Currency and International Business Quiz

What is the definition of exchange rates?

• The value of one currency in relation to another currency.

• The rate at which interest is charged on loans and credit cards.

• The rate at which stocks and bonds are traded on the stock market.

• The rate at which goods and services are exchanged between countries.

What are currency fluctuations? Changes in the value of one currency relative to ___

• changes in the price of gold

• another currency caused by government regulations.

• another currency over a period of time.

• another currency due to inflation.

What are foreign exchange markets?

• Markets for buying and selling commodities

• Centralized markets for buying and selling currencies

• Markets for buying and selling stocks

• Decentralized markets for buying and selling currencies

What is currency risk management?

• Strategies to increase the impact of exchange rate fluctuations on financial transactions or investments.

• Techniques to completely eliminate the impact of exchange rate fluctuations on financial transactions or investments.

• Methods to maximize profits from exchange rate fluctuations.

• Strategies and techniques to mitigate the impact of exchange rate fluctuations on financial transactions or investments.

How does currency devaluation impact international business?

• It has no impact on international business

• It leads to a decrease in demand for both domestic and foreign products

• It makes exports more expensive and imports cheaper

• It can make exports cheaper and imports more expensive, leading to changes in demand for domestic and foreign products.

Which of the following is NOT a factor affecting exchange rates?

• The color of the sky

• Political stability

• Inflation

• Interest rates

What is the main purpose of foreign exchange markets?

• To sell foreign goods

• Facilitate the exchange of one currency for another

• To regulate the stock market

• To provide loans to foreign countries

How can an international company protect itself against currency changes?

• Hedging (the use of futures, options, and/or currency-hedged funds

• Diversification globally and investing in countries with conservative currency management

• Transacting in your own currency, e.g. demand payment in US$

• All of the above

What is positive about your currency suddenly weakening?

• Your exports become cheaper

• Demand for your commodities may rise

• It may help government correct balance of payment

  imbalances

• All of the above

What are the potential negative/s of currency devaluation for businesses?

• Weakening purchasing power

• All of the above

• Less profits (if you are owned by an overseas company)

• Rising cost of imported materials