Global Finance

_is a loan instrument which promises to pay a fixed sum on a fixed date, and to pay interest to the lender

• Securities

• Bond

• Derivatives

• Shares

Which of the following is a Bretton Woods institution?

• The International Monetary Fund (IMF)

• The World Trade Organization (WTO)

• The International Labor Organization (ILO)

• The Securities and Exchange Commission (SEC)

A country's exporters favour all but which one of the following?

• A weak domestic currency

• A strong domestic currency

• A stable currency market

• A well regulated currency market

Why has globalization increased financial risks?

• Global production now involves many countries

• Global supply chains need increased sources of capital

• Global companies seek differing locations as part of their financial strategy

• Global capital flows can be highly volatile

Which of the following is an advantage of the pegged exchange rate?

• It protects the country against economic downturn

• It attracts foreign investors

• It leads to financial stability

• It deters speculators on the country's currency

What was a primary goal of the Bretton Woods system established in 1944?

• To promote free trade by eliminating all trade barriers

• To stabilize global financial markets by fixing exchange rates to the U.S. dollar, pegged to gold

• To establish a worldwide currency that would replace national currencies

• To encourage unrestricted capital flows between countries

Why are stable exchange rates important to a global economy?

• Stable exchange rate encourage international trade and finance

• Fluctuating exchange rates encourage speculation about a country's market

• Stable exchange rates keep down the price of gold

How can companies manage Currency Risk in international transactions?

• Selling products at a loss

• Investing in real estate

• Using financial instruments like forward contracts, options, and currency swaps to hedge against exchange rate fluctuations, diversifying currency exposure by operating in multiple countries or denominating transactions in stable currencies.

• Using social media marketing strategies

What is the primary purpose of a currency swap in global finance?

• To speculate on future exchange rate movements
• To manage exchange rate risk and obtain financing in foreign currencies
• To facilitate international trade by reducing trade barriers
• To provide liquidity in the foreign exchange market

Which of the following is an example of country risk in global business?

• Exchange rate fluctuations
• Interest rate changes
• Political instability
• Market competition