Test bank International Finance MCQ wordChap 7.docx
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TestbankInternationalFinanceMCQwordChap7
FundamentalsofMultinationalFinance,3e（Moffett）
Chapter7
ForeignExchangeRateDeterminationandForecasting
7.1
MultipleChoiceandTrue/FalseQuestions
1）
Theimportantthingtorememberaboutforeignexchangeratedeterminationisthatparityconditions,assetapproach,andbalanceofpaymentsapproachesare________theoriesratherthan________theories.
A）
competing;complementary
B）
competing;contemporary
C）
complementary;contiguous
D）
complementary;competing
Answer:
D
Topic:
ComplementaryTheories
Skill:
Recognition
2）
WhichofthefollowingdidNOTcontributetotheexchangeratecollapseinemergingmarketsinthe1990s?
A）
Infrastructureweaknesses.
B）
Speculationonthepartofmarketparticipants.
C）
Thesharpreductionofcross-borderforeigndirectinvestment.
D）
Alloftheabovecontributedtotheemergingmarketsexchangeratecollapseofthe1990s.
Answer:
D
Topic:
MarketCollapse
Skill:
Recognition
3）
Itissafetosaythatmostdeterminantsofthespotexchangeratearealsoaffectedbychangesinthespotrate.i.e.,theyarelinkedANDmutuallydetermined.
Answer:
TRUE
Topic:
DeterminantsofSpotExchangeRates
Skill:
Conceptual
4）
Apopularspeculationinthe1990swas
A）
U.S.investorsinvestinginJapanesesecuritiestotakeadvantageofJapan'shighernominalandrealinterestrates.
B）
JapaneseinvestorsinvestingintheUnitedStatessecuritiestotakeadvantageofthehigherU.S.nominalandrealinterestrates.
C）
sellingshorttheU.S.dollaragainsttheRussianRuble.
D）
Noneoftheabovewasapopularspeculationtechniqueinthe1990s.
Answer:
B
Topic:
InternationalSpeculation
Skill:
Recognition
5）
The________providesameanstoaccountforinternationalcashflowsinastandardizedandsystematicmanner.
A）
parityconditions
B）
assetapproach
C）
balanceofpayments
D）
internationalFishereffect
Answer:
C
Topic:
Balanceofpayments
Skill:
Recognition
6）
WhichofthefollowingisNOTacurrentaccountactivity?
A）
Netimport/exportofgoods（BalanceofTrade）.
B）
Netimport/exportofservices.
C）
Netportfolioinvestment.
D）
Alloftheaboveareactivitiesofthecurrentaccount.
Answer:
C
Topic:
CurrentAccount
Skill:
Conceptual
7）
The________approacharguesthatequilibriumexchangeratesareachievedwhenthenetinflowofforeignexchangearisingfromcurrentaccountactivitiesisequaltothenetoutflowofforeignexchangearisingfromfinancialaccountactivities.
A）
balanceofpayments
B）
monetary
C）
assetmarket
D）
lawofoneprice
Answer:
A
Topic:
ExchangeRates
Skill:
Recognition
8）
The________approachstatesthattheexchangerateisdeterminedbythesupplyanddemandfornationalcurrencystocks,aswellastheexpectedfuturelevelsandratesofgrowthofmonetarystock
A）
balanceofpayments
B）
monetary
C）
assetmarket
D）
lawofoneprice
Answer:
B
Topic:
ExchangeRates
Skill:
Recognition
9）
The________arguesthatexchangeratesaredeterminedbythesupplyanddemandforawidevarietyoffinancialassets
A）
balanceofpayments
B）
monetary
C）
assetmarket
D）
lawofoneprice
Answer:
C
Topic:
ExchangeRates
Skill:
Recognition
10）
Technicalanalysisofexchangeratesdevelopedinpartduetotheforecastinginadequaciesoffundamentalexchangeratetheories.
Answer:
TRUE
Topic:
ExchangeRates
Skill:
Conceptual
11）
The________approachtothedeterminationofspotexchangerateshypothesizesthatthemostimportantfactorsaretherelativerealinterestrateandacountry'soutlookforeconomicgrowthandprofitability.
A）
balanceofpayments
B）
parityconditions
C）
managedfloat
D）
assetmarket
Answer:
D
Topic:
AssetMarket
Skill:
Recognition
12）
Theauthorscompromiseastothekeyfactorsforexchangeratedetermination.Theyconcludethat________isimportantintheshortrun,butthat________determineslongrunexchangerates.
A）
Fishereffect;PPP
B）
assetmarkets,interestrates,andexpectations;PPP
C）
PPP;Fishereffect
D）
Fishereffect;assetprices,interestrates,andexpectations
Answer:
B
Topic:
KeyFactorsforEquilibriuminForeignExchangeMarkets
Skill:
Conceptual
13）
________,traditionallyreferredtoaschartists,focusonpriceandvolumedatatodeterminepasttrendsthatareexpectedtocontinueintothefuture.
A）
Mappists
B）
TrappistMonks
C）
Filibusters
D）
Technicalanalysts
Answer:
D
Topic:
TechnicalAnalysis
Skill:
Recognition
14）
Thelongerthetimehorizonofthetechnicalanalystthemoreaccuratethepredictionofforeignexchangeratesislikelytobe.
