1. Which of the following is NOT a characteristic of microfinance?
A.Microfinance lends money to low-income entrepreneurs at competitive interest rates.
B.Sometimes a loan is made to a group of entrepreneurs who sink or swim together.
C.Most microfinance borrowers are female.
D.The microfinance concept was pioneered in a way for developing countries to create a market economy.
E.Most borrowers are men.
2. The exchange rate depends on all of the following EXCEPT ________.
A.government mandate
B.the trader conducting it
C.the size of the transaction
D.the securities exchange
E.general economic conditions
3. The forces of ________ determine currency prices, and transactions are conducted through a process of bid and ask quotes.
A.interest arbitrage
B.currency speculation
C.interbank interest rates
D.foreign bonds
E.supply and demand
4. Which of the following is a system that allocates financial resources in the form of debt and equity according to their most efficient uses?
A.A stock
B.A bond
C.A capital market
D.Liquidity
E.An equity
5. Which of the following is NOT a function of the foreign exchange market?
A.Currency arbitrage
B.Interbank interest rates
C.Currency speculation
D.Currency hedging
E.Currency conversion
6. If an exchange rate quotes the number of Japanese yen needed to buy one U.S. dollar (¥/$), the yen is the ________ and the dollar is the ________.
A.denominator, numerator
B.quoted currency, base currency
C.spot rate, spot market
D.exchange-rate risk, cross rate
E.supply, demand
7. Which government policy does NOT restrict currency convertibility?
A.Requirement of import licenses
B.Approval by a country's central bank
C.Implementing multiple exchange rates
D.Countertrade
E.Issuing import deposit requirements
8. A(n) ________ is a country or territory whose financial sector features very few regulations and few, if any, taxes.
A.booking center
B.operational center
C.securitization
D.deregulation
E.offshore financial center
9. One simple form of countertrade is ________, in which goods are exchanged for others of equal value.
A.liquidity
B.multiple exchange rates
C.spot rates
D.barter
E.hard currency
10. Companies can be better skilled at foreign exchange activities by doing all of the following EXCEPT ________.
A.working with major banks
B.getting the best deal possible
C.consolidating to save
D.using telephones, e-mails, or faxes
E.matching needs to providers
11. The international capital market consists of the ________, ________, and ________.
A.vehicle currency, currency futures contract, liquidity
B.international bond market, international equity market, Eurocurrency market
C.countertrade, interbank market, securities exchange
D.stock market, bond market, currency market
E.liquidity, Eurobond, over-the-counter (OTC) market
12. To exchange currency in international transactions, companies rely on the ________, where currencies are bought and sold.
A.over-the-counter (OTC) market
B.interbank market
C.forward market
D.foreign exchange market
E.Eurocurrency market
13. Which of the following statements about forward rates is FALSE?
A.The forward rate shows a nation's present and future economic conditions.
B.It is an exchange rate at which two parties agree to exchange currencies on a future date.
C.Forward rates show the expectations of traders and bankers regarding a currency's future spot rate.
D.The forward market handles transactions at forward rates.
E.Forward rates do not reflect a country's social and political situation.
14. Which of the following currency instruments is NOT used in the forward market?
A.Derivatives
B.Forward contracts
C.Currency swaps
D.A currency forward contract
E.Clearing
15. The practice of insuring against potential losses that result from adverse changes in exchange rates is called ________.
A.interest arbitrage
B.currency arbitrage
C.currency hedging
D.currency speculation
E.currency conversion
16. Equity normally takes the form of ________, or shares of ownership in a company's assets.
A.liquidity
B.derivative
C.bonds
D.stock
E.Debt
17. Which of the following is NOT a goal for government imposing currency restrictions?
A.Protecting a currency from speculators
B.Preserving a country's hard currencies
C.Preserving hard currencies to pay for imports and financing trade deficits
D.Permitting convertibility of currency
E.Preventing investment in other nations
18. As many countries abandoned central planning and socialist-style economics, the pace of privatization ________ worldwide.
A.plummeted
B.accelerated
C.fell
D.declined
E.increased only slightly