1. Which of the following is not a function of money? ______.
A. To act as a medium of exchange
B. To act as a unit of account
C. To act as a store of value
D. To provide a double coincidence of wants
E. To act as a means of payment
2. The price in the foreign exchange market is called ______.
A. the trade surplus
B. the exchange rate
C. the money price
D. the currency rate
3. Market risk refers to the risk of______.
A. financial prices fluctuations
D. deferred payments
4. Which of the following is not among the generally accepted accounting principles? ______.
A. Cash basis
D. Going concern
E. Money measurement.
5. What is a documentary letter of credit? ______.
A. A conditional bank undertaking to pay an exporter on production of stipulated documentation
B. A method of lending against documentary security
C. An international trade settlement system biased in favour of importers
D. All of the above
6. Holding a group of assets reduces risk as long as the assets ______.
A. are perfectly correlated
B. are completely independent
C. do not have precisely the same pattern of returns
D. have a correlation coefficient greater than one
7. An amount, payable in money goods, or service, owed by a business to a creditor, is known as a/an .
8. What function is money serving when you buy a ticket to a movie? ______.
A. store of value
B. a medium of exchange
C. transaction demand
D. a unit of account
9. If foreigners expect that the future price of sterling will be lower, the ______.
A. supply of sterling will increase, demand for sterling will fall, and the
exchange rate will fall
B. supply of sterling will increase, demand for sterling will rise, and the
exchange rate may or may not increase
C. supply of sterling will fall, demand for sterling will increase, and the exchange rate will rise
D. supply of sterling will fall, demand for sterling will fall, and the exchange rate may or may not fall
10. The documentary collection provides the seller with a greater degree of protection than shipping on ______.
A. open account
B. bank's letter of guarantee
C. banker's draft
D. documentary credit
11. Which of the following statements is not true of central banks? ______.
A. They pay the government's salaries
B. They always undertake the regulation of the banking system
C. They are always the lender of last resort
D. None of the above
12. When GBP/USD rate goes from 1.6150 to 1.8500, we say the dollar ______.
A. appreciates by 12.70%
B. depreciates by 14.55%
C. depreciates by 12.70%
D. appreciates by 14.55%
13. According to diversification principle in investment, suppose you invest Stock X and Stock Y with equal funds, which of the following is not true? ______.
A. If X and Y are totally independent with each other, the risk of the portfolio is reduced
B. If X and Y are perfectly negatively correlated, the risk of the portfolio is perfectly offset
C. If X and Y are perfectly positively correlated, the risk of the portfolio is neither reduced nor increased
D. If X and Y are perfectly negatively correlated, the risk of the portfolio is neither reduced nor increased
14. These are four main methods of securing payment in international trade:
(1) payment under documentary credit
(2) open account
(3) collection, that is document against payment or acceptance of a bill of exchange
(4) payment in advance
From an exporter's point of view, the order of preference is ______.
A. (4) , (2) , (3) , (1)
B. (4) , (1) , (3) , (2)
C. (4) , (3) , (1) , (2)
D. (2) , (4) , (1) , (3)
15. The main liability on a bank balance sheet is ______.
B. capital and reserves
C. loans and overdrafts
16. ______ shows that net income for a specified period of time and how it was calculated.
A. The income statement
B. The capital statement
C. The accounting statement
D. The statement of financial condition
17. Why must the liabilities and assets of a bank be actively managed? ______.
A. Because assets and liabilities are not evenly matched on the same time scale
B. Because assets and liabilities are evenly matched
C. Because the interbank market uses LIBOR
D. Because assets and liabilities can be underwritten
18. If the expected returns of two risky assets have a perfect negative correlation, then risk .
A. is increased
B. falls to zero
C. is unaffected
D. is reduced by one-half
19. A possible disadvantage of freely fluctuating exchange rates with no official intervention is that .
A. some nations would experience continual deficits
B. the exchange rates may experience wide and frequent fluctuations
C. nations would no longer be able to undertake domestic policies designed to achieve and maintain full employment
D. nations would need a larger supply of international reserves than otherwise
20. What are your GBP/USD position and the average rate if you sell ￡4m at 1.6350 buy ￡5m at 1.6340 and sell $5m at 1.6348?