Answer:
FALSE
Topic:
TechnicalAnalysis
Skill:
Conceptual
15）
Short-termforeignexchangeforecastsareoftenmotivatedbysuchactivitiesas________whereaslong-termforecastsaremorelikelymotivatedby________.
A）
long-terminvestment;long-termcapitalappreciation
B）
long-termcapitalappreciation;desiretohedgeareceivable
C）
thedesiretohedgeapayable;thedesireforlong-terminvestment
D）
thedesireforlong-terminvestment;thedesiretohedgeapayable
Answer:
C
Topic:
KeyFactorsforEquilibriuminForeignExchangeMarkets
Skill:
Recognition
16）
Themoreefficienttheforeignexchangemarketis,themorelikelyitisthatexchangeratemovementsarerandomwalks.
Answer:
TRUE
Topic:
MarketEfficiency
Skill:
Conceptual
17）
AmajorU.S.multinationalfirmhasforecasttheeuro/dollarratetobeeuro1.10/$oneyearhence,andanexchangerateof$1.40fortheBritishpound（£）inthesametimeperiod.Whatdoesthisimplythecompany'sexpectedratefortheeuroperpoundtobeinoneyear?
A）
euro1.40/£
B）
£1.40£/euro
C）
£1.54/euro
D）
euro1.54/£
Answer:
D
Topic:
CurrencyCrossRates
Skill:
Analytical
18）
Theauthorsclaimthattheoreticalandempiricalstudiesappeartoshowthatfundamentalsdoapplytothelong-termforforeignexchange.
Answer:
TRUE
Topic:
KeyFactorsforEquilibriuminForeignExchangeMarkets
Skill:
Recognition
19）
Theauthorsclaimthatrandomevents,institutionalfrictions,andtechnicalfactorsmaycausecurrencyvaluestodeviatesignificantlyfromtheirlong-termfundamentalpath.
Answer:
TRUE
Topic:
KeyFactorsforEquilibriuminForeignExchangeMarkets
Skill:
Recognition
20）
Theauthorsclaimthatthetheoriesofinternationalcurrencyvaluesholdbetterforlessliquidandpoorlycapitalizedmarkets.
Answer:
FALSE
Topic:
KeyFactorsforEquilibriuminForeignExchangeMarkets
Skill:
Recognition
21）
Whichofthefollowingwasnotaninternationalcurrencycrisisinthe1990sandearly2000s?
A）
TheAsianCrisis
B）
TheRussianCrisis
C）
TheArgentineCrisis
D）
Alloftheabovewerecurrencycrisesinthe1990sand2000s.
Answer:
D
Topic:
InternationalCurrencyCrises
Skill:
Recognition
22）
TheAsianCurrencycrisisappearedtobeginin________.
A）
SouthKorea
B）
Taiwan
C）
Thailand
D）
Japan
Answer:
C
Topic:
InternationalCurrencyCrises
Skill:
Recognition
23）
PriortoJuly2,1997,theThaigovernment
A）
allowedtheThaiBhattofloatagainstmajorcurrencies.
B）
fixedtheBhat'svalueagainsttheKoreanwononly.
C）
fixedtheBhat'svalueagainstmajorcurrenciesespeciallytheU.S.dollar.
D）
Noneoftheabove.
Answer:
C
Topic:
InternationalCurrencyCrises
Skill:
Recognition
24）
The"tequilaeffect"isaslangtermusedtodescribeaformoffinancialpaniccalled________.
A）
runonthemarket
B）
speculation
C）
contraryinvesting
D）
contagion
Answer:
D
Topic:
InternationalCurrencyCrises
Skill:
Recognition
25）
TheauthorsdidnotidentifywhichofthefollowingasarootoftheAsiancurrencycrisis?
A）
ThecollapseofsomeAsiancurrencies.
B）
TherateofinflationintheUnitedStates.
C）
Corporatesocialism.
D）
Bankingstabilityandmanagement.
Answer:
B
Topic:
InternationalCurrencyCrises
Skill:
Conceptual
26）
CorporatesocialismintheAsianmarketscouldbecontributedinpart
A）
totherelativelyshortandstablepost-WWIIhistoryofcapitalismintheirmarkets.
B）
abeliefbytheownersofAsiancompaniesthattheirgovernmentswouldnotallowthemtofail.
C）
thepracticeoflifetimeemploymentatmanycorporations.
D）
alloftheabove.
Answer:
D
Topic:
InternationalCurrencyCrises
Skill:
Recognition
27）
TheauthorsrefertothepracticeofmanyAsianfirmsbeinglargelycontrolledbyfamiliesofgroupsrelatedtothegoverningbodyofthecountryas________.
A）
illegal
B）
insidertrading
C）
cronyism
D）
notinmybackyard
Answer:
C
Topic:
InternationalCurrencyCrises
Skill:
Recognition
28）
TheprinciplefocusoftheIMFbailouteffortsduringtheAsianfinancialcrisiswas________.
A）
bankingliquidity
B）
shareholder'swealth
C）
reestablishingfixedcurrencyexchangeratesinAsia
D）
dollarizationofAsiancurrencies
Answer:
A
Topic:
AsianCrisis
Skill:
Recognition
29）
Intheyearsimmediatelypreceding
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