304 Unit Test Series
The most commonly accepted goal of the MNC is:
to maximize revenues
to maximize shareholder wealth
to maximize profitability of the
firm
to maximize earnings
Yes, the
answer is correct.
Feedback:
The commonly
accepted objective of an MNC is to maximize stockholder wealth on a global
basis, as reflected by stock price.
Accepted
Answers:
to maximize
profitability of the firm
Several
constraints confront the MNC in its attempt to maximize shareholder wealth.
Which of the following is probably not a constraint?
Competitive
Ethical
Regulatory
Enviorenmental
Yes, the
answer is correct.
Feedback:
Competitiveness
of sector is not a constraint for a MNC.
Accepted
Answers:
Competitive
Several
constraints confront the MNC in its attempt to maximize shareholder wealth.
Which of the following is probably not a constraint?
joint venture
new foreign subsidiary
licensing
franchising
Yes, the
answer is correct.
Feedback:
A product
cycle is the process by which a firm provides a specialized sales or service
strategy, support assistance, and possibly an initial investment in the
franchise in exchange for periodic fees.
Accepted
Answers:
joint
venture
Production
of goods and services has become globalized to a large extent as a result of
Natural resources being depleted in one
country after another
Skilled labor being highly mobile
Multinational corporations'
efforts to source inputs and locate production anywhere where costs are lower
and profits higher
Common tastes worldwide for the same goods and
services
Yes, the
answer is correct.
Feedback:
As a result
of Globalization, Supply chain has improved for sourcing input and delivering
output.
Accepted
Answers:
Multinational
corporations' efforts to source inputs and locate production anywhere where costs
are lower and profits higher
China has
experienced large trade surpluses. Chinese investors have responded to this by
Liquidating their positions in stocks to buy
dollar denominated bonds
Investing heavily in U.S. and
other foreign financial markets
Lobbying the U.S. government to depreciate its
currency
Lobbying the Japanese government to allow the
yen to appreciate
Yes, the
answer is correct.
Feedback:
Investing
heavily in US and other markets.
Accepted
Answers:
Investing
heavily in U.S. and other foreign financial markets
Due to the
larger opportunity set of funding sources around the world from which an MNC
can choose, an MNC may be able to obtain capital at a lower cost than a purely
domestic firm.
TRUE
FALSE
Yes, the
answer is correct.
Feedback:
MNC uses
such opportunities and invest in other markets
Accepted
Answers:
TRUE
One of the
most prevalent factors conflicting with the realization of the goal of an MNC
is the existence of agency problems.
TRUE
FALSE
Yes, the
answer is correct.
Feedback:
The
imperfect markets theory states that factors of production are some what
immobile, allowing firms to capitalize on a foreign country's resources.
Accepted
Answers:
TRUE
________ are
most commonly classified as a foreign direct investment.
Foreign acquisitions
Purchases of international stocks
Licensing agreements
Exporting transactions
Yes, the
answer is correct.
Feedback:
A foreign
acquisition is defined to include deals in which the target country is
different from the UK.
Accepted Answers:
Foreign
acquisitions
___________not
mentioned as a constraint interfering with the MNC goal?
economic
environmental
regulatory
ethical
Yes, the
answer is correct.
Feedback:
Open
economies what lures international invvestors.
Accepted
Answers:
economic
We are now
living in a world where all the major economic functions—consumption,
production, and investment__________.
are still inherently local
are still regional in nature
are slowly becoming globalized
are highly globalized
Yes, the answer
is correct.
Feedback:
Highly
globalized
Accepted
Answers:
are highly
globalized
The balance
of payments of country means
Balance in income and expenditure of govt.
Balance in demand and supply of money
Balance in export and import earnings
The annual account of foreign
trade
Yes, the
answer is correct.
Feedback:
The balance
of payments (BOP), also known as balance of international payments, summarizes
all transactions that a country's individuals, companies, and government bodies
complete with individuals, companies, and government bodies outside the
country.
Accepted
Answers:
The annual
account of foreign trade
Balance of
payments of a country includes:
Savings Account
Investments Account
Capital receipts and payments
Trade payable
Yes, the
answer is correct.
Feedback:
The balance
of payments include both the current account and capital account. The current
account includes a nation's net trade in goods and services, its net earnings
on cross-border investments, and its net transfer payments.
Accepted
Answers:
Capital
receipts and payments
The balance
of payment does not include
transactions in real assets
transactions of financial claims
transactions between two
non-residents
transactions in gold
Yes, the
answer is correct.
Feedback:
Transactions
between two foreign companies
Accepted
Answers:
transactions
between two non-residents
A debit in
balance of payments does not indicate
import of goods and services
foreign tourists encashing
travellers cheque in the country
investments made abroad
transactions in real assets
Yes, the
answer is correct.
Feedback:
Foreign
tourists encashing travellers cheque in the country
Accepted
Answers:
foreign
tourists encashing travellers cheque in the country
Difference
in balance of payments due to statistical discrepancies are recorded as
balance of trade
balance of payment
errors and omissions
deficit
Yes, the
answer is correct.
Feedback:
Errors and
omissions
Accepted
Answers:
errors and
omissions
A tariff is
a maximum limit on imports.
