follow the outline and solve question

1) Financial globalization has not resulted in:

A) continuing imbalances of balance of payments.

B) an increase in quantity and speed in the flow of capital across the world.

C) capital markets less open and a decrease in the availability of capital for many organizations.

D) uniform ways of ownership, control, and governance across the world.

2) A well-established, large, Brazil-based MNE will probably be most adversely affected by which of the following elements of firm value?

A) an open marketplace

B) high-quality strategic management

C) access to capital

D) access to qualified labor pool

3) The modern eurocurrency market was born shortly after:

A) World War II

B) World War I

C) Korean War

D) Bosnian War

4) The theory that suggests specialization by country can increase worldwide production is:

A) the theory of comparative advantage.

B) the theory of foreign direct investment.

C) the international Fisher effect.

D) the theory of working capital management.

5) Which of the following is not always understood by MNE management?

A) Culture, history, and institutions

B) Political risk

C) Foreign exchange risk

D) Financial instruments

6) ________ investments are designed to promote and enhance the growth and profitability of the firm. ________ investments are designed to deny those same opportunities to the firm's competitors.

A) Conservative; Aggressive

B) Defensive; Proactive

C) Proactive; Defensive

D) Aggressive; Proactive

7) The phase of the globalization process characterized by imports from foreign suppliers and exports to foreign buyers is called the:

A) domestic phase.

B) multinational phase.

C) international trade phase.

D) import-export banking phase.

8) Under the gold standard of currency exchange that existed from 1879 to 1914, an ounce of gold cost $20.67 in U.S. dollars and 4.2474 in British pounds. Therefore, the exchange rate of pounds per dollar under this fixed exchange regime was:

A) 4.8665/$.

B) 0.2055/$.

C) always changing because the price of gold was always changing.

D) unknown because there is not enough information to answer this question.

9) One of the innovations introduced by Bretton Woods was the creation of the Special Drawing Right or SDR. The SDR is an international reserve asset created by the:

A) U.S. Department of the Treasury

B) International Bank of Reconstruction and Development (IBRD)

C) World Bank (WB)

D) International Monetary Fund (IMF)

10) A review of the evolution of the Global Monetary System shows that capital flows dominate trade in which of the following eras EXCEPT:

A) Classical Gold Standard

B) Fixed Exchange Rates, 1945-1973

C) The Floating Era, 1973-1997

D) The Emerging Era, 1997-Present

11) Since 2009 the IMF's exchange rate regime classification system uses a "de facto classification" methodology. Under this system, countries with "fixed exchange rates" are considered to have:

A) a residual agreement.

B) soft pegs.

C) hard pegs.

D) floating arrangements.

12) Which of the following is NOT an attribute of the "ideal" currency?

A) monetary independence

B) full financial integration

C) exchange rate stability

D) All are attributes of an ideal currency.

13) According to the authors, what is the single most important mandate of the European Central Bank?

A) Promote international trade for countries within the European Union.

B) Price, in euros, all products for sale in the European Union.

C) Promote price stability within the European Union.

D) Establish an EMU trade surplus with the United States.

14) In January 2000 Ecuador officially replaced its national currency, the Ecuadorian sucre, with the U.S. dollar. This practice is known as:

A) bi-currencyism.

B) securitization

C) a Yankee bailout.

D) dollarization.

15) The following are examples of degrees of internationalization of an international currency EXCEPT:

A) First degree of internationalization is when an international currency becomes readily accessible for trade.

B) A second degree of internationalization is when an international currency is used for international investment.

C) A third degree of internationalization is when an international currency is used for international investment.

D) A third degree of internationalization is when an international currency takes the role of a reserve currency.

16) Which of the following international transactions would NOT be counted as a balance of payments (BOP) transaction?

A) An American tourist purchases cheese in Milwaukee, Wisconsin.

B) The U.S. subsidiary of a British firm pays profits (dividends) back to its parent firm in London.

C) A Canadian lumber baron purchases a U.S. corporate bond through an investment broker in

Seattle.

D) All of the above are considered BOP transactions.

17) The ________ includes all international economic transactions with income or payment flows occurring within the year.

A) capital account

B) current account

C) financial account

D) IMF account

18) Portfolio investment is capital invested in activities that are ________ rather than made for ________.

A) short term; the long term

B) long term; profit

C) profit motivated; control

D) control motivated; profit

19) Use the following terms for this question:

C = consumption

I = capital investment spending

G = government spending

X = exports of goods and services

M = imports of goods and services

BOP = balance of payments

GDP = gross domestic product

NPV = net present value

INF = inflation

R = real rate of return

The static equation for the nations GDP is:

A) GDP = C + I + G + (X + M ) INF

B) GDP = C + I + G + X + M

C) GDP = C + I + G + X - M

D) GDP = C + I + X - M + R

20) Which of the following is NOT likely to occur in the quantity adjustment phase of the J-Curve adjustment path?

A) Imports become relatively more expensive.

B) Exports become relatively less expensive.

C) The balance of trade gets worse.

D) All of the above are true.

21) This was an era dominated by industrialized nation economies that were dependent on gold convertibility to maintain confidence in the system.

