mock mcq test - dias

MOCK MCQ TEST

SUBJECT: INTERNATIONAL

FINANCIAL MANAGEMENT (IFM)

PAPER CODE: MS 221

FOR PRIVATE CIRCULATION

The Questions and Answers contained in this document

have been prepared by the faculty of the Institute from the

sources believed to be reliable. Neither the Institute nor

the faculty gives any guarantee with respect to

completeness or accuracy of the contents contained in the

document and shall in no event be liable for any errors,

omissions or damages arising out of use of the matter

contained in the document. The Institute and the faculty

specifically disclaim any implied warranty as to

merchantability or fitness of the information for any

particular purpose.

MOCK MCQ TEST

SUBJECT: INTERNATIONAL FINANCIAL MANAGEMENT

PAPER CODE: MS 221

1. Which of the following is a legitimate reason for international investment?

(a) Dividends from a foreign subsidiary are tax exempt in the United States.

(b) Most governments do not tax foreign corporations.

(c) There are possible benefits from international diversification.

(d) International investments have less political risk than domestic investments.

2. By definition, currency appreciation occurs when

(a) the value of all currencies fall relative to gold.

(b) the value of all currencies rise relative to gold.

(c) the value of one currency rises relative to another currency.

(d) the value of one currency falls relative to another currency.

3. Theory which considers change in exchange rate with fluctuations in inflation rates is

classified as

(a) liquidated power parity

(b) purchasing power parity

(c) selling power parity

(d) volatile power parity

4. If purchasing power parity were to hold even in the short run, then:

(a) real exchange rates should tend to decrease over time.

(b) quoted nominal exchange rates should be stable over time.

(c) real exchange rates should tend to increase over time.

(d) real exchange rates should be stable over time.

5. Given a home country and a foreign country, purchasing power parity suggests that:

(a) the home currency will appreciate if the current home inflation rate exceeds the

current foreign inflation rate

(b) the home currency will depreciate if the current home interest rate exceeds the

current foreign interest rate

(c) the home currency will depreciate if the current home inflation rate exceeds the

current foreign inflation rate

(d) the home currency will depreciate if the current home inflation rate exceeds the

current foreign interest rate

6. Interest Rate Parity (IRP) implies that:

(a) Interest rates should change by an equal amount but in the opposite direction to the

difference in inflation rates between two countries

(b) The difference in interest rates in different currencies for securities of similar risk

and maturity should be consistent with the forward rate discount or premium for

the foreign currency

(c) The interest rates between two countries start in equilibrium, any change in the

differential rate of inflation between the two countries tends to be offset over the

longterm by an equal but opposite change in the spot exchange rate

(d) In the long run real interest rate between two countries will be equal

(e) Nominal interest rates in each country are equal to the required real rate plus

compensation for expected inflation

7. In equilibrium position, spread between foreign and domestic rate of interest must be equal

to spread of

(a) domestic rates

(b) forward and spot exchange rates

(c) forward rate

(d) spot rates

8. Rule which states that similar set of goods and services produced in various countries

should have equal price is classified as

(a) law of similar mortgage rate

(b) law of one type manufacturing

(c) law of similar labor rules

(d) law of one price

9. Example of derivative securities includes

(a) swap contract

(b) option contract

(c) futures contract

(d) all of above

10. Authority which intervenes directly or indirectly in foreign exchange markets by altering

interest rates is considered as

(a) central government

(b) centralized stocks

(c) central corporations

(d) centralized instruments

11. The forward market is especially well-suited to offer hedging protection against

(a) translation risk exposure.

(b) transactions risk exposure.

(c) political risk exposure.

(d) taxation.

12. Suppose that the Japanese yen is selling at a forward discount in the forward-exchange

market. This implies that most likely

(a) this currency has low exchange-rate risk.

(b) this currency is gaining strength in relation to the dollar.

(c) interest rates are higher in Japan than in the United States.

(d) interest rates are declining in Japan.

13. Hedging is used by companies to:

(a) Decrease the variability of tax paid

(b) Decrease the spread between spot and forward market quotes

(c) Increase the variability of expected cash flows

(d) Decrease the variability of expected cash flows

(e) Increase the variability of tax paid

14. Which of the following is true of foreign exchange markets?

(a) The futures market is mainly used by hedgers while the forward market is mainly

used for speculating.

