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The North American Free Trade Association (NAFTA) continues to generate more foreign trade despite some negative political views.

A) True
B) False

Correct Answer

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When Country A's currency strengthens against Country B's, citizens of Country A will


A) pay less to buy Country B's products.
B) pay more to buy Country B's products.
C) pay more to buy domestically produced products.
D) not be affected by the change in their currency's value.

E) A) and B)
F) C) and D)

Correct Answer

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Which of the following is not commonly used to minimize transaction exposure in foreign exchange dealings?


A) Hedging in the forward exchange market
B) Hedging in the money market
C) Hedging in the stock market
D) Hedging in the currency futures market

E) B) and D)
F) A) and B)

Correct Answer

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All of the countries that joined the "Eurozone" were able to enjoy economic benefits for various reasons.

A) True
B) False

Correct Answer

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Which of the following kinds of risk is NOT uniquely associated with multinational corporations (MNCs) ?


A) Exchange rate risk
B) Business risk
C) Political risk
D) None of these options are uniquely associated with MNCs.

E) B) and C)
F) None of the above

Correct Answer

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Which of the following is not a reason for U.S. firms operating in foreign markets?


A) Less expensive labor
B) Better economic and political environment (in the U.S.)
C) Tax incentives
D) To achieve international diversification

E) A) and B)
F) B) and C)

Correct Answer

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The lending rate for borrowers in the Eurodollar market is based on the prime lending rate.

A) True
B) False

Correct Answer

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Political risk and labor unrest will tend to strengthen a country's currency.

A) True
B) False

Correct Answer

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A portfolio of international stocks in comparison to purely U.S. stocks generally shows


A) a lower percentage risk for a given number of stocks.
B) higher percentage risk for a given number of stocks.
C) the same percentage risk for a given number of stocks.
D) a lower percentage return for a given number of stocks.

E) A) and B)
F) C) and D)

Correct Answer

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