TRUE
FALSE
Yes, the
answer is correct.
Feedback:
Tariff
quotas work by assigning low or no duties to imports up to a certain volume
(primary duties) and then higher rates (secondary duties) to any imports that
exceed that level.
Accepted
Answers:
FALSE
Changes in
countries ownership of long-term and short-term assets are measured in the
balance of payments with the capital account.
TRUE
FALSE
Yes, the
answer is correct.
Feedback:
The current
account represents the investment in fixed assets in foreign countries that can
be used to conduct business operations.
Accepted
Answers:
TRUE
FDI in BOP
is covered under _______
Official reserve accoun
Current account
Capital account
Balancing items
Yes, the
answer is correct.
Feedback:
The Foreign
Direct Investment (FDI) inflows are reported under the capital account of BOP.
Accepted
Answers:
Capital
account
Balance of
payment records________transactions of the country with outsiders
economic
debit
credit
cash
Yes, the
answer is correct.
Feedback:
BOP records
economic transactions.
Accepted
Answers:
economic
For balance
of payments statistics, visible trade refers to trade in________.
goods only
service only
goods/commodities
gold
Yes, the
answer is correct.
Feedback:
The visible
trade balance (merchandise trade balance) is that part of the balance of trade
figures that refers to international trade in physical goods, but not trade in
services; it thus contrasts with the invisible balance. The balance is
calculated as the value of visible exports less the value of visible imports.
Accepted
Answers:
goods/commodities
Foreign
currency forward market is
Over the counter, Unorganized
market
organised market without trading
Organised, listed market
Unorganised Listed market
Yes, the
answer is correct.
Feedback:
OTC trading
is common in certain markets such as forex and commodities derivatives.
Accepted
Answers:
Over the
counter, Unorganized market
For
calculating cross currency rates, banks in India use the dollar/foreign
currency rate quoted in
Mumbai
London
New York
any international market
Yes, the
answer is correct.
Feedback:
International
Market
Accepted
Answers:
any
international market
Derivatives
can be used by an exporter for managing
currency risk
credit risk
cargo risk
loan risk
Yes, the
answer is correct.
Feedback:
Derivatives
can be used by an exporter for managing credit risk. Credit risk is the
possibility of a loss resulting from a borrower's failure to repay a loan or
meet contractual obligations.
Accepted
Answers:
credit risk
The
difference between buying rate and selling rate is the gross profit for the
bank and is know as the
bid rate
offer rate
spread
Swap
Yes, the
answer is correct.
Feedback:
Spread is
the gap between the bid and the ask prices of a security or asset, like a
stock, bond or commodity.
Accepted
Answers:
spread
Instability
in currency is called as
Country risk
Financial risk
Currency risk
Liquidity risk
Yes, the
answer is correct.
Feedback:
More
instability in currency is called as currency risk.
Accepted
Answers:
Currency
risk
A purchaser
of a currency put option buys the right to sell a specific currency at a
specific price within a specific period of time.
TRUE
FALSE
Yes, the
answer is correct.
Feedback:
Put options
give the holder the right to sell an underlying asset at a specified price (the
strike price). The seller (or writer) of the put option is obligated to buy the
stock at the strike price. Put options can be exercised at any time before the
option expires.
Accepted Answers:
TRUE
You can
discount the host-currency cash flows at the foreign risk-free rate,and then
translate the result at the expected future spot exchange rate.
TRUE
FALSE
Yes, the
answer is correct.
Feedback:
Money
markets and exchange markets are free and the host-currency cash flow is
risk-free.
Accepted
Answers:
FALSE
In quote of
1 USD = INR 73, _______ is a home country
India
USA
France
Russia
Yes, the
answer is correct.
Feedback:
India
Accepted
Answers:
India
______ is a
market where foreign currencies are bought & sold.
Stock market
Forex market
Capital market
Debt market
Yes, the
answer is correct.
Feedback:
The forex
market is the market in which participants can buy, sell, exchange, and
speculate on currencies. The forex market is made up of banks, commercial
companies, central banks, investment management firms, hedge funds, and retail
forex brokers and investors.
Accepted
Answers:
Forex market
_______
contacts are bilateral contracts.
Forward
Futures
Options
Swaps
Yes, the
answer is correct.
Feedback:
A forward
contract is a customizeable derivative contract between two parties to buy or
sell an asset at a specified price on a future date.
Accepted
Answers:
Forward
The Exchange
rate is the
Opportunity cost at which goods are produced
domestically
Balance of trade ratio of one country to
another
Price of one country's currency
expressed in terms of another country's currency
Amount of currency that can be purchased with
one ounce of Gold
Yes, the
answer is correct.
Feedback:
An exchange
rate is the value of a nation's currency in terms of the currency of another
nation or economic zone.
Accepted
Answers:
Price of one
country's currency expressed in terms of another country's currency
For floating
exchange rates, a decline in the value of a currency is referred to as:
a devaluation
a revaluation
a depreciation
an appreciation
Yes, the
answer is correct.
Feedback:
A clean
float, also known as a pure exchange rate, occurs when the value of a currency
is determined purely by supply and demand.
