Test bank International Finance MCQ wordChap 7.docx

1、Test bank International Finance MCQ wordChap 7Fundamentals of Multinational Finance, 3e (Moffett) Chapter 7 Foreign Exchange Rate Determination and Forecasting7.1 Multiple Choice and True/False Questions1) The important thing to remember about foreign exchange rate determination is that parity condi

2、tions, asset approach, and balance of payments approaches are _ theories rather than _ theories. A) competing; complementary B) competing; contemporary C) complementary; contiguous D) complementary; competing Answer: D Topic: Complementary Theories Skill: Recognition2) Which of the following did NOT

3、 contribute to the exchange rate collapse in emerging markets in the 1990s? A) Infrastructure weaknesses. B) Speculation on the part of market participants. C) The sharp reduction of cross-border foreign direct investment. D) All of the above contributed to the emerging markets exchange rate collaps

4、e of the 1990s. Answer: D Topic: Market Collapse Skill: Recognition3) It is safe to say that most determinants of the spot exchange rate are also affected by changes in the spot rate. i.e., they are linked AND mutually determined. Answer: TRUE Topic: Determinants of Spot Exchange Rates Skill: Concep

5、tual4) A popular speculation in the 1990s was A) U.S. investors investing in Japanese securities to take advantage of Japans higher nominal and real interest rates. B) Japanese investors investing in the United States securities to take advantage of the higher U.S. nominal and real interest rates. C

6、) selling short the U.S. dollar against the Russian Ruble. D) None of the above was a popular speculation technique in the 1990s. Answer: B Topic: International Speculation Skill: Recognition5) The _ provides a means to account for international cash flows in a standardized and systematic manner. A)

7、 parity conditions B) asset approach C) balance of payments D) international Fisher effect Answer: C Topic: Balance of payments Skill: Recognition 6) Which of the following is NOT a current account activity? A) Net import/export of goods (Balance of Trade). B) Net import/export of services. C) Net p

8、ortfolio investment. D) All of the above are activities of the current account. Answer: C Topic: Current Account Skill: Conceptual7) The _ approach argues that equilibrium exchange rates are achieved when the net inflow of foreign exchange arising from current account activities is equal to the net

9、outflow of foreign exchange arising from financial account activities. A) balance of payments B) monetary C) asset market D) law of one price Answer: A Topic: Exchange Rates Skill: Recognition8) The _ approach states that the exchange rate is determined by the supply and demand for national currency

10、 stocks, as well as the expected future levels and rates of growth of monetary stock A) balance of payments B) monetary C) asset market D) law of one price Answer: B Topic: Exchange Rates Skill: Recognition9) The _ argues that exchange rates are determined by the supply and demand for a wide variety

11、 of financial assets A) balance of payments B) monetary C) asset market D) law of one price Answer: C Topic: Exchange Rates Skill: Recognition10) Technical analysis of exchange rates developed in part due to the forecasting inadequacies of fundamental exchange rate theories. Answer: TRUE Topic: Exch

12、ange Rates Skill: Conceptual 11) The _ approach to the determination of spot exchange rates hypothesizes that the most important factors are the relative real interest rate and a countrys outlook for economic growth and profitability. A) balance of payments B) parity conditions C) managed float D) a

13、sset market Answer: D Topic: Asset Market Skill: Recognition12) The authors compromise as to the key factors for exchange rate determination. They conclude that _ is important in the short run, but that _ determines long run exchange rates. A) Fisher effect; PPP B) asset markets, interest rates, and

14、 expectations; PPP C) PPP; Fisher effect D) Fisher effect; asset prices, interest rates, and expectations Answer: B Topic: Key Factors for Equilibrium in Foreign Exchange Markets Skill: Conceptual13) _, traditionally referred to as chartists, focus on price and volume data to determine past trends t

15、hat are expected to continue into the future. A) Mappists B) Trappist Monks C) Filibusters D) Technical analysts Answer: D Topic: Technical Analysis Skill: Recognition14) The longer the time horizon of the technical analyst the more accurate the prediction of foreign exchange rates is likely to be.