A) The Gold Standard, 1860-1914

B) The Interwar Years , 1914-1945

C) The Bretton Woods Era, 1945-1971

D) The Floating Era, 1971-1997

22) Which of the following is NOT typically associated with the public ownership of business organizations?

A) the state

B) the government

C) families

D) civil society

23) In the Anglo-American model of corporate governance, the primary goal of management is to:

A) maximize the wealth of all stakeholders.

B) maximize shareholder wealth.

C) minimize costs.

D) minimize risk.

24) Which of the following is NOT a source of new stock exchange listing additions?

A) initial public offerings

B) movements of share listings from one exchange to another

C) spinouts from larger firms

D) all of the above are sources

25) Which of the following broad topics is NOT identified as an area to be established as good corporate governance practice by the Organization for Economic Cooperation and Development (OECD)?

A) protect the rights of shareholders

B) disclosure and transparency

C) the proper role of stakeholders in the governance of the firm

D) All of the above should be a concern of good corporate governance.

26) Which of the following is NOT a possible and appropriate response by shareholders dissatisfied with existing firm management of a publicly traded firm?

A) Shareholders could sell their shares of stock.

B) Shareholders could remain quietly disgruntled.

C) Shareholders, perhaps with the help of others, could attempt to initiate a takeover.

D) All of these responses may be possible and appropriate.

27) Which of the following is NOT a motivation identified by the authors as a function of the foreign exchange market?

A) the transfer of purchasing power between countries

B) obtaining or providing credit for international trade transactions

C) minimizing the risks of exchange rate changes

D) All of the above were identified as functions of the foreign exchange market.

28) ________ seek to profit from trading in the market itself rather than having the foreign exchange transaction being incidental to the execution of a commercial or investment transaction.

A) Speculators and arbitrageurs

B) Foreign exchange brokers

C) Central banks

D) Treasuries

29) ________ are agents who facilitate trading between dealers without themselves becoming principals in the transaction.

A) Central banks

B) Foreign exchange brokers

C) Arbitrageurs

D) Foreign exchange dealers

30) A ________ transaction in the foreign exchange market requires delivery of foreign exchange at some future date.

A) spot

B) forward

C) swap

D) currency

31) A ________ transaction in the interbank market is the simultaneous purchase and sale of a given amount of foreign exchange for two different value dates.

A) spot

B) forward-forward

C) swap

D) futures

32) The greatest volume of daily foreign exchange transactions are:

A) spot transactions.

B) forward transactions.

C) swap transactions.

D) This question is inappropriate because the volume of transactions are approximately equal across the three categories above.

33) The following is an example of an American term foreign exchange quote:

A) $20/

B) ?0.85/$

C) 100/?

D) none of the above

Answer:A

34) If the current exchange rate is 113 Japanese yen per U.S. dollar, the price of a Big Mac hamburger in the United States is $3.41, and the price of a Big Mac hamburger in Japan is 280 yen, then other things equal, the Big Mac hamburger in Japan is:

A) correctly priced.

B) under priced.

C) over priced.

D) There is not enough information to determine if the price is appropriate or not.

35) One year ago the spot rate of U.S. dollars for Canadian dollars was $1/C$1. Since that time the rate of inflation in the U.S. has been 4% greater than that in Canada. Based on the theory of Relative PPP, the current spot exchange rate of U.S. dollars for Canadian dollars should be approximately:

A) $0.96/C$.

B) $1/C$.

C) $1.04/C$.

D) Relative PPP provides no guide for this type of question.

36) The government just released international exchange rate statistics and reported that the real effective exchange rate index for the U.S. dollar vs the Japanese yen decreased from 105 last year to 95 currently and is expected to fall still further in the coming year. Other things equal U.S. ________ to/from Japan think this is good news and U.S. ________ to/from Japan think this is bad news.

A) importers; exporters

B) importers; importers

C) exporters; exporters

D) exporters; importers

37) Jaguar has full manufacturing costs of their S-type sedan of 22,803. They sell the S-type in the UK with a 20% margin for a price of 27,363. Today these cars are available in the US for $55,000 which is the UK price multiplied by the current exchange rate of $2.01/. Jaguar has committed to keeping the US price at $55,000 for the next six months. If the UK pound appreciates against the USD to an exchange rate of $2.15/, and Jaguar has not hedged against currency changes, what is the percentage margin the company will realize given the new exchange rate?

A) 20.0%

B) 15.3%

C) 12.2%

D) 7.2%

38) Assume a nominal interest rate on one-year U.S. Treasury Bills of 2.60% and a real rate of interest of 1.00%. Using the Fisher Effect Equation, what is the approximate expected rate of inflation in the U.S. over the next year?

A) 2.10%

B) 2.05%

C) 1.60%

D) 1.00%

39) According to the international Fisher Effect, if an investor purchases a five-year U.S. bond that has an annual interest rate of 5% rather than a comparable British bond that has an annual interest rate of 6%, then the investor must be expecting the ________ to ________ at a rate of at least 1% per year over the next 5 years.

A) British pound; appreciate

B) British pound; revalue

C) U.S. dollar; appreciate

D) U.S. dollar; depreciate

40) A ________ is an exchange rate quoted today for settlement at some time in the future.

A) spot rate

B) forward rate

C) currency rate

D) yield curve