Accepted
Answers:
a
devaluation
Exchange
rate entail delivery of trade currency within two business days know as
Forward rate
Future rate
Spot rate
Bid rate
Yes, the
answer is correct.
Feedback:
Exchange
rate entail delivery of trade currency within two business days know as spot
rate.
Accepted
Answers:
Spot rate
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
Creates imbalances in foreign exchange
Yes, the
answer is correct.
Feedback:
In foreign
exchange, an arbitrageur is a person who performs arbitrage and makes the
profit from the difference of market prices.
Accepted
Answers:
simultaneously
buys large amounts of a currency in one market and sell it in another market
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
Creates imbalances in foreign exchange
Yes, the
answer is correct.
Feedback:
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.
Accepted
Answers:
buys foreign
currency, hoping to profit by selling it a a higher exchange rate at some later
date
The term
"exchange rate" refers to the price of one currency in terms of
another.
TRUE
FALSE
Yes, the
answer is correct.
Feedback:
An exchange
rate is the value of a nation's currency in terms of the currency of another
nation or economic zone.
Accepted
Answers:
TRUE
Because
exchange rates are always in equilibrium, companies cannot be negatively
affected by exchange rate movements.
TRUE
FALSE
Yes, the
answer is correct.
Feedback:
The exchange
rate at which the demand for a currency and supply of the same currency are
equal. The equilibrium exchange rate indicates that the price of exchanging two
currencies will remain stable.
Accepted Answers:
FALSE
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
Yes, the
answer is correct.
Feedback:
The asset
market model of exchange rate determination states that the exchange rate
between two currencies represents the price that just balances the relative
supplies of, and demand for, assets denominated in those currencies.
Accepted
Answers:
Amount of
one currency that must be paid in order to obtain one unit of another currency
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
Yes, the
answer is correct.
Feedback:
Foreign
exchange transaction is a type of currency transaction that involves two
countries. Generally, a foreign exchange transaction involves conversion of
currency of one country with that of another.
Accepted
Answers:
foreign
exchange transaction
Foreign
exchange market is considered 24 hours market ___________.
it is open all through the day
all transactions are to be settled with in 24
hours
due to geographical dispersal at
least one market is active at any point of time
minimum 24 hours must lapse before any
transaction is settled
Yes, the
answer is correct.
Feedback:
Because
foreign currencies are in high demand, the forex market is open 24 hours a day,
and trading is not done at one central location.
Accepted
Answers:
due to
geographical dispersal at least one market is active at any point of time
Transaction
exposure can be hedged
by internal methods only
by external methods only
either by internal methods or by external
methods, but not by both
either by internal methods or by
external methods or a combination of both
Yes, the
answer is correct.
Feedback:
One way that
firms can limit their exposure to changes in the exchange rate is to implement
a hedging strategy. Through hedging using forward rates, they may lock in a
favorable rate of currency exchange and avoid exposure to risk. Hedging
strategies may include currency swaps or currency futures.
Accepted
Answers:
either by
internal methods or by external methods or a combination of both
The exchange
loss/gain due to transaction exposure is reckoned on-
entering into a transaction in foreign
exchange
quoting a price for a foreign currency
transaction
conversion of foreign currency
into domestic currency
entry in the books of accounts
Yes, the
answer is correct.
Feedback:
A currency's
exchange rates may be floating (that is, they may change from day to day) or
they may be pegged to another currency.
Accepted
Answers:
conversion
of foreign currency into domestic currency
A
transaction in which the currencies to be exchanged the next day of the
transaction is known as
ready transaction
value today
spot transactions
Value tomorrow
Yes, the
answer is correct.
Feedback:
Value
tomorrow refers to spot foreign exchange transaction in which delivery and
payment are made on the next business day after the contract. Normal delivery
is two business days after the contract.
Accepted
Answers:
Value
tomorrow
The external
methods of hedging transaction exposure does not include
forward contract hedge
money market hedge
cross hedging
futures hedging
Yes, the
answer is correct.
Feedback:
The term
"cross hedge" refers to the practice of hedging risk using two
distinct assets with positively correlated price movements. The investor takes
opposing positions in each investment in an attempt to reduce the risk of
holding just one of the securities.
Accepted
Answers:
cross
hedging
A limitation
of hedging translation exposure is that translation losses are not tax
deductible, whereas gains on forward contracts used to hedge translation
exposure are taxed.
TRUE
FALSE
Yes, the
answer is correct.
Feedback:
Net asset
translation exposures arise when the value of non-functional currency assets
and liabilities are to be translated into the functional currency of the
company.
Accepted
Answers:
TRUE
A foreign
subsidiary with more susceptible expenses than revenue to exchange rate
movements will be favorably affected by an appreciation of the foreign
currency.
TRUE
FALSE
Yes, the
answer is correct.
Feedback:
A foreign
subsidiary with more revenue than expenses denominated in a foreign currency
will be favorably affected by appreciation of the foreign currency.
Accepted
Answers:
FALSE
Translation
exposure arises in respect of items translated at________
current rate
historical rate
average rate
primary rate
Yes, the
answer is correct.
Feedback:
Translation
exposure (also known as translation risk) is the risk that a company's
equities, assets, liabilities, or income will change in value as a result of
exchange rate changes.