A. Short ￡2 058 478.10 long $3 370 000 at 1.6371
B. Long ￡5 941 521.90 short $9710 000 at 1.6342
C. Short ￡5 941 521.90 long $9 710 000 at 1.6342
D. Long ￡4 058 478.10 short $6 630 000 at 1.6336
21. A correlation coefficient of +1.0 means two stocks are ______.
A. perfectly negatively correlated
B. opposite the market beta
C. equal to the market beta
D. perfectly positively correlated
22. The percentage analysis of increases and decreases in corresponding items in comparative financial statements is called ______.
A. external analysis
B. horizontal analysis
C. vertical analysis
D. comparative analysis
23. What is the name of the document which can make a buyer feel confident that goods are of a certain standard? ______.
A. Inspection certificate
B. Commercial invoice
C. Insurance policy
D. Certificate of origin
24. Sometimes financial intermediaries by "borrowing short and lending long" find themselves in difficult financial situations because .
A. short-term rates are falling
B. long-term rates are rising
C. deposits increase too rapidly
D. short-term rates rise relative to rates of their holdings
E. long-term rates rise more sharply than short-term rates
25. Incoterms were written ______.
A. by the International Chamber of Commerce
B. under the United Nations Convention for the International Sale of Goods (Vienna Convention )
C. under the Kyoto Protocols as adopted in 2000
D. under "fast track" authority granted by the U.S. Congress
26. The purpose of keeping account is to .
A. determine whether the business has made a profit or a loss
B. find out why the business has lost money
C. see how much has been spent
D. find out why the business cannot fulfil its commitments
27. If reserves are 20 percent, then the multiplier effect will be ______ times, so the original deposit of RMB40 000 can create up to ______ of new deposits.
28. ABC Company is the beneficiary of a confirmed irrevocable letter of credit. ______ bank ( s ) will assure the company that it will be paid.
29. Legal tender includes .
A. notes and coins
B. notes only
C. coins only
D. notes, coins and checks
30. The following are the basic functions of a bill of lading except to act as ______.
A. a receipt for the goods from the shipping company to the exporter
B. a document of title for goods being shipped overseas
C. a certificate of origin, which certifies that the goods were produced in a particular country
D. evidence of the carriage contract between the exporter and the carrier
31. Persistent foreign trade deficits under a flexible exchange rate system usually lead to ______.
A. inflation in the domestic economy
B. speculation of future devaluation
C. falling interest rates
D. rising imports
32. The additional amount paid in buying or selling a currency at a given future date is called .
33. Banks manage their assets considering ______.
B. some optimum combination of the above
34. What is the function of the book-keeping system in bank accounting? ______.
A. To prove that all the day's transactions have gone through for the right amount
B. To prove that all the day's transactions have all been posted to the right account
C. To prove that the fresh balance of those accounts is correct after recording the transactions
D. All of the above
35. The risk that is specific to individual stocks is called ______.
A. systematic risk
B. country risk
C. unsystematic risk
D. market risk
36. The main objective of the Exchange Equalization Account is to ______.
A. prevent undue fluctuation in the exchange value of one country's own currency against other currencies
B. control the rate of inflation
C. ensure that notes and coins continue to be acceptable as a medium of exchange
D. permit the exchange of payments between banks
37. How can you prove that no transactions are missing or wrong at the end of the day? ______.
A. There is no other way than have these transactions reposted to the proper entries
B. We can examine all the transactions carefully and find the wrong records
C. We can balance the total debits and the total credits by calculating them again
D. We can do that by checking the total debits and the total credits to see whether they are in state of balance
38. Money _____.
A. serves as the critical function of a medium of exchange
B. facilitates trade in goods and services
C. overcomes the inefficiencies of barter
D. all of the above
39. If dealers buy currency forward but do not sell forward at the same time, their position is known as .
40. Incoterms apply ______.
A. only if clearly incorporated into the contract of sale
B. to International shipments beyond a certain tonnage
C. to international shipments under the Uniform Commercial Code
D. to all international shipments of goods
41. Under which one of the following circumstances would it be wise for your customer to arrange a forward foreign exchange contract? ______.
