International Banking and Finance
Solved Exam Questions
Course Introduction
International Banking and Finance explores the operations and structure of global financial systems, focusing on the roles and regulations of international banks and financial markets. The course examines the key principles of international monetary theory, foreign exchange markets, cross-border lending, risk management, and the impact of international financial institutions. Students will analyze the factors driving globalization of financial services, learn about regulatory frameworks such as Basel accords, and understand the challenges and risks arising from economic and political factors in global finance. Through case studies and practical examples, the course prepares students to navigate the complexities of managing financial operations in a dynamic international environment.
Recommended Textbook
Multinational Business Finance 15th Edition by David K. Eiteman
Available Study Resources on Quizplus 18 Chapters
1227 Verified Questions
1227 Flashcards
Source URL: https://quizplus.com/study-set/218 Page 2
Chapter 1: Multinational Financial Management: Opportunities and Challenges
Available Study Resources on Quizplus for this Chatper
73 Verified Questions
73 Flashcards
Source URL: https://quizplus.com/quiz/3222
Sample Questions
Q1) Comparative advantage is one of the underlying principles driving the growth of global business.
A)True
B)False
Answer: True
Q2) The concept of relative comparative advantage's origins lie in:
A) Adam Smith's work of 1776.
B) David Ricardo's work of 1776.
C) The Wealth of Nations book, published in 1887.
D) On the Principles of Political Economy and Taxation book, published in 1817.
Answer: D
Q3) Ownership, control, and governance changes radically across the world. The publicly traded company is not the dominant global business organization-the privately held or family-owned business is the prevalent structure-and their goals and measures of performance differ dramatically.
A)True
B)False
Answer: True
To view all questions and flashcards with answers, click on the resource link above. Page 3
Chapter 2: The International Monetary System
Available Study Resources on Quizplus for this Chatper
61 Verified Questions
61 Flashcards
Source URL: https://quizplus.com/quiz/3223
Sample Questions
Q1) Since 2009 the IMF's exchange rate regime classification system uses a "de facto classification" methodology. Under this system, countries with "fixed exchange rates" are considered to have:
A) a residual agreement.
B) soft pegs.
C) hard pegs.
D) floating arrangements.
Answer: B
Q2) Since 2009 the IMF's exchange rate regime classification system uses a "de facto classification" methodology. Under this system, a country that has given up their own sovereignty over monetary policy is considered to have:
A) a residual agreement.
B) hard pegs.
C) soft pegs.
D) floating arrangements.
Answer: B
To view all questions and flashcards with answers, click on the resource link above. Page 4
Chapter 3: The Balance of Payments
Available Study Resources on Quizplus for this Chatper
83 Verified Questions
83 Flashcards
Source URL: https://quizplus.com/quiz/3224
Sample Questions
Q1) The balance of payments:
A) determines the eligibility of countries for IMF aid.
B) adds up the value of all assets and liabilities of a country on a specific date.
C) records all international transactions for a country over a period of time.
D) all of the above
Answer: C
Q2) Which of the following is NOT part of the balance of payments account?
A) the current account
B) the financial/capital account
C) the official reserves account
D) All of the above are BOP accounts.
Answer: D
Q3) A country experiencing a serious trade deficit is not as likely to expand imports as it would be if running a surplus.
A)True
B)False
Answer: True
To view all questions and flashcards with answers, click on the resource link above. Page 5
Chapter 4: Financial Goals and Corporate Governance
Available Study Resources on Quizplus for this Chatper
69 Verified Questions
69 Flashcards
Source URL: https://quizplus.com/quiz/3225
Sample Questions
Q1) The problems that may arise due to the separation of ownership and management in large business organizations are known as:
A) separation anxiety.
B) the agency problem.
C) corporate disconnect theory.
D) none of the above
Q2) Which of the following is NOT a delisting category?
A) forced delistings
B) mergers
C) acquisitions
D) All of the above are categories of delistings.
Q3) Generally speaking, which of the following is NOT considered an important factor in the composition and control of corporate boards of directors?
A) the number of insider vs. outside directors
B) the total number of directors on the board
C) the composition of the compensation committee
D) All of the above are important factors of board composition.