Accepted
Answers:
current rate
Translation
loss is_____
a loss to the parent company
a loss to the subsidiary company
a notional loss
an actual loss
Yes, the
answer is correct.
Feedback:
By
"notional loss" is meant a loss which exists in the eyes of the law
but which, on the facts, is either different in kind or in extent from the
actual loss.
Accepted
Answers:
a notional
loss
Maintaining
a foreign currency account is helpful to_________.
avoid transaction cost
avoid exchange risk
avoid both transaction cost and
exchange risk
avoid exchange risk and domestic currency
depreciation
Yes, the
answer is correct.
Feedback:
Help in to
avoid both transaction cost and exchange risk
Accepted
Answers:
avoid both
transaction cost and exchange risk
Translation
loss may occur when______
exposed assets exceed exposed liabilities and
foreign currency appreciates
exposed assets exceed exposed
liabilities and foreign currency depreciates
the subsidiary's balance sheet shows a loss
the foreign currency depreciates
Yes, the
answer is correct.
Feedback:
The loss
that occurs when one exchanges one floating currency for another and then
trades back into the first currency after it has become stronger.
Accepted
Answers:
exposed
assets exceed exposed liabilities and foreign currency depreciates
An
authorised person under FEMA does not include
an authorised dealer
an authorised money changer
an off-shore banking unit
an exchange broker
Yes, the
answer is correct.
Feedback:
An "
Authorized Person" under FEMA, is a person who is authorized by Reserve
Bank to deal in Foreign Exchange
Accepted
Answers:
an exchange
broker
According to
classification by IMF, the currency system of India falls under
Managed floating
independently floating
crawling peg
pegged to basked of currencies
Yes, the
answer is correct.
Feedback:
According to
classification by IMF, the currency system of India falls under managed
floating.
Accepted
Answers:
Managed
floating
A foreign
currency account maintained by a bank abroad is its
nostro account
vostro account
loro account
foreign bank account
Yes, the
answer is correct.
Feedback:
NOSTRO is a
Latin word and means 'Ours'. Thus, NOSTRO account means 'our account with you'.
It is an account maintained by a bank with its branch or another bank at
overseas centre and the account is maintained in foreign currency.
Accepted
Answers:
nostro
account
'Non-resident
Bank Accounts' refer to
nostro account
vostro account
loro account
accounts opened in offshore centres
Yes, the
answer is correct.
Feedback:
A vostro
account is an account a correspondent bank holds on behalf of another bank.
These accounts are an essential aspect of correspondent banking in which the
bank holding the funds acts as custodian for or manages the account of a
foreign counterpart.
Accepted
Answers:
vostro
account
The term
'Nostro account' means
Our account with you
Your account with us
their account with them
No account exist
Yes, the
answer is correct.
Feedback:
NOSTRO is a
Latin word and means 'Ours'. Thus, NOSTRO account means 'our account with you'.
It is an account maintained by a bank with its branch or another bank at
overseas centre and the account is maintained in foreign currency.
Accepted
Answers:
Our account
with you
Government
controls such as taxes on purchases of foreign bonds can impact the value of a
currency.
TRUE
FALSE
Yes, the
answer is correct.
Feedback:
TRUE
Accepted
Answers:
TRUE
Under FEMA,
the RBI has been authorised to make regulations to carry out the provisions of
the Act.
TRUE
FALSE
Yes, the
answer is correct.
Feedback:
The Reserve
bank has also made Regulations/ issued Notifications under various provisions
of the Act. ... In terms of Section 10(1) of the FEMA, 1999 Reserve Bank is
empowered to authorise any person to be known as authorised person to deal in
foreign exchange as an authorised dealer or money changer.
Accepted
Answers:
TRUE
The
authorised dealers under FEMA are classified into_______categories.
3
1
2
4
Yes, the
answer is correct.
Feedback:
3: Banks,
Upgraded FFMCs, Select financial and other Institutions
Accepted
Answers:
3
_____ was
introduced at a time when forex reserves of the country were low.
FERA
FEMA
GATT
EXIM
Yes, the
answer is correct.
Feedback:
Foreign
Exchange Regulation Act (FERA) was promulgated in 1973 and it came into force
on January 1, 1974. Section 29 of this Act referred directly to the operations
of MNCs in India
Accepted
Answers:
FERA
Non-resident
bank accounts are maintained in__________.
the permitted currencies
the currency of the country of the bank
maintaining the account
the currencies in which FCNR accounts are
permitted to be maintained
Indian rupee
Yes, the
answer is correct.
Feedback:
NRE Accounts
are maintained in INR. This means that when you deposit the money in the NRE
Account, the foreign currency is converted to Indian rupees at the prevailing
foreign exchange rates.
Accepted
Answers:
Indian rupee
Global bond
market consists of all bonds sold by issued companies, governments, or other
firms
within their own countries
outside their own countries
London Banks
to developing nations only
Yes, the
answer is correct.
Feedback:
Global bond
market consists of all bonds sold by issued companies, governments, or other
firms outside their own countries. A global bond is a type of bond that can be
traded in a domestic or European market. It is a bond issued and traded outside
the country where the currency of the bond is denominated.