A. Import of goods priced in a foreign currency
B. Import of goods priced in RMB
C. Export of goods priced in RMB
D. Export of goods priced in a foreign currency where the rate of exchange has been agreed in the sales contract
42. Incoterms address ______.
A. the risks of loss between the parties
B. breaches of contract
C. ownership rights
D. type of ship used
43. Which of the following is or was an example of representative full-bodied money? ______.
A. Debt money
B. ATS account
C. Gold certificate
D. Demand deposit
44. Risks associated with investing in foreign countries are the following except ______.
A. voting risk
B. exchange rate risk
C. country risk
D. political risk
45. An exporter sells goods to a customer abroad on FOB and on CIF term. Who is responsible for the freight charges in each? ______.
A. Exporter; Exporter
B. Exporter; Importer
C. Importer; Importer
D. Importer; Exporter
46. Default risk refers to the possibility that a borrower may ______.
A. be unable to repay the principal on his loan
B. be unable to make the interest payments on his loan
C. go bankrupt
D. all of the above
47. What is the reserve requirement? ______.
A. The requirement of a bank to deposit a percentage of money
B. The requirement for deposits in cash
C. The percentage of a bank's deposits in the form of cash reserves
D. The requirement for cash reserves
48. A draft is like a check that can be endorsed but it isn't a title to goods, like ______.
A. a bill of lading
B. an inspection certificate
C. a certificate of origin
D. an insurance certificate
49. Arbitrage ______.
A. is a general economic term for buying something where it is cheap and selling it where it is dear
B. keeps exchange rates consistent across markets
C. has been outlawed by the International Monetary Fund
D. cannot occur where there is a forward exchange market
E. both A and B
50. What is the purpose of comparing the ledger entries with the documents? ______.
A. To prove that all the transactions have made for the right amounts
B. To prove that all the accounts have been posted correctly
C. To check the number of all the debits and credits
D. To post the right accounts
51. What is Dollar Cost Averaging? ______.
A. A brokerage account that gives investors cheap trades
B. The idea that prices tend to rise over the long term
C. Buying stocks that are below average in value
D. A flat quarterly mutual fund fee averaged throughout the year
E. A strategy of investing money on a regular basis to take advantage of market fluctuations
52. From a Chinese bank's point of view, the currency account which it maintains abroad is known as______, while a RMB account operated in China for a foreign bank is termed ______.
A. a vostro account…… a nostro account
B. a vostro account…a mirror account
C. a mirror account…a nostro account
D. a nostro account…… a vostro account
53. Under FOB terms the bill of lading would state goods ______.
A. loaded on board, freight payable at destination
B. loaded on board, freight paid
C. received for shipment, freight paid
D. received for shipment, freight payable at destination
54. The liabilities of the bank as shown in its balance sheet represent the ______ which it uses in its business.
A. sources of the funds
B. share capital
D. advances to customers
55. International payments and other messages are often sent through an international computer network called ______.
56. Low levels of uncertainty (risk) are associated with .
B. stock options
C. higher potential returns
D. lower potential returns
57. Government securities would appear on a commercial bank's balance sheet as ______.
A. an asset
C. part of net worth
D. a liability
58. A major problem with a fixed exchange rate system is that when countries run foreign trade deficits, ______.
A. there is no self-correcting mechanism
B. currency values become unstable
C. the value of the reserve currency declines
D. world inflation increases
59. In a particular economy banks are required to keep 25 percent of all deposits in the form of reserves; this gives a credit-creation multiplier of ______.