To view all questions and flashcards with answers, click on the resource link above. Page 6
Chapter 5: The Foreign Exchange Market
Available Study Resources on Quizplus for this Chatper
69 Verified Questions
69 Flashcards
Source URL: https://quizplus.com/quiz/3226
Sample Questions
Q1) The European and American terms for foreign currency exchange are square roots of one another.
A)True
B)False
Q2) The authors identify two tiers of foreign exchange markets:
A) bank and nonbank foreign exchange.
B) commercial and investment transactions.
C) interbank and client markets.
D) client and retail market.
Q3) When the cross rate for currencies offered by two banks differs from the exchange rate offered by a third bank, a triangular arbitrage opportunity exists.
A)True
B)False
Q4) A contract to deliver dollars for euros in six months is both "buying euros forward for dollars" and "selling dollars forward for euros."
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 7
Chapter 6: International Parity Conditions
Available Study Resources on Quizplus for this Chatper
62 Verified Questions
62 Flashcards
Source URL: https://quizplus.com/quiz/3227
Sample Questions
Q1) Assume a nominal interest rate on one-year U.S. Treasury Bills of 2.60% and a real rate of interest of 1.00%. Using the Fisher Effect Equation, what is the approximate expected rate of inflation in the U.S. over the next year?
A) 2.10%
B) 2.05%
C) 1.60%
D) 1.00%
Q2) Jaguar has full manufacturing costs of their S-type sedan of £22,803. They sell the S-type in the UK with a 20% margin for a price of £27,363. Today these cars are available in the U.S. for $55,000 which is the UK price multiplied by the current exchange rate of $2.01/£. Jaguar has committed to keeping the U.S. price at $55,000 for the next six months. If the UK pound appreciates against the USD to an exchange rate of $2.15/£, and Jaguar has not hedged against currency changes, what is the percentage margin the company will realize given the new exchange rate?
A) 20.0%
B) 15.3%
C) 12.2%
D) 7.2%
To view all questions and flashcards with answers, click on the resource link above. Page 8
Chapter 7: Foreign Currency Derivatives: Futures and Options
Available Study Resources on Quizplus for this Chatper
88 Verified Questions
88 Flashcards
Source URL: https://quizplus.com/quiz/3228
Sample Questions
Q1) Option volatility is defined as the square root of the standard deviation of daily percentage changes in the underlying exchange rate.
A)True
B)False
Q2) As long as the option has time remaining before expiration, the option will possess time the time value element.
A)True
B)False
Q3) For a $1.50/£ call option with an initial premium of $0.033/£ and a rho value of 0.2, after an increase in the U.S. dollar rate from 8% to 9% - the new ATM option premium would be:
A) $0.037/£.
B) $1.55/£.
C) $0.036/£.
D) $0.035/£.
Q4) Foreign currency options are available both over-the-counter and on organized exchanges.
A)True
B)False
9
To view all questions and flashcards with answers, click on the resource link above.
Chapter 8: Interest Risk and Swaps
Available Study Resources on Quizplus for this Chatper
49 Verified Questions
49 Flashcards
Source URL: https://quizplus.com/quiz/3229
Sample Questions
Q1) Individual borrowers - whether they be governments or companies - possess their own individual credit rating, the market's assessment of their ability to repay debt in a timely manner. These credit assessments influence all the following EXCEPT:
A) cost of capital.
B) access to capital.
C) credit risk premium.
D) risk-free rate.
Q2) If a financial manager earning interest on a future date were to buy Futures and interest rates end up going up, the position outcome would be:
A) Futures price falls; short earns a profit.
B) Futures price rises; short earns a loss.
C) Future price falls; long earns a loss.
D) Futures price rises; long earns a profit.
Q3) The real exposure of an interest or currency swap is not the total notional principal, but the mark-to-market values of differentials in interest or currency interest payments since the inception of the swap agreement.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 10
Chapter 9: Foreign Exchange Rate Determination and Intervention
Available Study Resources on Quizplus for this Chatper
63 Verified Questions
63 Flashcards
Source URL: https://quizplus.com/quiz/3230
Sample Questions
Q1) ________ is the alteration of economic or financial fundamentals that are thought to be drivers of capital to flow in and out of specific currencies.