Accepted
Answers:
outside
their own countries
Eurobonds
are admired because
they are less risky than traditional bonds
European companies are considered very stable
absence of government regulation
they are always denominated in euro
Yes, the
answer is correct.
Feedback:
Eurobonds
are admired because of absence of government regulation. ... Eurobonds are
important because they help organizations raise capital while having the
flexibility to issue them in another currency.
Accepted
Answers:
absence of
government regulation
An American
Depositary Receipt is defined as a security:
that has been deposited in an interest-bearing
account at a U.S. bank.
issued outside of the U.S. that represents
shares of a U.S. stock.
issued in the U.S. which
represents shares of a foreign stock.
that has a guarantee of payment from a U.S.
bank.
Yes, the
answer is correct.
Feedback:
An American
Depositary Receipt is defined as a security: ... issued in the U.S. that
represents shares of a foreign stock.
Accepted
Answers:
issued in
the U.S. which represents shares of a foreign stock.
If the U.S.
dollar appreciates relative to the British pound
it will take fewer dollars to
purchase a pound
it will take more dollars to purchase a pound
it is called a weakening of the dollar
it is called a weakening of the international
currency
Yes, the answer
is correct.
Feedback:
it will take
fewer dollars to purchase a pound
Accepted
Answers:
it will take
fewer dollars to purchase a pound
Which one of
the following terms is used to describe international bonds issued in a single
country and generally denominated in that country's currency?
Eurobonds
ADR
Foreign Bonds
Swaps
Yes, the
answer is correct.
Feedback:
Foreign
bond, A Bond denominated in the local currency of the country where the bond is
issued, issued by a foreign borrower, and registered for sale to investors in
the country where it is issued. For example, a US dollar-denominated bond
issued in the US market by an issuer that resides outside the United States.
Accepted
Answers:
Foreign
Bonds
The demand
curve for foreign currency is upward sloping, because when the foreign currency
is worth more, more people will want to buy it.
TRUE
FALSE
Yes, the
answer is correct.
Feedback:
False, The
LM curve is upward sloping because higher income results in higher demand for
money, thus resulting in higher interest rates.
Accepted
Answers:
FALSE
Government
controls such as taxes on purchases of foreign bonds can impact the value of a
currency.
TRUE
FALSE
Yes, the
answer is correct.
Feedback:
TRUE,
Government control is against the open economy
Accepted
Answers:
TRUE
In ADR/GDR
process, __________ issues depository receipts in foreign markets.
Custodian Bank
Depository Bank
Issuing Company
Lead manager
Yes, the
answer is correct.
Feedback:
A depository
can be an organization, bank, or institution that holds securities and assists
in the trading of securities. A depository provides security and liquidity in
the market, uses money deposited for safekeeping to lend to others, invests in
other securities, and offers a funds transfer system.
Accepted
Answers:
Depository
Bank
_______________rate
that most international banks charge when they loan Eurodollars to other banks.
ADR
LIBOR
Cross rate
Swap rate
Yes, the
answer is correct.
Feedback:
The London
Interbank Offered Rate (LIBOR) is a benchmark interest rate at which major
global banks lend to one another in the international interbank market for
short-term loans.
Accepted
Answers:
LIBOR
The spot
exchange rate is the exchange rate that applies to a/an_________.
LIBOR transactions
ADR transactions
Spot trade
Forward trade
Yes, the
answer is correct.
Feedback:
A spot
trade, also known as a spot transaction, refers to the purchase or sale of a
foreign currency, financial instrument or commodity for instant delivery on a specified
spot date.
Accepted
Answers:
Spot trade
Which of the
following is considered lending for promotion of exports?
Packing Credit
Overdraft
Cash Credit Account
Bill Discounting
Yes, the
answer is correct.
Feedback:
Packing
credit is basically a loan provided to exporters or sellers to finance the
goods' procurement before shipment. The bank will make the funds available to a
letter of credit issued favoring the seller and a confirmed order for selling
the goods or services.
Accepted
Answers:
Packing
Credit
Dumping in
the context of international trade refers to
Exporting goods at prices below
the cost of production
Exporting goods of inferior quality
Exporting goods only to re-import them at
cheaper rates
Exporting goods without paying appropriate
taxes in the receiving country
Yes, the
answer is correct.
Feedback:
Dumping is,
in general, a situation of international price discrimination, where the price
of a product when sold in the importing country is less than the price of that
product in the market of the exporting country.
Accepted
Answers:
Exporting
goods at prices below the cost of production
Which among
the following is the most important source region of NRI remittances to India?
North America
Europe
Asia Pacific
South America
Yes, the
answer is correct.
Feedback:
Asia Pacific
Accepted
Answers:
Asia Pacific
In context
with the two way trade of India with different regions, which among the
following region is India's largest trade partner?
EU Region
Gulf Region
North America
Latin America
Yes, the
answer is correct.
Feedback:
Gulf Region
Accepted
Answers:
Gulf Region
Consider an
exporter that sells its accounts receivables off to another firm that becomes
responsible for obtaining cash from the various importers. This reflects:
accounts receivable financing.
Consignment
factoring
Letter of credit
Yes, the
answer is correct.
