WorksheetsInternational Finance FIN470 QUIZ 2
Total questions: 30
Worksheet time: 22mins
FX Risk for a firm is
How a decline in real value of a nation's currency impacts its exports?
More competitive
Less competitive
No effect
What does price elasticity depend on?
Availability of substitutes necessity of the product,
Ford factory in Detroit that produces cars for sale only in the United States and uses only U.S. labor and materials. Based on this information, which statement is correct?
Ford factory will have high accounting exposure in terms of FX
This factory will be hurt by dollar appreciation
A dollar depreciation will reduce its competitive position (profits)
None of the answers
Together with the Central Bank of Azerbaijan, which institution holds FX auction and how many times per week the auction is held?
SOFAZ / twice a week
Ministry of Finance / 3 times a week
Ministry of Finance / 4 times a week
Only by CBAR / once a week
Which of the followings is the most extreme form of political risk?
Change in labour laws
Which of the followings is NOT a measure of political stability?
Frequency of changes of government
Number of armed insurrections
Number of political parties in a country
Violent deaths per 100,000 population
Political risk is often assessed using economic indicators such as
Balance-of-payment deficit or surplus
Inflation
Growth rate GDP per capita
All of them
From an economic standpoint, political risk refers to uncertainty over ..?
Property rights
Safety of people
Capital flight
Number of incarcerated people
According to the World Bank methodology, which of the followings is the correct estimation of the capital flight?
Capital flight cannot be measured numerically
Average of current account surplus + capital account
Sum of the cash and card payments to the abroad less the current account deficits
Sum of gross capital outflow and current account deficit, less increase in foreign reserves
Why capital flight occurs?
Capital flight occurs due to loose government regulations
Capital flight occurs as a result of increased government incentives for investment
People move out assets due to economic or political instability, high taxes, or better investment opportunities in other countries.
Fiscal irresponsibility is:
Excessive savings of the government
Careful financial planning of the government
Irresponsibility of assigning corporate tax rate in an economy
Which of the followings is a logical outcome of monetary expansion (expansionary monetary policy)?
Decreased Consumer Price Index
Increased Inflation
Increased interest rates
Decreased spending and borrowing
Who is this guy?
David Ricardo
Friedrich Hayek
Adam Smith
Milton Friedman
An overvalued currency...
Taxes exports
Subsidize exports
Prevents capital flight
Taxes import
Which of the followings is not a factor for country's ability to repay its debt?
Ratio of debt to GDP
Average interest rate on its debt
Primary budget balance
Inflation rate
Which of the followings is not a generic / main source of funds for a company?
Government subsidiary
Internally generated cash
Short-term external funds
Long-term external funds
Debt is preferred alternative for most of the firms. TRUE OF FALSE?
True
False
Which of the statements is not correct for the privately placed bonds?
Privately placed bonds are sold to only pre-selected investors
It has customized loan agreements called covenants
It is traded in an open market and investors can directly buy it
It is subject to government regulations
Companies from which countries heavily rely on bank borrowing for the financing?
CHOOSE TWO ANSWER
Japan
France
United Kingdom
United States
What is regulatory arbitrage in the context of financial markets?
A Yankee bond is ..?
What is equity warrants?
An instruments that give holder the right to buy stocks of a company at a specific price before a fix date.
Depository Receipts are ...?
Certificates representing shares of a foreign company's stock issued by a bank
Which of the following organization DOES NOT require government guarantee when lending money?
International Bank for Reconstruction and Development
International Finance Corporation
International Development Association
World Bank
Which of the following statements is not correct for Project Finance?
Projects are setup as independent entities, lenders can count on project assets and cash flows
Cost of project financing exceeds the parent’s cost of borrowing due to credit risk.
Like asset-backed securities like mortgages, underlying asset is usually small and moderately liquid.
Infrastructure related projects such as pipelines and power plants are the main scopes.
When McDonald’s issues yuan denominated bonds in Hong Kong, this bond is called ..?
Panda bond
Samurai bond
What is the primary difference between transaction exposure and operating exposure?
Transaction exposure deals with competitive strategy; operating exposure does not.
Transaction exposure arises from cash flow projections; operating exposure arises from balance sheet changes.
Transaction exposure is contractual; operating exposure affects future revenues and costs.
Operating exposure is only relevant for multinational firms.
Why is the real exchange rate important in evaluating competitiveness?
Because it includes central bank reserves
It adjusts nominal rate changes for inflation differences
It measures speculation in currency markets
It represents interest rate parity
Which countries are rated as having the least political risk according to most political risk indices?
Venezuela and Italy
Canada and Singapore
Lebanon and much of Africa
Switzerland and Brazil
