Test bank International Finance MCQ (word)Chap 7.doc

Fundamentals of Multinational Finance, 3e (Moffett) Chapter 7 Foreign Exchange Rate Determination and Forecasting 7.1 Multiple Choice and True/False Questions 1) The important thing to remember about foreign exchange rate determination is that parity conditions, 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: Recognition 2) Which of the following did NOT 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 collapse of the 1990s. Answer: D Topic: Market Collapse Skill: Recognition 3) 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: Conceptual 4) 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) 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: Recognition 5) The ________ provides a means to account for international cash flows in a standardized and systematic manner. A) parity conditions B) asset approach C) balance of payments D) international Fisher effect Answe