Archives: Quiz

1) There are no transactions costs associated with trading futures or options. a. True b. False 2) According to the international Fisher effect, if Venezuela has a much higher nominal rate than other countries, its inflation rate will likely be […]

1) A letter of credit does not guarantee that the goods purchased will be those invoiced and shipped. a. True b. False 2) Assume the U.S. one-year interest rate is 11% and the French one-year interest rate is 18%. The […]

1) Morton Company obtains a one-year loan of 2,000,000 Japanese yen at an interest rate of 6%. At the time the loan is extended, the spot rate of the yen is $.005. If the spot rate of the yen at […]

1) A parallel loan represents simultaneous loans provided by two parties with an agreement to repay at a specified point in the future. a. True b. False 2) If interest rate parity does not hold, and the forward ____ is […]

1) Direct foreign investment by U.S.-based MNCs occurs primarily in the Bahamas and Brazil. a. True b. False 2) In general, a firm that concentrates on local sales, has very little foreign competition, and obtains foreign supplies (denominated in foreign […]

1) Since corporations have specialized needs, they usually prefer futures contracts to forward contracts for hedging purposes. a. True b. False 2) Assume a two-country world: Country A and Country B. Which of the following is correct about purchasing power […]

1) Which of the following is not a form of financial risk? a. Exchange rate movements b. Inflation rates c. Blockage of fund transfers d. All of the above are forms of financial risk. 2) Transaction exposure results when an […]

1) Which of the following factors is not expected to generally have a favorable impact on the firm’s cost of capital according to the text? a. easy access to international capital markets b. high degree of international diversification c. high […]

1) The maximum one-day loss estimated using the value-at-risk (VAR) method is independent of the confidence level used. a. True b. False 2) The capital asset pricing model (CAPM) suggests that the required return on a firm’s stock is a […]

1) If the U.S. dollar appreciates, a. an MNC’s U.S. sales will probably decrease b. an MNC’s exports denominated in U.S. dollars will probably increase c. an MNC’s interest owed on foreign funds borrowed will probably increase d. an MNC’s […]

1) If a U.S. firm desires to avoid the risk from exchange rate fluctuations, and it will need C$200,000 in 90 days to make payment on imports from Canada, it could: a. obtain a 90-day forward purchase contract on Canadian […]

1) Assume the annual British interest rate is above the annual U.S. interest rate. Also assume the pound’s forward rate of $1.75 equals the pound’s spot rate. Given this information, interest rate parity ____ exist, and the U.S. firm ____ […]

1) Although netting typically increases the need for foreign exchange conversion, it generally reduces the number of cross border transactions between subsidiaries. a. True b. False 2) The valuation of MNC accounts for all the cash flows received by the […]

1) The ____ an MNC, the ____ its cost of capital is likely to be. a. larger; higher b. larger; lower c. smaller; lower d. A and C 2) Eurobonds: a. are usually issued in bearer form b. typically carry […]

1) A U.S. firm plans to borrow Swiss francs today for a one-year period. The Swiss interest rate is 9%. It uses today’s spot rate as a forecast for the franc’s spot rate in one year. The U.S. one-year interest […]

1) Procedural and documentation requirements imposed by the foreign government are referred to as: a. regulatory barriers b. industry barriers c. protective barriers d. “Red Tape” barriers 2) If you have a position where you might be obligated to buy […]

1) All insurance policies list the perils that will be covered by the policy. 2) The full market value of any lost property can be deducted as a casualty or theft loss when the loss results from a sudden, unexpected, […]

1) A uniform settlement statement is a lender’s promise to grant a loan. 2) Property owned for business purposes is covered with a floater in your homeowner’s policy. Answer: F homeowner’s policies do not cover property owned for business use. […]

1) All of a taxpayer’s income is subject to federal income taxes. 2) A taxpayer whose itemized deductions were less than his or her standard deduction would benefit by itemizing deductions. Answer: F itemizing deduction only benefits a taxpayer if […]

1) If you redeem an I bond within the first five years, you will forfeit the 3 most recent months’ interest; after five years, you will forfeit the 12 most recent months’ interest. 2) You redeem your shares in an […]

1) The coverage for diseases and injuries to the eyes are covered by vision care insurance. 2) In general, the shorter the maturity time on a certificate of deposit, the higher the rate of interest that will be paid. Answer: […]

1) Leverage is the speed and ease with which an investment can be converted to cash. 2) Insurance that covers the cost of one’s annual vision checkup and one pair of glasses annually would typically be considered important insurance. Answer: […]

1) A single mutual fund company offers only one class of load shares to investors, such as A, B, or C. 2) Both property and liability insurance protect you from financial losses resulting from damage to or destruction of your […]

1) Your goal should be to use credit cards in a manner that avoids all fees, including finance charges. This means paying at least the minimum payment every month. 2) An any-occupation policy will cost more than an own-occupation policy, […]