A) Indirect Intervention
B) Direct Intervention
C) Foreign Direct Investment
D) Capital Controls
Q2) ________ is the restriction of access to foreign currency by government.
A) Indirect Intervention
B) Direct Intervention
C) Foreign Direct Investment
D) Capital Controls
Q3) The large and liquid capital and currency markets follow many of the principles outlined by the different schools of thought on exchange rate determination (parity conditions, balance of payments approach, and asset approach) relatively well in the medium to long term.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 11
Chapter 10: Transaction Exposure
Available Study Resources on Quizplus for this Chatper
64 Verified Questions
64 Flashcards
Source URL: https://quizplus.com/quiz/3231
Sample Questions
Q1) Although rarely acknowledged by the firms themselves, selective hedging is essentially speculation.
A)True
B)False
Q2) The structure of a money market hedge is similar to a forward hedge. The difference is the cost of the money market hedge is determined by the differential interest rates, while the forward hedge is a function of the forward rates quotation.
A)True
B)False
Q3) There are as many different approaches to exposure management as there are firms and no real consensus exists regarding the best approach. Discuss the following theoretical dimensions to currency hedging: optimal hedge ratio, hedge symmetry, hedge effectiveness and hedge timing.
Q4) The treasury function of most firms, the group typically responsible for transaction exposure management, is NOT usually considered a profit center.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
Page 12
Chapter 11: Translation Exposure
Available Study Resources on Quizplus for this Chatper
54 Verified Questions
54 Flashcards
Source URL: https://quizplus.com/quiz/3232
Sample Questions
Q1) According to your authors, the main purpose of translation is:
A) to prepare consolidated financial statements.
B) to help management assess the performance of foreign subsidiaries.
C) to act as an interpreter for managers without foreign language skills.
D) none of the above
Q2) It is highly unusual for a multinational firm to have both integrated foreign entities AND self-sustaining foreign entities.
A)True
B)False
Q3) It is possible to use different exchange rates for different line items on a financial statement.
A)True
B)False
Q4) Translation gains or losses can be quite different from operating gains or losses not only in magnitude but also in sign.
A)True
B)False
Q5) Describe a balance sheet hedge and give at least two examples of when such a hedge could be justified.
To view all questions and flashcards with answers, click on the resource link above. Page 13
Chapter 12: Operating Exposure
Available Study Resources on Quizplus for this Chatper
58 Verified Questions
58 Flashcards
Source URL: https://quizplus.com/quiz/3233
Sample Questions
Q1) Most swap dealers arrange swaps so that each firm that is a party to the transaction knows who the counterparty is.
A)True
B)False
Q2) Which of the following is NOT an example of a financial cash flow?
A) parent invested equity capital
B) interest on intrafirm lending
C) payment for goods and services
D) intrafirm principal payments
Q3) Which of the following is NOT an example of diversifying operations?
A) diversifying sales
B) diversifying location of operations
C) raising funds in more than one country
D) sourcing raw materials in more than one country
Q4) Operating cash flows may occur in different currencies and at different times, but financing cash flows may occur only in a single currency.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 14
Chapter 13: Global Cost and Availability of Capital
Available Study Resources on Quizplus for this Chatper
83 Verified Questions
83 Flashcards
Source URL: https://quizplus.com/quiz/3234
Sample Questions
Q1) Because of the international diversification of cash flows, the risk of bankruptcy for MNEs is significantly lower than that for purely domestic firms.
A)True
B)False
Q2) Capital market segmentation is a financial market imperfection caused mainly by government constraints, institutional practices, and investor perceptions. List and explain three imperfections.
Q3) Refer to Instruction 13.1. At the end of the year the investor sells his stock that now has an average price per share of 57. What is the investor's average rate of return after converting the stock back into dollars?
A) -1.35%
B) 5.0%
C) -5.0%
D) -7.24%
Q4) A MNE's marginal cost of capital is constant for considerable ranges in its capital budget, but this statement cannot be made for most domestic firms.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
15
Chapter 14: Funding the Multinational Firm
Available Study Resources on Quizplus for this Chatper
95 Verified Questions
95 Flashcards
Source URL: https://quizplus.com/quiz/3235
Sample Questions
Q1) Level ________ is the easiest standard to satisfy for issuing ADRs.
