PRELIMS

Question 1

[TRUE OR FALSE] The process of actually changing one currency into another currency is called translation.

Answer 1

True

Question 2

[TRUE OR FALSE] The number of units of the foreign currency needed to acquire one unit of the domestic currency (the Philippine Peso) is referred to as the indirect quotation of the exchange rate.

Answer 2

TRUE

Question 3

[TRUE OR FALSE] international trade encompasses all commercial activities that take place to promote the transfer of goods, services. resources, people, ideas and technologies across national boundaries

Answer 3

FALSE

Question 4

[TRUE OR FALSE] A foreign currency is strengthening; as a result, the indirect exchange rate will decrease

Answer 4

TRUE

Question 5

[TRUE OR FALSE] To determine the Philippine peso equivalent of an amount stated in a foreign currency, multiply the toreign currency by the direct exchange rate

Answer 5

TRUE

Question 6

[TRUE OR FALSE] International trade covers a much broader scope since it refers to commercial transactions that are carried out in the world.

Answer 6

FALSE

Question 7

[TRUE OR FALSE] AS to effect on foreign reserve, both international trade and international business has a direct impact on the foreign reserves of a country

Answer 7

TRUE

Question 8

[TRUE OR FALSE] 1944 the League of Nations organized the First World Economic Conference.

Answer 8

FALSE

Question 9

T OR F The Philippine peso is strengthening: as a result, the direct exchange rate will increase.

Answer 9

F

Question 10

T OR F In order to make running an international business easy, one can also hire industry experts from that area to learn and benefit from their experience which eventually eases the complexities of international business.

Answer 10

T

Question 11

T OR F Foreign trade is the purchase or sale of goods and services outside national geographic borders, so that parties involved in the commercial transaction are in different countries.

Answer 11

T

Question 12

T OR F Presentation currency is the currency of the primary economic environment in which the entity operates

Answer 12

F

Question 13

Direct quote is the number of units of home currency per one unit of foreign currency. T OR F

Answer 13

T

Question 14

T OR F Operating exposure is not easily quantifiable and reflects impact of changes in real exchange rates on a firm’s operation

Answer 14

T

Question 15

T OR F The key feature that distinguishes a monetary itern from a non-monetary item is the right to receive (or an obligation to deliver) a fixed or determinable number of units of currency.

Answer 15

T

Question 16

British pound can be exchanged for 180 cents of US currency, what fraction should be used to compute the indirect quotation of the exchange rate expressed in British pound? a. 1/180
B. 1/0.56
C. 1.8/1
D. 1/1.8

Answer 16

D. 1/1.8

Question 17

Exchange rate is
A. The spot exchange rate at the end of reporting period
B. The exchange rate for immediate delivery
C. The ratio of exchange for two currencies
D. The difference resulting from translating a given number of units of one currency into another currency at different exchange rates

Answer 17

C. The ratio of exchange for two currencies

Question 18

An entity started trading in country A, whose currency was the dollar. After several years, the entity expanded and exported its product to country B, whose currency was the euro. The business was conducted through a subsidiary in country B. The subsidiary is essentially an extension of the entity’s own business, and the directors of the two entities are common. The functional currency of the subsidiary is

Answer 18

THE DOLLAR