(b) The futures market and the forward market are mainly used for hedging.

(c) The futures market is mainly used by speculators while the forward market is

mainly used for hedging.

(d) The futures market and the forward market are mainly used for speculating.

15. Exchange rates

(a) are always fixed

(b) fluctuate to equate the quantity of foreign exchange demanded with the quantity

supplied

(c) fluctuate to equate imports and exports

(d) fluctuate to equate rates of interest in various countries

16. An arbitrageur in foreign exchange is a person who

(a) earns illegal profit by manipulating foreign exchange

(b) causes differences in exchange rates in different geographic markets

(c) simultaneously buys large amounts of a currency in one market and sell it in another

market

(d) None of the above

17. A speculator in foreign exchange is a person who

(a) buys foreign currency, hoping to profit by selling it a a higher exchange rate at some

later date

(b) earns illegal profit by manipulation foreign exchange

(c) causes differences in exchange rates in different geographic markets


18. A floating exchange rate

(a) is determined by the national governments involved

(b) remains extremely stable over long periods of time

(c) is determined by the actions of central banks

(d) is allowed to vary according to market forces

19. The current system of international finance is a

(a) gold standard

(b) fixed exchange rate system

(c) floating exchange rate system

(d) managed float exchange rate system

20. A simultaneous purchase and sale of foreign exchange for two different dates is called

(a) currency devalue

(b) currency swap

(c) currency valuation

(d) currency exchange

21. Investment can be defined.

(a) Person’s dedication to purchasing a house or flat

(b) Use of capital on assets to receive returns

(c) Usage of money on a production process of products and services

(d) Net additions made to the nation’s capital stocks

22. The concept of Financial management is.

(a) Profit maximization

(b) All features of obtaining and using financial resources for company operations

(c) Organization of funds

(d) Effective Management of every company

23. What is the primary goal of financial management?

(a) To minimise the risk

(b) To maximise the owner’s wealth

(c) To maximise the return

(d) To raise profit

24. GST is a consumption of goods and service tax based on.

(a) Development

(b) Dividend

(c) Destiny

(d) Duration

(e) Destination

25. The finance manager is accountable for.

(a) Earning capital assets of the company

(b) Effective management of a fund

(c) Arrangement of financial resources

(d) Proper utilisation of funds

26. The market value of a share is responsible for.

(a) The investment market

(b) The government

(c) Shareholders

(d) The respective companies

27. The capital budget is associated with.

(a) Long terms and short terms assets

(b) Fixed assets

(c) Long terms assets

(d) Short term assets

28. CAPM stands for.

(a) Capital asset pricing model.

(b) Capital amount printing model.

(c) Capital amount pricing model.

(d) Capital asset printing model.

29. What does financial leverage measure?

(a) No change with EBIT and EPS

(b) The sensibility of EBIT with % change with respect to output

(c) The sensibility of EPS with % change in the EBIT level

(d) % variation in the level of production

30. From the below-mentioned items which are financial assets?

(a) Machines

(b) Bonds

(c) Stocks

(d) B and C

31. Trade between two countries can be useful if cost ratios of goods are:

(a) Undetermined

(b) Decreasing

(c) Equal

(d) Different

32. The term Euro Currency market refers to

(a) The international foreign exchange market

(b) The market where the borrowing and lending of currencies take place outside the

country of issue

(c) The countries which have adopted Euro as their currency

(d) The market in which Euro is exchanged for other currencies

33. Which of the following theories suggests that firms seek to penetrate new markets over

time?

