1. A British importer of U.S.computer equipment would take which action in the foreign exchange markets?
a. supply dollars
b. demand dollars
c. demand pounds d. both a and c above
e. none of the above
2. Capital accounts transactions are all of the following except they:
a. are made with the expectation of a future gain or to settle a debt.
b. are reversible.
c. represent a flow of income.
d. represent a geographic re positioning of wealth.
3. Under freely floating exchange rates a government would
a. do nothing.
b. sell assets to foreign investors for foreign exchange to buy the domestic currency.
c. buy assets to foreign investors for domestic currency.
d. intervene in the markets for the benefit of its exporters
4. The Euro currency market serves as a place to store excess liquidity for multinational corporations, countries and individuals because of all of the following except:
a. Lack of regulation allows investors to hold debt securities in bearer form.
b. The presence of a withholding of tax.
c. Investments earn higher returns.
d. Euro currency deposits are highly liquid because of very short maturities with nearly 90 percent of deposits being less than 180 days.
5. A __________ draft would be paid on demand; whereas a bank would pay a __________ draft at maturity as stated in the __________.
a. time; sight; bill of lading
b. sight; time; bill of lading
c. time; sight; letter of credit
d. sight; time; letter of credit
6.Which of the following affects the level of insurance premiums?
a. probability of loss b. value of loss
c. expected operating expenses
d.all of the above
7. Which of the following is likely to be a material component of an insurer’s revenue?
a. interest on bonds b .interest on mortgages
c. dividends on stocks
d. all of the above
8. “Objective risk” is
a. synonymous with “pure risk”
b. determined according to principles of probability and statistics
c. uninsurable
d. synonymous with “speculative risk”
9. The “Law of Large Numbers” is
a. a statistical principle relied on by insurers in managing objective risk
b. an informal rule of thumb for valuing pure risks
c. a principle of portfolio diversification that helps manage interest rate risk
d. none of the above
10. “Qualified” pension plans would have an incentive to invest in all the following except
a. municipal bonds
b. corporate bonds
c. preferred stocks
d. mortgages
