FIN705 - Sample Questions and Problems

(Summer, 2001)

Multiple Choice/True-False Quesitons.

1. Which of the following theories identifies the non-transferability of resources as a reason for international business?

a. theory of comparative advantage.
b. imperfect markets theory.
c. product cycle theory.
d. none of the above.

2. A high home inflation rate relative to other countries would ___the home country's current account balance, other things equal. A high growth in the home income level relative to other countries would _____ the country's current account balance, other things equal.

a. increase; increase.
b. increase; decrease.
c. decrease; decrease.
d. decrease; increase.

3. If a U.S. firm desires to avoid the risk from exchange rate fluctuations, and it is receiving 100,000 euros in 90 days, it could:

a. obtain a 90-day forward purchase contract on euros.
b. obtain a 90-day forward sale contract on euros.
c. purchase euros 90 days from now at the spot rate.
d. sell euros 90 days from now at the spot rate.

4. Assume that the U.S. places a strict quota on goods imported from Chile and that Chile does not retaliate. Holding other factors constant, this event should immediately cause the U.S. demand for Chilean pesos to _____ and the value of the peso to _____.

a. increse; incrase.
b. increase; decline.
c. decline; decline.
d. de line; increase.

5. Any event that reduces the U.S. demand for Japanese yen should result in a(an) _____ in the value of the Japanese yen with respect to _____, other things being equal.

a. increase; U.S. dollar.
b. increase; nondollar currencies.
c. .decrease; nondollar currencies.
d. .decrease; U.S. dollar.

6. When you own _____, there is no obligation on your part; however, when you own _____, there is an obligation on your part.

a. call options; put options
b. futures contracts; call options.
c. forward contracts; futures contracts.
d. put options; forward contracts.

7. The Fed may use a stimulative monetary policy with least concern about causing inflation if the dollar's value is expected to:

a. remain stable.
b. strengthen.
c. weaken.
d. fluctuate.

Answer: 1. b. 2. c. 3. b. 4. c. 5. d. 6. d. 7. b.

* For the type of questions and problems, refer to the syllabus assignments.

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