16、Answer: FALSE Topic: Technical Analysis Skill: Conceptual15) Short-term foreign exchange forecasts are often motivated by such activities as _ whereas long-term forecasts are more likely motivated by _. A) long-term investment; long-term capital appreciation B) long-term capital appreciation; desire

17、 to hedge a receivable C) the desire to hedge a payable; the desire for long-term investment D) the desire for long-term investment; the desire to hedge a payable Answer: C Topic: Key Factors for Equilibrium in Foreign Exchange Markets Skill: Recognition 16) The more efficient the foreign exchange m

18、arket is, the more likely it is that exchange rate movements are random walks. Answer: TRUE Topic: Market Efficiency Skill: Conceptual17) A major U.S. multinational firm has forecast the euro/dollar rate to be euro1.10/$ one year hence, and an exchange rate of $1.40 for the British pound () in the s

19、ame time period. What does this imply the companys expected rate for the euro per pound to be in one year? A) euro 1.40/ B) 1.40/euro C) 1.54/euro D) euro 1.54/ Answer: D Topic: Currency Cross Rates Skill: Analytical18) The authors claim that theoretical and empirical studies appear to show that fun

20、damentals do apply to the long-term for foreign exchange. Answer: TRUE Topic: Key Factors for Equilibrium in Foreign Exchange Markets Skill: Recognition19) The authors claim that random events, institutional frictions, and technical factors may cause currency values to deviate significantly from the

21、ir long-term fundamental path. Answer: TRUE Topic: Key Factors for Equilibrium in Foreign Exchange Markets Skill: Recognition20) The authors claim that the theories of international currency values hold better for less liquid and poorly capitalized markets. Answer: FALSE Topic: Key Factors for Equil

22、ibrium in Foreign Exchange Markets Skill: Recognition21) Which of the following was not an international currency crisis in the 1990s and early 2000s? A) The Asian Crisis B) The Russian Crisis C) The Argentine Crisis D) All of the above were currency crises in the 1990s and 2000s. Answer: D Topic: I

23、nternational Currency Crises Skill: Recognition22) The Asian Currency crisis appeared to begin in _. A) South Korea B) Taiwan C) Thailand D) Japan Answer: C Topic: International Currency Crises Skill: Recognition 23) Prior to July 2, 1997, the Thai government A) allowed the Thai Bhat to float agains

24、t major currencies. B) fixed the Bhats value against the Korean won only. C) fixed the Bhats value against major currencies especially the U.S. dollar. D) None of the above. Answer: C Topic: International Currency Crises Skill: Recognition24) The tequila effect is a slang term used to describe a for

25、m of financial panic called _. A) run on the market B) speculation C) contrary investing D) contagion Answer: D Topic: International Currency Crises Skill: Recognition25) The authors did not identify which of the following as a root of the Asian currency crisis? A) The collapse of some Asian currenc

26、ies. B) The rate of inflation in the United States. C) Corporate socialism. D) Banking stability and management. Answer: B Topic: International Currency Crises Skill: Conceptual26) Corporate socialism in the Asian markets could be contributed in part A) to the relatively short and stable post-WWII h

27、istory of capitalism in their markets. B) a belief by the owners of Asian companies that their governments would not allow them to fail. C) the practice of lifetime employment at many corporations. D) all of the above. Answer: D Topic: International Currency Crises Skill: Recognition27) The authors

28、refer to the practice of many Asian firms being largely controlled by families of groups related to the governing body of the country as _. A) illegal B) insider trading C) cronyism D) not in my backyard Answer: C Topic: International Currency Crises Skill: Recognition 28) The principle focus of the IMF bailout efforts during the Asian financial crisis was _. A) banking liquidity B) shareholders wealth C) reestablishing fixed currency exchange rates in Asia D) dollarization of Asian currencies Answer: A Topic: Asian Crisis Skill: Recognition29) In the years immediately preceding