A) 144a
B) III
C) II
D) I
Q2) For firms to raise capital in international markets, it is more important to adhere to capital structure ratios similar to those found in the United States and United Kingdom than to those in the firm's home country.
A)True
B)False
Q3) Which of the following is a characteristic of an euroequity issue?
A) an initial public offering of euro denominated securities
B) the issuers are located in Europe
C) the investors are located in Europe
D) is an offering on multiple exchanges in multiple countries at the same time
Q4) Private equity funds are best known for buying control of private owned firms, taking them publicly, improving management, and then reselling them after one to three years.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 16
Chapter 15: Multinational Tax Management
Available Study Resources on Quizplus for this Chatper
65 Verified Questions
65 Flashcards
Source URL: https://quizplus.com/quiz/3236
Sample Questions
Q1) Of the OECD 30 countries, most employ a worldwide approach to tax policy, but a few, including the United States, use the worldwide approach.
A)True
B)False
Q2) Refer to Table 15.1. What is the minimum effective tax rate that BayArea can achieve on its foreign-sourced income?
A) 26%
B) 35%
C) 40%
D) 0%
Q3) What is a transfer price, and can a government regulate it? What difficulties and motives does a parent multinational firm face in setting transfer prices?
Q4) A country CANNOT have both a territorial and a worldwide approach as a national tax policy.
A)True B)False
Q5) Why do the U.S. tax authorities tax passive income generated offshore differently from active income?
To view all questions and flashcards with answers, click on the resource link above. Page 17
Chapter 16: International Trade Finance
Available Study Resources on Quizplus for this Chatper
75 Verified Questions
75 Flashcards
Source URL: https://quizplus.com/quiz/3237
Sample Questions
Q1) What is a banker's acceptance? How are they initiated? Why are they desirable for the exporter?
Q2) The following parties are usually guarantors in forfaiting EXCEPT:
A) commercial banks.
B) government ministries of finance.
C) large commercial enterprises.
D) government banks.
Q3) Refer to Instruction 16.1. ________ is an unsecured promissory note.
A) A banker's acceptance
B) An overdraft
C) A securitized loan
D) Commercial paper
Q4) A letter of credit that is confirmed in the ________ country has the additional advantage of eliminating the problem of ________.
A) exporter's; portfolio risk
B) importer's; blocked foreign exchange
C) exporter's; blocked foreign exchange
D) none of the above
To view all questions and flashcards with answers, click on the resource link above. Page 18
Chapter 17: Foreign Direct Investment and Political Risk
Available Study Resources on Quizplus for this Chatper
55 Verified Questions
55 Flashcards
Source URL: https://quizplus.com/quiz/3238
Sample Questions
Q1) Which of the following is NOT an example of a country-specific risk?
A) transfer risk
B) war and ethnic strife
C) cultural and religious heritage
D) All of the above are examples of country-specific risk.
Q2) ________ risks are those that affect the MNE at the local or project level, but originate at the country level.
A) Country-specific
B) Firm-specific
C) Global-specific
D) none of the above
Q3) A/An ________ would be an example of an owner-specific advantage for an MNE.
A) patent
B) economy of scale
C) economy of scope
D) all of the above
Q4) What are the advantages and disadvantages of serving a foreign market through a greenfield foreign direct investment compared to an acquisition of a local firm in the target market?
To view all questions and flashcards with answers, click on the resource link above. Page 19
Chapter 18: Multinational Capital Budgeting and Cross-Border Acquisitions
Available Study Resources on Quizplus for this Chatper
61 Verified Questions
61 Flashcards
Source URL: https://quizplus.com/quiz/3239
Sample Questions
Q1) Which of the following changes does NOT create business opportunities for select firms to both enhance and defend their competitive positions in global markets?
A) changes in technology
B) changes in regulation
C) changes in capital markets
D) changes in management
Q2) As opposed to greenfield investment, a cross-border acquisition is typically quicker.
A)True
B)False
Q3) Project evaluation from the ________ viewpoint serves some useful purposes and/but should ________ the ________ viewpoint.
A) local; be subordinated to; parent's
B) local; not be subordinated to; parent's
C) parent's; be subordinated to; local
D) none of the above
Q4) Debt is usually a large component of project financing.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 20