60. Regulation of the money supply and financial markets is referred to as ______.
A. fiscal policy
B. income policy
C. monetary policy
D. budgetary policy
61. When a country runs a foreign trade deficit under a flexible foreign exchange rate system, its .
A. imports automatically increase
B. currency automatically depreciates
C. exports automatically decline
D. currency automatically appreciates
62. Which of the following statements is not true of accounting? ______.
A. Accounting is language of business
B. The user of accounting includes business, government, nonprofit organizations and individuals.
C. Accounting is useful for decision making
D. Accounting is an end rather than a means to an end
63. The term foreign exchange is best defined by the following statement: it is ______.
A. the rate of exchange between two currencies
B. synonymous with currency exchange
C. the place in which foreign currencies are exchanged
D. an instrument such as paper currency, note, and check used to make payments between countries
64. What is Asset Allocation? ______.
A. Buying assets of different types, risks, and potential returns
B. Buying assets with more than one brokerage account
C. The ability to buy mutual funds
D. Buying stocks for the long term
65. External users of financial accounting information include all of the following except .
B. line managers
C. general public
66. CAPM is short for .
A. Capital Asset Pricing Model
B. Cash Added Price Matrix
C. Capital Asset Pricing Matrix
D. Cost and Price Model
67. Liquidity measures the ______.
A. value of an asset
B. ease with which an asset can be exchanged
C. usefulness of an asset
D. economic and monetary reliability of an asset compared with other assets
68. In a letter of credit transaction, the bank pays the seller against ______ which agree(s) with______.
A. documents…… the credit
B. merchandise…… the contract
C. documents…… the contract
D. merchandise……the buyer ordered
69. A barter economy is one that does not possess _______.
A. any wealth B. printed currency
C. a medium of exchange D. gold
70. Which of the following is not true of airway bill? ______.
A. When goods are delivered to the airline, the airway bill is signed by them or their agents as a receipt of the goods
B. Airway bill is a document of title to the goods
C. Airway bill may also provide evidence of despatch of the goods where it has been stamped indicating details of the relevant flight
D. None of the above
71. The value of money varies _____.
A. directly with the unemployment rate
B. directly with the price level
C. inversely with the unemployment
D. inversely with the price level
72. The economics news on the television reports that the dollar has strengthened relative to the Japanese yen. This means that ______.
A. the dollar has depreciated relative to the yen
B. the dollar can now purchase more yen
C. the yen can now purchase more dollars
D. the US trade balance with the Japanese economy has improved
73. The theory of international exchange that holds that exchange rates are set so that the price of similar goods in different countries is the same is the ______.
A. price feedback theory
B. trade feedback theory
C. purchasing power parity theory
D. J-curve theory
74. According to the optimal portfolio theory, where should portfolios lie? ______.
A. On the efficient frontier
B. Above the efficient frontier
C. Under the efficient frontier
D. Anywhere, as long as the portfolio is diversified
75. Which of the following is not a user of management accounting information? ______.
A. Store manager
76. Based on the scenarios below, what is the expected return for a portfolio with the following return profile? ______.
|Rate of return||
77. Financial markets serve to channel funds from ______.
A. the government to contractors
B. investors to consumers
C. consumers to producers
D. savers to investors
78. The agreements that were reached at the Bretton Woods conference in 1944 established a system .
A. of essentially fixed exchange rates under which each country agreed to intervene in the foreign exchange market when necessary to maintain the agreed-upon value of its currency
B. of floating exchange rates determined by the supply and demand of one nation's currency relative to the currency of other nations
C. that prohibited governments from intervening in the foreign exchange markets
D. in which the values of currencies were fixed in terms of a specific number of ounces of gold, which in turn determined their values in international trading
79. Which of the following statements is not consistent with generally accepted accounting principles relating to asset valuation? .
A. Assets are originally recorded in accounting records at their cost to the business entity
B. Accountants prefer to base the valuation of assets upon objective, verifiable evidence rather than upon appraisals or personal opinion
C. Accountants assume that assets such as office supplies, land and buildings will be used in business operations rather than sold at current market prices
D. Subtracting total liabilities from total assets indicates what the owner's equity in the business is worth under current market conditions
80. A fiscal expansion in the UK ______ the pound sterling.
A. tends to appreciate
B. tends to depreciate
C. does not affect the price of
D. has no predictable effect on the price of
81. What are the expected returns for Stocks X and Y respectively? ______.
A. 20% and 10%
B. 18% and 12%
C. 20% and 11%
D. 18% and 5%
82. Which of the following payment terms eliminates the exchange risk, assuming the exporter invoices in foreign currency? ______.
A. Confirmed irrevocable documentary credit
B. Open account
C. Documentary collection D/A
D. None of the above
83. ABC Co. Ltd. purchased a car for $ 12 000, making a down payment of $5 000 cash and signing a $7 000 note payable due in 60 days. Which of the following is not correct? ______.