(a) Imperfect Market Theory

(b) Product cycle theory

(c) Theory of Comparative Advantage


34. Dumping refers to:

(a) Reducing tariffs

(b) Sale of goods abroad at low a price, below their cost and price in home market

(c) Buying goods at low prices abroad and selling at higher prices locally

(d) Expensive goods selling for low prices

35. International trade and domestic trade differ because of:

(a) Different government policies

(b) Immobility of factors

(c) Trade restrictions

(d) All of the above

36. The margin for a currency future should be maintained with the clearing house by

(a) The seller

(b) The buyer

(c) Either the buyer or the seller as per the agreement between them

(d) Both the buyer and the seller

37. The following statement with respect to currency option is wrong

(a) Foreign currency- Rupee option is available in India

(b) An American option can be executed on any day during its currency

(c) Put option gives the buyer the right to sell the foreign currency

(d) Call option will be used by exporters

38. Govt. policy about exports and imports is called:

(a) Commercial policy

(b) Fiscal policy

(c) Monetary policy

(d) Finance policy

39. Which of the following is international trade:

(a) Trade between countries

(b) Trade between regions

(c) Trade between provinces

(d) Both (b) and (c)

40. Market in which currencies buy and sell and their prices settle on is called the

(a) International bond market

(b) International capital market

(c) Foreign exchange market

(d) Eurocurrency market

41. Purchasing goods from a foreign country is called

(a) Import

(b) Entrepot

(c) Export

(d) Re-Export

42. Goods imported for the purpose of export is known as

(a) Home trade

(b) Foreign trade

(c) Entrepot

(d) Trade

43. Agents are appointed by?

(a) Manufacturer

(b) Wholesaler

(c) Retailer

(d) Principal

44. Who among these can check the price fluctuations in the market by holding back the

goods when prices fall and releasing the goods when prices rise

(a) Agent

(b) Mercantile agent

(c) Wholesaler

(d) Retailer

45. These are agents whose function is to bring the buyer and the seller into contact.

(a) Commission agent

(b) Selling agent

(c) Broker

(d) Stockist

46. Who among the following appoints the agent

(a) Principal

(b) Retailer

(c) Manufacturer

(d) Wholesaler

47. Which among the following is not concerned with Chambers of Commerce & Industry

(a) CII

(b) FICCI

(c) ICICI

(d) ASSOCHAM

48. One example of Small scale Fixed retailers among these is

(a) Pedlars

(b) General stores

(c) Hawkers

(d) Cheap Jacks

49. This retail business acts as a universal supplier of a wide variety of products.

(a) Multiple shop

(b) Mail order Business

(c) Tele-shopping

(d) Departmental store

50. What is the Bill receivable account?

(a) Personal Account

(b) Machinery Account

(c) Real Account

(d) Nominal Account

51. A bill of exchange includes.

(a) An order to pay

(b) A request to pay

(c) A promise to pay

(d) All the above

52. Which bill is drawn and accepted in the same country?

(a) Trade Bill

(b) Foreign Bill

(c) Inland Bill

(d) Accommodation Bill

53. Who draws a bill of exchange?

(a) Creditor

(b) Debtor

(c) Holder


54. What is the person known as who draws a bill of exchange

(a) Drawer

(b) Payee

(c) Drawee


55. What are the three additional days known as that a drawer gives to the drawee for

payment

(a) Conditional days

(b) Additional days

(c) Days of grace

(d) Days of rebate

56. When the drawee signs the bill, it is considered as

(a) Accepted

(b) Retired

(c) Renewed

(d) Endorsed

57. What kind of acceptance is known as when the bill is accepted without any condition?

(a) Qualified acceptance

(b) Conditional acceptance

(c) Blank acceptance

(d) General acceptance

58. When the bill is noted from the notary public, it is known as?

(a) Noting

(b) Discounting

(c) Accepting


59. What is retiring a bill under rebate means?

(a) Making a payment of the bill before the due date

(b) Dishonoring of a bill

(c) Making a payment of the bill after the due date

(d) All of the above

60. The most widely used monetary policy tool among these is.

(a) Open market operations

(b) Issuing of notes

(c) Close market operations

(d) Discount rate

ANSWER KEY

1 c 11 b 21 b 31 d 41 a 51 a

2 c 12 c 22 b 32 b 42 c 52 c

3 b 13 d 23 b 33 b 43 d 53 c

4 d 14 c 24 e 34 b 44 c 54 a

5 c 15 b 25 c 35 d 45 c 55 c

6 b 16 c 26 a 36 d 46 a 56 a

7 b 17 a 27 c 37 d 47 c 57 d

8 d 18 d 28 a 38 a 48 b 58 a

9 d 19 d 29 c 39 a 49 d 59 a

10 a 20 b 30 c 40 c 50 c 60 a

mock mcq test - dias

Documents