Q. The World Bank's Multilateral Investment Guarantee Agency (MIGA):
✅ Correct Answer: (A)
offers various forms of export insurance.
International Financial Management MCQs and Notes
Q. Suppose the exchange rates between the United States and Euro Area are in long-run equilibrium as defined by the idea of purchasing power parity. If the law of one price holds perfectly, then differences between U.S. and Euro Area rates of inflation would
✅ Correct Answer: (D)
violate the conditions for the law of one price.
Q. An Austrian firm that buys foreign exchange because its managers expect the euro to depreciate is
✅ Correct Answer: (A)
increasing the supply of foreign exchange.
Q. All else equal, if Euro Area raises its interest rates,
✅ Correct Answer: (B)
the U.S. demand for euros increases.
Q. All else equal and under a system of floating exchange rates, if a country enters a period of exceptionally strong growth,
✅ Correct Answer: (A)
the pressure on its currency is to revalue.
Q. Covered interest arbitrage involves both
✅ Correct Answer: (D)
the sale of domestic stocks and the purchase of foreign bonds.
Q. In order to protect against foreign exchange risk, firms can use
✅ Correct Answer: (B)
interest rate arbitrage.
Q. When an individual or firm in a particular country requests that a bank sell foreign exchange, the bank will probably
✅ Correct Answer: (A)
call a foreign bank and arrange a purchase.
Q. A firm that buys foreign exchange in order to take advantage of higher foreign interest rates is
✅ Correct Answer: (B)
demonstrating purchasing power parity.
Q. Reducing a current account deficit requires a country to:
✅ Correct Answer: (A)
Increase private saving relative to investment