Feedback:
Factoring is
a financial transaction and a type of debtor finance in which a business sells
its accounts receivable (i.e., invoices) to a third party (called a factor) at
a discount.
Accepted
Answers:
factoring
The
all-in-rate a bank charges its customer(s) for accepting drafts includes both
the discount rate and the acceptance commission.
TRUE
FALSE
Yes, the
answer is correct.
Feedback:
TRUE
Accepted
Answers:
TRUE
Using
international trade as a method of conducting international business is a
relatively bold approach that can be used by firms to penetrate markets.
TRUE
FALSE
Yes, the
answer is correct.
Feedback:
TRUE
Accepted
Answers:
TRUE
A ____
provides a summary of freight charges and conveys title to the merchandise.
a letter of credit
a banker's acceptance
a bill of lading
bill of exchange
Yes, the
answer is correct.
Feedback:
A bill of
lading (BL or BoL) is a legal document issued by a carrier to a shipper that
details the type, quantity and destination of the goods being carried.
Accepted
Answers:
a bill of
lading
With ____,
the exporter ships the goods to the importer while still retaining actual title
to the merchandise.
a letter of credit arrangement
a letter of credit arrangement
a draft arrangement
a consignment arrangement
Yes, the
answer is correct.
Feedback:
In
consignment arrangements, a consignee receives goods from a vendor without
obtaining the full right to receive benefits from the asset or to direct use of
the asset. ... An entity must determine if an arrangement is a consignment as
this will affect the timing of revenue recognition.
Accepted
Answers:
a consignment
arrangement
____________terms
provides the supplier with the greatest degree of protection.
a letter of credit
Consignment
prepayment
drafts (sight/time)
Yes, the
answer is correct.
Feedback:
Prepayment
provides the supplier with the greatest degree of protection.
Accepted
Answers:
prepayment
The cost of
debt varies across countries for several reasons. Which of the following can
cause a difference in the debt risk premiums across countries?
demographics
monetary policies
tax laws
government willingness to rescue
failing firms
Yes, the
answer is correct.
Feedback:
Government
willingness to rescue failing firms can make a difference in the debt risk
premiums across countries.
Accepted
Answers:
government
willingness to rescue failing firms
An argument
for MNCs to have a debt-intensive capital structure is:
they are well diversified.
foreign government tax rules may change over
time.
exposure to exchange rate fluctuations.
exposure to fund blockage.
Yes, the
answer is correct.
Feedback:
An argument
for MNCs to have a debt-intensive capital structure is well diversification.
Accepted
Answers:
they are
well diversified.
The capital
asset pricing theory is based on the premise that:
only unsystematic variability in cash flows is
relevant.
only systematic variability in
cash flows is relevant.
both systematic and unsystematic variability
in cash flows are relevant.
neither systematic nor unsystematic
variability in cash flows is relevant.
Yes, the
answer is correct.
Feedback:
The model is
based on the relationship between an asset's beta, the risk-free rate
(typically the Treasury bill rate) and the equity risk premium, or the expected
return on the market minus the risk-free rate.
Accepted
Answers:
only
systematic variability in cash flows is relevant.
A risk
associated with the project and the way considered by well diversified
stockholder is classified as
Expected risk
Beta risk
Industry risk
Returning risk
Yes, the
answer is correct.
Feedback:
Beta, in the
context of investing, is also known as beta coefficient and is a measure of the
volatility, or systematic risk, of a security or a portfolio in comparison to
the market as a whole.
Accepted
Answers:
Beta risk
During the
planning period, a marginal cost for raising a new debt is classifed as
Debt cost
Relevant cost
Borrowing cost
Embedded cost
Yes, the
answer is correct.
Feedback:
Relevant
cost is a managerial accounting term that describes avoidable costs that are
incurred only when making specific business decisions.
Accepted
Answers:
Relevant
cost
Investors in
some countries are restricted by their governments to invest in local markets
only. Even when investors are allowed to invest in other countries, they may
not have complete information about stocks of companies outside their home
countries. This represents an implicit barrier to cross-border investing.
TRUE
FALSE
Yes, the
answer is correct.
Feedback:
TRUE
Accepted
Answers:
TRUE
Increased
debt financing by the subsidiary will always be offset by reduced debt financing
by the parent to keep the "global" target capital structure.
TRUE
FALSE
Yes, the
answer is correct.
Feedback:
TRUE
Accepted
Answers:
TRUE
Other things
being equal, countries with relatively _______ populations and _______
inflation are more likely to have a low cost of capital.
young, high
old, high
old, low
young, low
Yes, the
answer is correct.
Feedback:
We find a
systematic relationship between the age structure and inflation: an increase in
the share of the dependant population is generally associated with higher
inflation, whereas an increase in the working age population has the opposite
effect.
Accepted
Answers:
old, low
MNCs
probably prefer to use ____________ foreign debt when their foreign
subsidiaries are subject to potentially ___________ local currencies.
more, strong
more, weak
less, strong
less, weak
Yes, the
answer is correct.
Feedback:
More, Weak
Accepted
Answers:
more, weak
To the
extent that individual economies are ______________ each other, net cash flows
from a portfolio of subsidiaries should exhibit ________ variability, which may
reduce the probability of bankruptcy.
dependent on, less
dependent on, more
independent of, less
independent of, more
Yes, the
answer is correct.
