International Finance MCQ Questions and Answers for Practice

Master the complexities of International Finance with our comprehensive Multiple Choice Questions (MCQs). Ideal for students and exam aspirants, these quizzes cover essential topics and prepare you for success.

About International Finance MCQ Questions

International Finance MCQs delve into key concepts such as exchange rates, international trade, financial markets, and global economic policies. These questions are designed to enhance your understanding and application of financial principles in a global context.

Why Practice International Finance Objective Questions?

Practicing these MCQs offers numerous benefits. They help you prepare for exams, improve your problem-solving skills, and boost your confidence for job interviews. Regular practice ensures that you stay updated with the latest trends and theories in international finance.

Who Should Use These MCQs?

Students preparing for school or college exams
Competitive exam aspirants
Candidates preparing for interviews

International Finance MCQ Questions for Practice

1. A floating exchange rate

is determined by the national governments involved
remains extremely stable over long periods of time
is determined by the actions of central banks
is allowed to vary according to market forces)

2. A forward contract to deliver British pounds for U)S) dollars could be described either as ..................or ...............

buying dollars forward; buying pounds forward
selling pounds forward; selling dollars forward
selling pounds forward; buying dollars forward
selling dollars forward; buying pounds forward

3. A forward currency transaction:

Is always at a premium over the spot rate
Means that delivery and payment must be made within one business day (USA/Canad
or two business days after the transaction date
Calls for exchange in the future of currencies at an agreed rate of exchange

4. A simultaneous purchase and sale of foreign exchange for two different dates is called

currency devalue
currency swap
currency valuation
currency exchange

5. A speculator in foreign exchange is a person who

buys foreign currency, hoping to profit by selling it a a higher exchange rate at some later date
earns illegal profit by manipulation foreign exchange
causes differences in exchange rates in different geographic markets
None of the above

6. A/An .............is an agreement between a buyer and seller that a fixed amount of one currency will be delivered at a specified rate for some other currency)

Eurodollar transaction
import/export exchange
foreign exchange transaction
interbank market transaction

7. According to the Purchasing Power Parity (PPP) theory

Exchange rates between two national currencies will adjust daily to reflect price level differences in the two countries
In the long run, inflation rates in different countries will equalize around the world
In the long run, the exchange rates between two national currencies will reflect pricelevel differences in the two countries
None of the above

8. An arbitrageur in foreign exchange is a person who

earns illegal profit by manipulating foreign exchange
causes differences in exchange rates in different geographic markets
simultaneously buys large amounts of a currency in one market and sell it in another market
None of the above

9. An economist will define the exchange rate between two currencies as the:

Amount of one currency that must be paid in order to obtain one unit of another currency
Difference between total exports and total imports within a country
Price at which the sales and purchases of foreign goods takes place
Ratio of import prices to export prices for a particular country

10. Arbitrageurs in foreign exchange markets:

attempt to make profits by outguessing the market)
make their profits through the spread between bid and offer rates of exchange)
take advantage of the small inconsistencies that develop between markets)
need foreign exchange in order to buy foreign goods)

11. Ask quote is for

Seller
Buyer
Hedger
Speculator

12. By definition, currency appreciation occurs when

the value of all currencies fall relative to gold.
the value of all currencies rise relative to gold.
the value of one currency rises relative to another currency.
the value of one currency falls relative to another currency.

13. Counterparty risk is:

The risk of loss when exchange rates change during the period of a financial contract
Based on the notional amount of the contract
The risk of loss if the other party to a financial contract fails to honour its obligation
Present only with exchange-traded options

14. Covered interest rate parity occurs as the result of:

the actions of market-makers
interest rate arbitrage
purchasing power parity
stabilising speculation

15. Exchange rates

are always fixed
fluctuate to equate the quantity of foreign exchange demanded with the quantity supplied
fluctuate to equate imports and exports
fluctuate to equate rates of interest in various countries