International Corporate Finance.docxVIP

International Corporate FinancePractice MCQsCHAPTER 8: PPP1) When people describe what they think an exchange rate value should be, they often use a benchmark model, known as ________.A) purchasing power parityB) interest rate parityC) the Fisher effectD) the International Fisher effectAnswer: AComment: Purchasing Power Parity and Real Exchange Rates, p.2592) One important reason to study the purchasing power parity theory is becauseA) investors should borrow in a foreign currency, when there is a forward discount.B) when inflation rates differ across international borders, PPP provides a baseline forecast of future exchange rates.C) forecasting exchange rates is difficult and PPP makes it easier.D) it provides currency dealers with a way to identify arbitrage opportunities.Answer: BComment: Purchasing Power Parity and Real Exchange Rates, p.2593) Understanding the theory of purchasing power parity is important because deviations from PPP significantly affect theA) operations of the central bank.B) hedging activities of multinational firms.C) profitability of multinational firms.D) arbitrage opportunities in the banking markets.Answer: CComment: Purchasing Power Parity and Real Exchange Rates, p.2594) What is the name of the ratio of a price level at one point in time to the price level in a designated base year?A) bid-ask spreadB) reserve requirementC) percent spreadD) price indexAnswer: DComment: Calculating a Price Index, p.2605) Within the United States, what is the name for the power of a dollar when it is used to purchase an amount of goods and services?A) internal purchasing powerB) external purchasing powerC) absolute purchasing power parityD) relative purchasing power parityAnswer: AComment: The Purchasing Power of a Currency, p.262CHAPTER 12: INTERNATIONAL EQUITY FINANCE1) In the field of finance, the market where initial public offerings are made is known as the ________ market.A) primaryB) secondaryC) money marketD) derivativeAnswer: AComment: