. A well-established, large, Indian-based MNE will probably be most adversely affected by which of the following elements of firm value?
1. A well-established, large, Indian-based MNE will probably be most adversely affected by which of the following elements of firm value?a.access to qualified labor poolb.an open marketplacec.access to unskilled labord.access to capital2 pointsQUESTION 21. Governments can influence comparative advantage. Which of the following would NOT be considered a way that government influences comparative advantage?a.tariffb.other non-tariff restrictionsc.managerial skillsd.quotas2 pointsQUESTION 31. Firms seeking new markets product in foreign countries. Which of the following is NOT a reason for producing in foreign countries?a.meeting local demand in the domestic marketsb.high likelihood of nationalization of assetsc.meeting local demand in the foreign countryd.low likelihood of nationalization of assets2 pointsQUESTION 41. A firm in the International Trade Phase of Globalization:a.receives all foreign receipts in foreign currency units and makes all foreign payments in domestic currency units.b.makes all foreign payments in foreign currency units and all foreign receipts in domestic currency units.c.bears direct foreign exchange risk.d.none of the above2 pointsQUESTION 51. Public ownership of business organizations does NOT include:a.civil societyb.familiesc.the stated.the government2 pointsQUESTION 61. Privatization is described as:a.firms that do not use publicly available debt.b.government operations that are purchased by corporations.c.non-public meetings held by members of interlocking directorates.d.firms that are purchased by the government2 pointsQUESTION 71. The Stakeholder Capitalism Model (SCM):a.places shareholders as the primary stakeholdersb.has financial profit as its main goal.c.considers all key participants of the firm.d.follows the Anglo-American model of corporate governance.2 pointsQUESTION 81. For a global firm, which of the following is generally NOT considered to be a viable goal?a.minimization of the firm’s effective global tax burdenb.maximization of after-tax income in all countriesc.maintaining a weak foreign currency and a strong local currencyd.correct positioning of the firm’s cash flows as to country and currency2 pointsQUESTION 91. The suspension of the gold standard for fixed international exchange rates was due primarily to World War 1. Why was this the case? World War 1:a.lasted too long.b.cost too much money.c.needed too much gold for armament plating.d.interrupted the free movement of gold.2 pointsQUESTION 101. Under the IMF’s exchange rate regime “de facto classification,” a country that has given up its own sovereignty over monetary policy is considered to have:a.floating arrangements.b.soft pegs.c.a residual agreement.d.hard pegs2 pointsQUESTION 111. With reference to the “Impossible Trinity,” if a country chooses to have a pure float exchange rate regime, which two of the three goals is a country most able to achieve?a.exchange rate stability and full financial integrationb.monetary independence and exchange rate stabilityc.full financial integration and monetary independenced.A country cannot attain any of the exchange rate goals with a pure float exchange rate regime.2 pointsQUESTION 121. The countries that use the euro as their currency have:a.gained control over their own money supply (monetary independence), allowed the free movement of capital in and out of their economies (financial integration), but give up exchange rate stability.b.agreed to use a single currency (exchange rate stability), allow individual control of their own money supply (monetary independence), but give up the free movement of capital in and out of their economies (financial integration).c.agreed to use a single currency (exchange rate stability), allow the free movement of capital in and out of their economies (financial integration), but give up individual control of their own money supply (monetary independence).d.none of the above2 pointsQUESTION 131. In January 2002, the Argentine Peso changed in value from Peso1.00/$ to Peso1.40/$, thus, the Argentine Peso ________ against the U.S. Dollar..a.remained neutralb.weakenedc.strengthenedd.all of the above2 pointsQUESTION 141. Which of the following international transactions would NOT be counted as a balance of payments (BOP) transaction?a.The U.S. subsidiary of a British firm pays bonuses to its employees in Chicago.b.A Canadian lumber baron purchases a U.S. corporate bond through an investment broker in Seattle.c.An American tourist purchases cheese in London, England.d.All of the above are considered BOP transactions.2 pointsQUESTION 151. The balance of payments:a.records all international transactions for a country over a period of time.b.adds up the value of all assets and liabilities of a country on a specific date.c.determines the eligibility of countries for World Bank aid.d.all of the above2 pointsQUESTION 161. The two major concerns about foreign direct investment are:a.who receives the profits and taxes.b.who pays the taxes and who receives the taxes.c.national defense and taxes.d.who controls the assets and who receives the profits.2 pointsQUESTION 171. Imports have the potential to lower a country’s inflation rate because of each of the following EXCEPT:a.the import of lower priced services limits what domestic competitors can charge for services.b.the higher prices of foreign goods spurs domestic competitors to cut prices.c.the import of lower priced goods limits what domestic competitors can charge for goods.d.all of the above2 pointsQUESTION 181. Which of the following is NOT likely to occur in the quantity adjustment phase of the J-Curve adjustment path?a.Exports become relatively less expensive.b.The balance of trade gets worse.c.Imports become relatively more expensive.d.All of the above are true.2 pointsQUESTION 191. A ________ is a securitized financial instrument that is sold to the market in tranches representing different levels of default risk.a.credit default swap (CDS)b.mortgaged backed security (MBS)c.collateralized debt obligation (CDO)d.guaranteed security asset (GSA)2 pointsQUESTION 201. The three stages of the global credit crisis of 2009-2009 were:a.1. The failure of specific mortgage-backed securities, 2. the failure of commercial and investment financial institutions, and 3. a credit-induced global recession.b.1. The failure of commercial and investment financial institutions, 2. a credit-induced global recession, 3. the failure of specific mortgage-backed securities credit-induced global recession.c.1. The failure of specific mortgage-backed securities, 2. a credit-induced global recession, 3. failure of commercial and investment financial institutions.d.1. The failure of commercial and investment financial institutions, 2. the failure of specific mortgage-backed securities, 3. a credit-induced global recession.2 pointsQUESTION 211. The member nations of the European Union have relative freedom to set their own fiscal policies EXCEPT for which of the following?a.government spendingb.government taxationc.government printing of the euro currencyd.government surpluses or deficits2 pointsQUESTION 221. While trading in foreign exchange takes place worldwide, the major currency trading centers are located in:a.London, New York, and Tokyo.b.Paris, Frankfurt, and Londonc.New York, Zurich, and Bahrain.d.Los Angeles, New York, and London.2 pointsQUESTION 231. The ________ is the mechanism by which participants transfer purchasing power between countries, obtain or provide credit for international trade transactions, and minimize exposure to the risks of exchange rate changes.a.foreign exchange marketb.federal open marketc.futures marketd.LIBOR2 pointsQUESTION 241. Foreign exchange ________ earn a profit by a bid-ask spread on currencies they purchase and sell. Foreign exchange ________, on the other hand, earn a profit by bringing together buyers and sellers of foreign currencies and earning a commission on each sale and purchase.a.speculators; arbitrageursb.central banks; treasuriesc.brokers; dealersd.dealers; brokers2 pointsQUESTION 251. The four currencies that constitute about 80% of all foreign exchange trading
are:a.U.K pound, Chinese yuan, euro, and Japanese yen.b.U.S. dollar, euro, Chinese yuan, and U.K. pound.c.U.S. dollar, U.K. pound, yen, and Chinese yuan.d.U.S. dollar, Japanese yen, euro, and U.K. pound.2 pointsQUESTION 261. A common type of swap transaction in the foreign exchange market is the ________ where the dealer buys the currency in the spot market and sells the same amount back to the same bank in the forward market.a.”spot against forward”b.”repurchase agreement”c.”forspot”d.”forward against spot”2 pointsQUESTION 271. Daily trading volume in the foreign exchange market was about ________ per ________ in 2015.a.$3,200 billion; dayb.$3,200 billion; monthc.$5,300 billion; monthd.$5,300 billion; day2 pointsQUESTION 281. If the direct quote for a U.S. investor for British pounds is $1.43/£, then the indirect quote for the British. investor would be ________ and the direct quote for the U.S. investor would be ________.a.£0.699/$; £0.699/$b.$0.699/£; £0.699/$c.$1.43/£; $1.43/£d.£1.43/£; £0.699/$2 pointsQUESTION 291. Given the following exchange rates, which of the multiple-choice choices represents a potentially profitable intermarket arbitrage opportunity?¥129.87/$€1.1226/$€0.00864/¥a.$0.8908/€b.¥113.96/€c.¥115.69/€d.$0.0077/¥2 pointsQUESTION 301. A German firm is attempting to determine the euro/pound exchange rate and has the following exchange rate information: USD/pound = $1.5509/£ and the USD/euro rate = $1.2194/€. Therefore, the pound/euro rate must be:a.€0.7316/£.b.£1.2719/€.c.€1.2719/£.d.£0.7863/€2 pointsQUESTION 311. The Economist publishes annually the “Big Mac Index” by which they compare the prices of the McDonald’s Corporation’s Big Mac hamburger around the world. The index estimates the exchange rates for currencies based on the assumption that the burgers in question are the same across the world and therefore, the price should be the same. If a Big Mac costs $2.54 in the United States and 294 yen in Japan, what is the estimated exchange rate of yen per dollar as hypothesized by the Hamburger index?a.