Feedback:
independent
of, less
Accepted
Answers:
independent
of, less
In order to
develop a distribution of possible net present values for international
projects, a form should use
A risk adjusted discount rate
A payback period
Certainty equivalents
Simulation
Yes, the
answer is correct.
Feedback:
The
risk-adjusted discount rate is based on the risk-free rate and a risk premium.
The risk premium is derived from the perceived level of risk associated with a
stream of cash flows for which the discount rate will be used to arrive at a
net present value.
Accepted
Answers:
A risk
adjusted discount rate
Which of the
following capital budgeting techniques takes into account the incremental
accounting income rather than cash flows:
Net present value
Internal rate of return
Accounting/Simple rate of return
Cash payback period
Yes, the
answer is correct.
Feedback:
Accounting
Rate of Return (ARR) is the percentage rate of return that is expected from an
investment or asset compared to the initial cost of investment. Typically, ARR
is used to make capital budgeting decisions.
Accepted
Answers:
Accounting/Simple
rate of return
Which of the
following techniques does not take into account the time value of money?
Internal rate of return method
Simple cash payback method
Net present value method
Discounted cash payback method
Yes, the
answer is correct.
Feedback:
the payback
method does not take into account the time value of money.
Accepted
Answers:
Simple cash
payback method
The
difference between the present value of cash inflows and the present value of
cash outflows associated with a project is known as:
net present value of the project
net future value of the project
net historical value of the project
net salvage value of the project
Yes, the
answer is correct.
Feedback:
Net present
value (NPV) is the difference between the present value of cash inflows and the
present value of cash outflows over a period of time.
Accepted
Answers:
net present
value of the project
If present
value of cash outflow is equal to present value of cash inflow, the net present
value will be:
positive
negative
zero
infinite
Yes, the
answer is correct.
Feedback:
A NPV of 0
means there is no change in value from the investment. In theory, investors
should invest when the NPV is positive and it has the highest NPV of all
available investment options.
Accepted
Answers:
zero
Increased
investment by the parent in foreign subsidiary causes more exchage rate
exposure to the parent over time because the cash flows remitted to the parent
will be larger-
TRUE
FALSE
Yes, the
answer is correct.
Feedback:
Yes
Accepted
Answers:
TRUE
Blocked
funds may penalize a project if the return on the forced reinvestment in the
foreign country is less than required rate of return on the project
TRUE
FALSE
Yes, the answer
is correct.
Feedback:
A blocked
fund is defined as money or capital realized when a foreign operation involving
the transfer of funds is blocked as a result of regulations imposed by the
government of the country where the money was generated.
Accepted
Answers:
TRUE
Generally, a
project is considered acceptable if its net present value is_________.
negative or zero
negative or positive
positive or zero
negative
Yes, the
answer is correct.
Feedback:
a project is
considered acceptable if its payback is less than the maximum cost recovery
time established by the firm.
Accepted
Answers:
positive or
zero
An increase
in the discount rate will______
reduce the present value of
future cash flows.
increase the present value of future cash
flows.
have no effect on net present value.
compensate for reduced risk.
Yes, the
answer is correct.
Feedback:
a raised
discount rate makes it more expensive for banks to borrow and thereby
diminishes the money supply while retracting investment activity.
Accepted
Answers:
reduce the
present value of future cash flows.
If the
profitability index of a project is 0.75, it means:
the NPV of the project is greater than zero
the project's cost is less than the present
value of its cash flows
the NPV of the project is greater than 1
the project returns 75 cents in
present value for each dollar invested in it
Yes, the
answer is correct.
Feedback:
the project
returns 75 cents in present value for each dollar invested in it. the NPV of
the project is greater than zero.
Accepted
Answers:
the project
returns 75 cents in present value for each dollar invested in it
The foreign
direct investment includes
Intellectual Property
Human Resource
Tangible Goods
Intangible Goods
Yes, the
answer is correct.
Feedback:
Foreign
Direct Investment includes Tangible Goods. There are two types of categories of
assets called tangible and intangible assets. Tangible assets are typically
physical assets or property owned by a company, such as computer equipment.
Accepted
Answers:
Tangible
Goods
The disputes
of FDI are over
Concern
Interest
Regard
Hobby
Yes, the
answer is correct.
Feedback:
The disputes
of FDI are over interest.
Accepted
Answers:
Interest
When capital
and labour are moved internationally, it will help in developing
Economic growth gains
Capital gains
More gains from income
More gains from trade
Yes, the
answer is correct.
Feedback:
When capital
and labour are moved internationally, it will help in developing more gains
from income.
Accepted
Answers:
More gains
from income
Removing
barriers or restrictions set by the government is known as
Globalisation
Privatisation
Nationalism
Liberalisation
Yes, the
answer is correct.
Feedback:
The term
liberalisation denotes removing restrictions from certain private individual
activity, typically pertaining to economic system.
Accepted
Answers:
Liberalisation
Which of the
following is a ‘barrier’ on foreign trade?
Tax on import
Quality control
Sales tax
Tax on local trade
Yes, the
answer is correct.
