Fin 403 final exam

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This work of FIN 403 Final Exam shows the solutions to the
following problems:
1.The current currency in Italy is called:
2.A Forward contract:
3.If the US Dollar appreciates compared to the Euro:
4.All else equal, if the Fed increases interest rates:
5.In general, when speculating on exchange rate movements,
the speculator will borrow the currency that is expected to
appreciate and invest in the country whose currency is
expected to depreciate.
6. To force the value of the pound to appreciate against the
dollar, the Federal Reserve should:
7. A strong dollar is normally expected to cause:
8. The value of the Canadian dollar, Japanese yen, and
Australian dollar with respect to the U.S. dollar are part of a:
9. Graylon, Inc., based in Washington, exports products to a
German firm and will receive payment of
Business - Finance
1. Which of the following is an international finance risk
factor? a) Political b) Temperature c) Balance of payment
2. What is most likely the consequence of globalization? a)
Prosperous world economy b) More trade opportunities c)
Decrease in local job opportunities
3. What is World Bank’s objective? a) Promote stability in
exchange rates b) Make loans to countries in order to

2. enhance economic development c) Promote private
enterprise within countries
4. 1 year go, 1 Hong Kong Dollar. Currently 1 Hong Kong
Dollar. Therefore, US Dollar has a) Appreciated b)
Depreciated c) No way to tell.
5. Which of the following BEST exemplifies the relationship
among the international flow of goods, services, and capital,
the balance of payments, and domestic economic behavior?
a) Interest rate, depreciation rate, and cross rate b) Inflation
rate, tax rate, and deflation rate c) Interest rate, inflation,
and exchange rate
6. Appreciation of US Dollar will encourage a) Importation b)
Exportation c) no change in America.
7. A weak dollar places a) downward b) upward pressure on
U.S. inflation, which in turn places further downward
pressure on the value of the dollar.
8. Forward currency contracts are created in organized
exchanges like the NYSE or the Chicago Mercantile Exchange.
a) True b) False
9. Which of the following is a function of the derivatives
market? a) Selling b) Hedging c) Fisher effect d) Increased
cost of capital
10. Which of the following derivatives could be used in
speculation and hedging in the foreign market? a) Money
market b) Capital market c) Option d) Internet
11. Which of the following is NOT an international risk
consideration? A) Terrorism b) Poverty c) Historical exchange
rate d) Cross-cultural risks
12. Select the characteristic of Monopoly a) Investment in
Research Development b) Buyers can shop around c) Pricing
is determined through supply and demand.

3. 13. Which would be the most favorable to foreign investment
for a U.S. organization? a) Canada-interest rate 14%, inflation
10% b) Japan-interest rate 15%, inflation 16% c) Iraq-interest
rate 25%, inflation 20% d) Australia-interest rate 13%,
inflation 18%
14. a) High national income b) Strong local currency c)
Political situation tends NOT to result in a strong demand for
imports and a current account deficit.
15. The difference between Future Contracts and Call options
is that future contracts require an obligation, which option
does not. a) True b) False
16. What type of risk exposure measures consolidated
financial statements to exchange rate movements? a)
Transaction exposure b) Economic Exposure c) Translation
Exposure
17. Currently, 1 US Dollar. Therefore, 1,000 ,490 US Dollar. 2
years ago, 1 US Dollar. How much Euro would 1,490 US Dollar
convert to back 2 years ago? a) 1,000 Euro b) 1,173 Euro c)
1,500 Euro
18. Select the factors used by MNCs to measure a country’s
financial risk. a) Interest rate b) Exchange rate c) Inflation
rates d) all the above
19. What instrument issued by a bank on behalf of the
importer (buyer) promising to pay the exporter (beneficiary)
upon presentation of shipping documents in compliance with
the terms stipulated. a) Draft b) Letter of Credit c) Open
account
20. Decisions to invest in a foreign country must weight the
potential benefits against costs and additional risk. Which
one is least likely to be considered as benefit from Direct
Foreign Investment? a) Use foreign technology b) Attract new

4. sources of demand c) Use foreign raw materials d) None of
above
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