada. Kalons is typically invoiced for these goods in Canadian dollars and is concerned that the Canadian dollar will appreciate in the near future. Which of the following is not an appropriate hedging technique under these circumstances?
a. purchase Canadian dollars forward.
b. purchase Canadian dollar futures contracts.
c. purchase Canadian dollar put options.
d. purchase Canadian dollar call options.
Q. A _______ involves an exchange of currencies between two parties, with a promise tore-exchange currencies at a specified exchange rate and future date.
a. long-term forward contract
b. currency swap
c. parallel loan
d. money market hedge
Q. Assume that Parker Company will receive SF 200,000 in 360 days. Assume the following interest rates: UK Switzerland 360-day borrowing rate 7% 5% 360-day deposit rate 6% 4% Assume the forward rate of the Swiss franc is £0.44 and the spot rate of the Swiss franc is £0.42. If Parker Company uses a money market hedge, what equivalent amount could it receive in 360 days?
a. £101,904
b. £101,923
c. £88,769
d. £84,919
Q. Which of the following is the least effective way of hedging transaction exposure in the long run?
a. long-term forward contract.
b. parallel loan.
c. currency swap.
d. money market hedge.
Q. In a forward hedge, if the forward rate is an accurate predictor of the future spot rate,the real cost of hedging payables will be:
a. highly positive.
b. zero.
c. highly negative.
d. none of the above
Q. The potential effect of exchange rate fluctuations on foreign direct investment is expressedas _____ exposure.
a. translation
b. transaction
c. conversion
d. economic
Q. Which of the following is not one of the steps for currency exposure management:
a. forecast the degree of exposure
b. develop a reporting system to monitor exposure and exchange rate movements
c. buying additional foreign subsidiaries
d. assign responsibility for hedging exposure
Q. Operational techniques include:
a. diversification of a company’s operations
b. purchasing of currency options
c. exposure netting
d. both A and C
Q. A(n) _____ hedge protects the company from adverse exchange rate movements but allow the company to benefit from favorable movements.
a. balance-sheet
b. forward market
c. money market
d. options market
Q. Which of the following are rules to use when choosing between forward contracts and currency options:
a. When the quantity of a foreign-currency cash outflow is known, buy the currency forward.
b. When the quantity of a foreign-currency cash outflow is unknown, buy the currency forward.
c. When the quantity of a foreign-currency cash flow is partially known and partially uncertain, use a forward contract to hedge the known and unknown portions.
d. When the quantity of a foreign-currency cash inflow is known, buy the currency forwar