A. From the viewpoint of a short-term creditor, this transaction makes the business less solvent
B. Total liabilities increased by $7 000
C. Total assets increased by $12 000
D. This transaction had no immediate effect on the owner's equity in the business
84. Which of the following terms of payment will entirely eliminate country risk? ______.
A. Revocable documentary credits
B. Confirmed Irrevocable documentary credits
C. Documentary collection D/P
D. Documentary collection D/A
85. The expiry date of a documentary credit is Sunday, 24 February, and documents have to be A presented to you. Which of the following is an acceptable presentation? (Assume there is no latest stated date for shipment stipulated.) ______.
A. Presentation to you on Monday 25 February with the bill of lading dated 25 February
B. Presentation on Monday 25 February with the bill of lading dated Sunday 24 February
C. Presentation on Tuesday 26 February with the bill of lading dated Sunday 24 February
D. Presentation on Friday 22 February with the bill of lading dated Sunday 29 January
86. What are the standard deviations of returns on Stocks X and Y respectively? ______.
A. 15% and 26%
B. 24% and 13%
C. 20% and 4%
D. 28% and 8%
87. Who makes the first presentation of documents under a transferable credit? ______.
B. First beneficiary
C. Second beneficiary
D. None of the above
88. A transaction caused a $10 000 decrease in both total assets and total liabilities. This transaction could have been ______.
A. repayment of a $ 10 000 bank loan
B. an asset with a cost of $10000 was destroyed by fire
C. purchase of a delivery truck for $10 000 cash
D. collection of a $10 000 account receivable
89. Money ceases to serve as an effective store of value when ______.
A. the government runs large deficits
B. the unemployment rate is very high
C. productivity in the economy declines
D. rapid inflation occurs
90. An indication that the money supply is greater than the desirable amount would be .
A. insufficient spending and excessive saving
C. inadequate spending and rising unemployment
D. rising wages and prices
91. If a nation's interest rates are relatively low compared to those of other countries, then the exchange value of its currency will tend to ______ under a system of exchange rates.
A. appreciate…… floating
C. appreciate…… fixed
D. depreciate…… fixed
92. Which of the following is true of a company's balance sheet? ______.
A. It displays sources and uses of cash for the period
B. It is unnecessary if both an income statement and a statement of cash flows are available
C. It is a separate representation of the company's revenue and expense transactions for the year
D. It is an expansion of the basic accounting equation of Assets=Liabilities+Owner's Equity
93. When Americans or foreigners expect the return on dollar deposits to be high relative to the return on foreign deposits, there is a ______ demand for dollar deposits and a correspondingly ______ demand for foreign deposits.
A. higher…… higher
B. lower…… higher
C. higher…… lower
94. Velocity is the ______.
A. inverse of GNP
B. speed at which checking accounts are converted into cash
C. relationship between the price level and the money supply
D. rate at which money turns over
95. Assume that of your $10 000 portfolio, you invest $9 000 in Stock X and $1 000 in Stock Y. What is the expected return on your portfolio? ______.
96. Which of the following would you expect to find in a correctly prepared income statement? .
A. Cash balance at the end of the period
B. Expenses incurred during the period to earn revenues
C. Contributions by the owner during the period
D. The reported company's financial position at a specific date
97. The concept of beta is most closely associated with ______.
A. correlation coefficient
B. the capital asset pricing model
C. nonsystematic risk
D. mean-variance analysis
98. The velocity of money for a given year can be calculated by ______.
A. dividing GNP by the money supply
B. dividing aggregate supply by aggregate demand
C. dividing the price level by the money supply
D. multiplying the price level by total output
99. The theory of purchasing power parity states that exchange rates between any two currencies will adjust to reflect changes in ______.
A. the price levels of the two countries
B. the current account balances of the two countries
C. the fiscal policies of the two countries
D. the trade balances of the two countries
100. Before issuing a credit, it is important for the issuing bank ______.
A. to make certain of the importer's creditworthiness
B. to go through the contract terms
C. to have a thorough understanding of the exporter
D. all of the above