Why is it true that the hypothesis that the forward exchange rate is an unbiased predictor of the future spot exchange rate is equivalent to the hypothesis that the forward premium (or discount) on a foreign currency is an unbiased predictor of the rate of its appreciation (or depreciation)? ANSWER Answer: When the […]
When managing accounts payable, a good strategy would be to ________. A) pay as early as possible creating better credit rating for a firm B) pay as slowly as possible without damaging a firm’s credit rating C) pay big customers early to maintain good relations and small customers on a later date D) pay only […]
Delaying the payment of accounts payable in order to improve cash management is known as ________. A) ACH transfers B) stretching payables C) credit scoring D) lockbox system ANSWER B
When managing accounts receivable, a good strategy would be to ________. A) send the accounts to a collection agency to extract payments B) tighten the credit terms to force the customer to pay on time C) offer cash discount without losing sales and imposing burden on customer D) make frequent personal visits to the customer […]
________ refers to funds that have been dispatched by a payer but are not in a form that can be spent by the payee. A) Banker’s acceptance B) Float C) A direct send D) Lockbox ANSWER B
What is the name of the ratio of a price level at one point in time to the price level in a designated base year? A) bid-ask spread B) reserve requirement C) percent spread D) price index ANSWER Answer: D
________ float is the delay between the receipt of a check and the actual deposit of it into a firm’s account. A) Disbursement B) Deposit C) Processing D) Clearing ANSWER C
One important reason to study the purchasing power parity theory is because A) investors should borrow in a foreign currency, when there is a forward discount. B) when inflation rates differ across international borders, PPP provides a baseline forecast of future exchange rates. C) forecasting exchange rates is difficult and PPP makes it easier. D) […]
Understanding the theory of purchasing power parity is important because deviations from PPP significantly affect the A) operations of the central bank. B) hedging activities of multinational firms. C) profitability of multinational firms. D) arbitrage opportunities in the banking markets. ANSWER Answer: C
Within the United States, what is the name for the power of a dollar when it is used to purchase an amount of goods and services? A) internal purchasing power B) external purchasing power C) absolute purchasing power parity D) relative purchasing power parity ANSWER Answer: A
