International Finance MCQ Quiz - Multiple Choice Questions & Answers Page 5

41. When an enterprise has an unhedged receivable or payable denominated in a foreign currency and settlement of the obligation has not yet taken place, that firm is said to have:

1. Tax exposure
2. Operating exposure
3. Transaction exposure
4. Accounting exposure

42. Which of the following is NOT a criticism of a flexible exchange rate system?

1. Flexible exchange rates tend to be variable and therefore cause more uncertainty
2. Flexible exchange rate systems require discipline on the part of central banks that may not be forthcoming
3. Under flexible exchange rates, trading countries tend to rely more heavily upon tariffs and other restrictions
4. The flexible exchange rate system reduces the power of fiscal policy

43. Which of the following is not a type of foreign exchange exposure?

1. Tax exposure
2. Translation exposure
3. Transaction exposure
4. Balance sheet exposure

44. Which of the following is not an interest rate derivative used for interest rate management?

1. Swap
2. Cap
3. Floor
4. All of the above are interest rate derivatives

45. Which of the following is true of foreign exchange markets?

1. The futures market is mainly used by hedgers while the forward market is mainly used for speculating.
2. The futures market and the forward market are mainly used for hedging.
3. The futures market is mainly used by speculators while the forward market is mainly used for hedging.
4. The futures market and the forward market are mainly used for speculating.

46. Which of the following may be participants in the foreign exchange markets?

1. bank and nonbank foreign exchange dealers
2. central banks and treasuries
3. speculators and arbitragers
4. All of the above

47. Which of the methods below may be viewed as most effective in protecting against economic exposure?

1. Futures market hedging
2. Forward contract hedges
3. Geographical diversification
4. Money market hedges