International Finance Multiple Choice Questions and Answers

31. The Bretton Woods accord

1. of 1879 created the gold standard as the basis of international finance
2. of 1914 formulated a new international monetary system after the collapse of the gold standard
3. of 1944 formulated a new international monetary system after the collapse of the gold standard
4. None of the above

32. The current system of international finance is a

1. gold standard
2. fixed exchange rate system
3. floating exchange rate system
4. managed float exchange rate system

33. The date of settlement for a foreign exchange transaction is referred to as:

1. Clearing date
2. Swap date
3. Maturity date
4. Value date

34. The difference between the value of a call option and a put option with the same exercise price is due primarily to:

1. The greater liquidity of call options
2. The use of continuous as opposed to discrete discounting
3. The differential between the current stock price and the exercise price in present value terms
4. The effect of dividends on the two securities

35. The exchange rate is the

1. total yearly amount of money changed from one countrys currency to another countrys currency
2. total monetary value of exports minus imports
3. amount of countrys currency which can exchanged for one ounce of gold
4. price of one countrys currency in terms of another countrys currency

36. The impact of Foreign exchange rate on firm is called as

1. Operating Exposure
2. Transaction exposure
3. Translation exposure
4. Business risk

37. The potential for an increase or decrease in the parents net worth and reported net income caused by a change in exchange rates since the last consolidation of international operations is a reflection of:

1. Translation exposure
2. Exchange rate exposure
3. Strategic exposure
4. Economic exposure

38. The Purchasing Power Parity (PPP) theory is a good predictor of

1. all of the following:
2. the long-run tendencies between changes in the price level and the exchange rate of two countries
3. interest rate differentials between two countries when there are strong barriers preventing trade between the two countries
4. either b or c

39. The Purchasing Power Parity should hold:

1. Under a fixed exchange rate regime
2. Under a flexible exchange rate regime
3. Under a dirty exchange rate regime
4. Always

40. Under a gold standard

1. a nations currency can be traded for gold at a fixed rate
2. a nations central bank or monetary authority has absolute control over its money supply
3. new discoveries of gold have no effect on money supply or prices
4. a & b