Feedback:
Import duty
is a tax collected on imports and some exports by a country's customs
authorities.
Accepted
Answers:
Tax on
import
MNCs
commonly consider direct foreign investment because it can improve their
profitability and enhance shareholder wealth.
TRUE
FALSE
Yes, the
answer is correct.
Feedback:
Yes
Accepted
Answers:
TRUE
The key to
international diversification is selecting foreign projects whose performance
levels are highly correlated over time.
TRUE
FALSE
Yes, the
answer is correct.
Feedback:
FALSE
Accepted
Answers:
FALSE
When a firm
perceives that a foreign currency is _________, the firm may attempt direct
foreign investment in that country, as the initial outlay should be relatively
_______.
overvalued, high
overvalued, low
Undervalued, high
Undervalued, low
Yes, the
answer is correct.
Feedback:
Undervalued,
Low
Accepted
Answers:
Undervalued,
low
When
economic conditions of two countries are ________, then a firm would _______
its risk by operating in both countries instead of concentrating just in one.
highly correlated, reduce
not highly correlated, not reduce
not highly correlated, reduce
highly correlated, not reduce
Yes, the
answer is correct.
Feedback:
Not highly
correlated, Reduce
Accepted
Answers:
not highly correlated,
reduce
Based on the
text, it should be obvious that markets are__________ in reality, and
consequently, monopolistic advantages _________ be exploited.
perfect, may possibly
perfect, cannot
imperfect, may possibly
imperfect, cannot
Yes, the
answer is correct.
Feedback:
Imperfect,
May possibly
Accepted
Answers:
imperfect,
may possibly
The risk on
a portfolio which cannot be eliminated or reduced by placing it in diversified
portfolio is classified as
Diversifiable risk
Market risk
Stock risk
Portfolio risk
Yes, the
answer is correct.
Feedback:
Market risk,
also known as systematic risk, refers to the uncertainty associated with ...
the beta coefficient to identify potential losses via statistical risk
management.
Accepted
Answers:
Market risk
In the asset
portfolio, the number of stocks are increased to:
Reduce return
Reduce average
Reduce risk
Increase prices
Yes, the
answer is correct.
Feedback:
In the asset
portfolio, the number of stocks are increased to reduce risk.
Accepted
Answers:
Reduce risk
What happens
to corporate bond with a fixed interest rate, if interest rates in nation
increase?
Decrease in value
Returned to corporation
Remain unchanged
Increase in value
Yes, the
answer is correct.
Feedback:
Decrease in
value
Accepted
Answers:
Decrease in
value
Political
consistency is chief aspect concerning which of the following risks?
Exchange risk
Systematic risk
Non-systematic risk
Country risk
Yes, the
answer is correct.
Feedback:
Risk that is
unique to a certain asset or company. An example of nonsystematic risk is the
possibility of poor earnings or a strike amongst a company's employees.
Accepted
Answers:
Non-systematic
risk
Which of the
following statements about portfolio diversification is correct?
Proper diversification can reduce or eliminate
systematic risk
The risk-reducing benefits of diversification
do not occur meaningfully untill at least 40-50 individual
Because diversification reduces a portfolio's
total risk, it necessarily reduces the portfolio's expected return
As more securities are added to
a portfolio, total risk would be expected
Yes, the
answer is correct.
Feedback:
Portfolio
diversification is the process of investing your money in different asset
classes and securities in order to minimize the overall risk of the portfolio.
Accepted
Answers:
As more
securities are added to a portfolio, total risk would be expected
A highly
risk-averse investor will never select a high-risk portfolio.
TRUE
FALSE
Yes, the
answer is correct.
Feedback:
The
risk-averse investor will pass up the opportunity for a large gain in favor.
Accepted
Answers:
FALSE
A
risk-averse investor will select a high-variance portfolio only if the expected
excess return is sufficiently high.
TRUE
FALSE
Yes, the
answer is correct.
Feedback:
A risk
averse investor avoids risks. S/he stays away from high-risk investments and
prefers investments which provide a sure shot return.
Accepted
Answers:
TRUE
_____________is
a statistic that measures how the returns of two risky assets move together?
Correlation
Standard deviation
Variance
Median
Yes, the
answer is correct.
Feedback:
Correlation
is a statistical measure that expresses the extent to which two variables are
linearly related.
Accepted
Answers:
Correlation
International
capital market____________.
limits available set of lending opportunities
increases overall portfolio risk for investors
allows investors to reduce risk
by holding international securities whose price move independently
is easily accessible to everyone
Yes, the
answer is correct.
Feedback:
International
capital market is that financial market or world financial center where shares,
bonds, debentures, currencies, hedge funds, mutual funds and other long term
securities are purchased and sold.
Accepted
Answers:
allows
investors to reduce risk by holding international securities whose price move
independently
The current
account of balance of payments includes__________.
unilateral payments
portfolio investments
short term borrowings
long term borrowings
Yes, the
answer is correct.
Feedback:
Unilateral
transfers is one part of the current account of the balance of payments. It
tracks the "one-way" transfer of funds from one country to another
that are made without any counter flow or exchange or goods and services.
Accepted
Answers:
unilateral
payments
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