1) Mutual funds front-end loads are, in effect, trailing commissions. 2) Condominium owners enjoy greater tax advantages than cooperative owners since cooperative owners cannot deduct interest and property tax payments. Answer: F cooperative owners can deduct their share of these […]

1) A family with two income earners will always need a greater amount of cash reserves than a family with one earner. 2) In the leveraging process, your own money is used to make an investment with the goal of […]

1) An employee stock-ownership plan allows the employees to regularly purchase shares of stock in the company at discounted prices. 2) A low asset-to-debt ratio is a positive indicator of financial well-being. Answer: F a high asset-to-debt ratio is desirable. […]

1) Discretionary income is the money people use to pay for the necessities of life. 2) Owing more on a home than its current market value is referred as being in default. Answer: F this condition is called being upside […]

1) The time to prequalify for a mortgage is after you have made an offer to buy a property. 2) An automatic premium loan provides an open-ended line of credit from which the policyholder can borrow money. Answer: F automatic […]

1) New employees generally must make a choice about health care coverage within the first few days of employment but can change it at any time. 2) The invoice price is not related to the seller’s cost of a product. […]

1) Readjustment-period needs typically last about one month. 2) A detailed written history of property ownership is called a deed. Answer: F it is called an abstract 3) For Social Security purposes, workers younger than age 72 who have fewer […]

1) Financial planning is only for the rich. 2) Bonds pay dividends to the bondholder on a regular basis. Answer: F bonds pay interest. 3) Real estate property taxes are based on the value of the land, not the buildings. […]

1) No-load mutual funds are appropriate for investors who want to buy investments through a broker or financial planner. 2) Term life insurance costs far more than cash-value life insurance. Answer: F term insurance costs much less than cash-value life […]

1) Target-date retirement funds are recommended for those who wish to actively manage their own investments. 2) The lower the annual percentage rate of interest (APR), the higher the cost of credit. Answer: F the lower the APR the lower […]

1) The default rate on high-quality bonds is slightly over 5 percent. 2) After mailing off a cover letter, you should wait at least a month before you contact the employer. Answer: F two-weeks is ample time for following up […]

1) The term money market account describes a variety of high-interest earning accounts that normally have unlimited check-writing privileges. 2) The need for life insurance is high until your first child is born. Answer: F the need is generally low […]

1) Visa and MasterCard are the most commonly recognized bank card names as well as the actual lenders. 2) A person is insolvent when he or she doesn’t have enough current income to pay all of his or her current […]

1) Commissions on load mutual funds are considerably lower than commissions on common stock investments. 2) Most tax shelters are methods permitting an investor to avoid taxes forever. Answer: F most tax shelters only defer taxes owed until a later […]

1) Needs and wants should both be considered necessities. 2) Effective career planning will help you identify an employment pathway that aligns your interests and abilities with the tasks expected. Answer: T 3) The discounted cash-flow method is an effective […]

1) Through the Social Security system, current workers support current retirees. 2) Stock brokerage firms earn commissions on clients’ stock transactions. Answer: T 3) An individual’s success in giving up smoking is an example of loss control. Answer: T 4) […]

1) When researching safety on a vehicle, you should check on recalls. 2) Your standard of living is where you would like to be and your level of living is where you actually are. Answer: T 3) Credit scores can […]

1) Probate is a court procedure to distribute assets of an estate. 2) Cash-value life insurance policies generally provide a policy illustration that charts the projected growth in the cash value for given rates of return. Answer: T 3) Short-term […]

1) Medical payments insurance would pay for your daughter’s injuries if she were hit by an automobile while riding her bicycle. 2) The more you save for your own retirement, the lower the proportion of your overall retirement income that […]

1) Deductibles are requirements that the insured pay an initial portion of any loss. 2) Professional networking is the process of establishing and using contacts to obtain and exchange career information. Answer: T 3) As a family matures, savings and […]

1) A portfolio is a collection of investments assembled to meet your investment goals. 2) After the budgeting period has ended, you need to add up the actual income received and expenditures made during that period. Answer: T 3) If […]

1) When lenders accept less than a 20 percent down payment, mortgage insurance is generally required. 2) By law, interest points must be included when calculating the APR for the loan. Answer: T 3) A share draft account is the […]

1) In most jurisdictions, landlords are prohibited from harrassing tenants who report violations of building codes or other tenant rights.. 2) The Fair Credit Reporting Act requires that reports contain accurate, relevant, and recent information, and that only bona fide […]

1) Cash-balance plans typically give older workers less in benefits. 2) The asset-to-debt ratio compares total assets with total liabilities and is a broad measure of a household’s financial liquidity. Answer: T 3) An aggressive-growth fund may employ high-risk investment […]

1) Optionally renewable policies can be canceled only at the time of expiration and renewal. 2) Workers compensation covers a full range of health care losses for job-related injuries and illnesses. Answer: T 3) The principal borrowed from a cash-value […]

1) Buying on impulse not only results in higher spending but failure to obtain what is really wanted.. 2) An indenture is a written legal agreement between a group of bondholders and the debtor describing the terms of the debt […]