$0.0086/¥b.¥115.75/$c.$0.0081/¥d.¥124/$2 pointsQUESTION 321. Assume the implied PPP rate of exchange of Mexican Pesos per U.S. dollar is 8.50 according to the Big Mac Index. Further, assume the current exchange rate is Peso 7.50/$1. Thus, according to PPP and the Law of One Price, at the current exchange rate the peso is:a.undervaluedb.overvalued.c.correctly valued.d.There is not enough information to answer this question.2 pointsQUESTION 331. ________ states that differential rates of inflation between two countries tend to be offset over time by an equal but opposite change in the spot exchange rate.a.The Fisher Effectb.Absolute Purchasing Power Parityc.The International Fisher Effectd.Relative Purchasing Power Parity2 pointsQUESTION 341. Assume a nominal interest rate on one-year U.S. Treasury Bills of 2.60% and a real rate of interest of 1.00%. Using the Fisher Effect Equation, what is the approximate expected rate of inflation in the U.S. over the next year?1.00%1.60%2.10%2.05%2 pointsQUESTION 351. Assume the current U.S. dollar-British spot rate is 0.6993£/$. If the current nominal one-year interest rate in the U.S. is 5% and the comparable rate in Britain is 6%, what is the approximate forward exchange rate for 360 days?a.£0.7060/$b.£0.6993/$c.£1.42/$d.£1.43/$2 pointsQUESTION 361. A major U.S. multinational firm has forecast the euro/dollar rate to be €1.10/$ one year hence, and an exchange rate of $1.40 for the British pound (£) in the same time period. What does this imply the company’s expected rate for the euro per pound to be in one year?a.€1.54/£b.£1.40/€c.£1.54/€d.€1.40/£2 pointsQUESTION 371. 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 amount the company will receive in pounds at the new exchange rate?a.£27,363b.£22,803c.£55,000d.£25,5812 pointsQUESTION 381. With covered interest arbitrage:a.the market must be out of equilibrium.b.the arbitrageur trades in both the spot and future currency exchange markets.c.a “riskless” arbitrage opportunity exists.d.all of the above2 pointsQUESTION 391. Argentina’s economic performance in the 1990s while their peso was pegged to the U.S. dollar can be characterized as ________ rates of inflation and ________ rates of unemployment.a.low; high;b.low; lowc.high; lowd.high; high2 pointsQUESTION 401. Peter Simpson thinks that the U.K. pound will cost $1.48/£ in six months. A 6-month currency futures contract is available today at a rate of $1.44/£. If Peter was to speculate in the currency futures market, and his expectations are correct, which of the following strategies would earn him a profit?a.Buy a pound currency futures contract.b.Sell a pound currency futures contract.c.Sell pounds today.d.Sell pounds in six months.2 pointsQUESTION 411. You hold a put option on yen is written with a strike price of ¥105.00/$. Which spot price maximizes your profit if you choose to exercise the option before maturity?a.¥105/$b.¥110/$c.¥115/$d.¥100/$2 pointsQUESTION 421. A call option on ABC stock is bought for $3.00. This call option has a strike price of $30 and can be exercised in three months or less. If this option is exercise today when the stock price is $55, what is the net profit from buying this option?a.$3.00b.$12.00c.$15.00d.$22.002 pointsQUESTION 431. Which of the following is NOT a contract specification for currency futures trading on an organized exchange?a.size of the contractb.last trading dayc.maturity dated.All of the above are specified2 pointsQUESTION 441. Assume that a call option has an exercise price of $1.50/£. At a spot price of $1.55/£, the call option has:a.a time value of $0.00.b.an intrinsic value of $0.05.c.an intrinsic value of $0.00.d.a time value of $0.05.2 pointsQUESTION 451. An agreement to swap a fixed interest payment for a floating interest payment would be considered a/an:a.currency swap.b.interest rate swap.c.forward swap.d.none of the above.2 pointsQUESTION 461. Futures contracts require that the purchaser deposit an initial sum as collateral. This deposit is called a:a.margin.b.settlement.c.collateralized deposit.d.marked market sum.2 pointsQUESTION 471. A foreign currency ________ gives the purchaser the right, not the obligation, to buy a given amount of foreign exchange at a fixed price per unit for a specified period.a.swapb.forwardc.optiond.future2 pointsQUESTION 481. ________ is the active buying and selling of the domestic currency against foreign currencies.a.Direct Interventionb.Indirect Interventionc.Foreign Direct Investmentd.Federal Funding2 pointsQUESTION 491. The ________ provides a means to account for international cash flows in a standardized and systematic manner.a.International Fisher Effectb.parity conditionsc.balance of paymentsd.asset approach2 pointsQUESTION 501. ________ is defined as the spread of a crisis in one country to its neighboring countries and other countries with similar characteristics.a.Capital market liquidityb.Political sciencec.Contagiond.Speculation