International Financial Management MCQ with Answers

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Online MCQ Quiz of International Financial Management

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International Financial Management

1 / 20

Q: Who draws a bill of exchange?

A. Creditor

B. Debtor

C. Holder

D. None of the above

2 / 20

Q: Following is (are) the method(s) for adjustment of risks

A. Risk-adjusted Discounting Rate

B. Risk Equivalence Coefficient Method

C. Both (A) and (B)

D. None of the above

3 / 20

Q: Capital structure weights are based on the:

A. market values of a firm's debt and equity.

B. market value of a firm's equity and the face value of its debt.

C. initial issue values of a firm's debt and equity.

D. book value of a firm's debt and equity.

4 / 20

Q: The most preferred form of securities for funding by firms in the U.S. is

A. debt

B. preferred stock

C. common stock

D. stock derivatives

5 / 20

Q: The impact of blocked funds on the net present value of a foreign project will be greater if interest rates are___in the host country and there are___investment opportunities in the host country.

A. very high; limited

B. very low; limited

C. very low; numerous

D. very high; numerous

6 / 20

Q: The relationship between the money rate of return, m, the real rate of return, h, and the inflation rate, i, is expressed in which of the following formulae?

A. h = 1 + i / 1 + m

B. m = h + i

C. (1 + m) = (1 + h)i

D. 1 + h = (1 + m) / (1 + i)

7 / 20

Q: An international project's NPV is___related to the size of the Initial investment and___related to the project's required rate of return.

A. positively; positively

B. positive; negatively

C. negatively; positively

D. negatively; negatively

8 / 20

Q: Assume that Baps Corporation is considering the establishment of a subsidiary in Norway. The initial investment required by the parent is $5,000,000. If the project is undertaken, Baps would terminate the project after four years. Baps' cost of capital is 13%, and the project is of the same risk as Baps' existing projects. All cash flows generated from the project will be remitted to the parent at the end of each year. Listed below are the estimated cash flows the Norwegian subsidiary will generate over the project's lifetime in Norwegian kroner (NOK): Year 1 Year 2 Year 3 Year 4 NOK 10,000,000 NOK 15,000,000 NOK 17,000,000 NOK 20,000,000 The current exchange rate of the Norwegian kroner is $.135. Baps' exchange rate forecast for the Norwegian kroner over the project's lifetime is listed below: Year 1 Year 2 Year 3 Year 4 $.13 $.14 $.12 $.15 Baps is also uncertain regarding the cost of capital. Recently, Norway has been involved in some political turmoil. What is the net

A. -$17,602.62.

B. $8,000,000.

C. $1,048,829.

D. $645,147.

9 / 20

Q: If a firm based in the Netherlands wishes to avoid the risk of exchange rate movements, and is due to receive USD100,000 in 90 days, it could:

A. sell US dollars 90 days from now at the spot rate.

B. enter into a 90-day forward sale of US dollars for euros;

C. purchase US dollars 90 days from now at the spot rate;

D. enter into a 90-day forward purchase of US dollars for euros;

10 / 20

Q: Operational techniques include:

A. diversification of a company's operations

B. purchasing of currency options

C. exposure netting

D. both A and C

11 / 20

Q: An example of cross-hedging is:

A. find two currencies that are highly positively correlated; match the payables of the one currency to the receivables of the other currency.

B. use the forward market to sell forward whatever currencies you will receive.

C. use the forward market to buy forward whatever currencies you will receive.

D. B and C

12 / 20

Q: The___the percentage of an MNC's business conducted by its foreign subsidiaries, the___the percentage of a given financial statement item that is susceptible to translation exposure.

A. greater; smaller

B. smaller; greater

C. greater; greater

D. none of the above

13 / 20

Q: The spot rate for the Singapore dollar is £ 0.320. The 30-day forward rate is £ 0.325.The forward rate contains an annualized___of___%.

A. discount; -18.75

B. premium; 18.75

C. discount; -18.46

D. premium; 18.46

14 / 20

Q: Which of the following is true of options?

A. The writer decides whether the option will be exercised.

B. The writer pays the buyer the option premium.

C. The buyer decides if the option will be exercis

15 / 20

Q: If U.S. inflation suddenly increased while European inflation stayed the same, there wouldbe:

A. an increased U.S. demand for Euros and an increased supply of Euros for sale.

B. a decreased U.S. demand for Euros and an increased supply of Euros for sale.

C. a decreased U.S. demand for Euros and a decreased supply of Euros for sale.

D. an increased U.S. demand for Euros and a decreased supply of Euros for sale.

16 / 20

Q: Under a gold standard, countries should

A. keep the supply of their domestic money constant.

B. keep the supply of their domestic money fixed in proportion to their gold holdings.

C. keep the supply of foreign exchange less than their domestic money supply.

D. restrict the demand for foreign goods.

17 / 20

Q: To force the value of the dollar to appreciate against the pound, the Federal Reserve should:

A. sell pounds for dollars in the foreign exchange market and the Bank of England should sell pounds for dollars in the foreign exchange market.

B. sell dollars for pounds in the foreign exchange market and the Bank of England should sell pounds for dollars in the foreign exchange market.

C. sell dollars for pounds in the foreign exchange market and the Bank of England should not intervene.

D. sell dollars for pounds in the foreign exchange market and the Bank of England should sell dollars for pounds in the foreign exchange market.

18 / 20

Q: Futures contracts are typically___; forward contracts are typically___

A. sold on an exchange; sold on an exchange

B. offered by commercial banks; sold on an exchange

C. sold on an exchange; offered by commercial banks

D. offered by commercial banks; offered by commercial banks

19 / 20

Q: Multinational firms face exposure to many different types of international risk. Which of the following is not a type of exposure?

A. diversifiable risk

B. political risk

C. foreign economies

D. exchange rate movements

20 / 20

Q: Assume a U.S. firm initiates direct foreign investment in the U.K. If the British pound is expected to appreciate against the dollar, the dollar value of earnings remitted to the parent should___The parent may request that the subsidiary___in order to benefit from the expectation about the pound.

A. increase; postpone remitting earnings until the pound strengthens

B. decrease; postpone remitting earnings until the pound strengthens

C. decrease; remit earnings immediately before the pound strengthens

D. increase; remit earnings immediately before the pound strengthens

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