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Study Resources (Business Management)

    21.Economist Martin Feldstein has coined the term "hot money" to pertain to long-term capital flows.      22.A Eurocurrency is the currency used by the countries of the European Union.      23.Eurocurrency can be created anywhere in the world.      24.A factor that makes the Eurocurrency market attractive to both depositors and borrowers is its lack of.
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    71.It follows from the Fisher Effect that if the real interest rate is the same worldwide; any difference in interest rates between countries reflects differing expectations about _____.    A. foreign exchange rates   B. inflation rates   C. unemployment rates   D. GDP growth rates     72.The _____ states that for any two countries, the spot exchange rate should change in an equal.
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  88.What are the advantages of global capital market in comparison with a purely domestic capital market?            89.What is systematic risk?            90.Explain the changes observed in the risk of investments when an investor increases the number of stocks in her portfolio.            91.Explain the two basic factors reflected by the relatively low correlation between the.
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  93.Explain PPP. Use an example to show how PPP can help explain exchange rates.            94.Discuss the failure of PPP theory to predict exchange rates accurately. What is the purchasing power puzzle?            95.Compare and contrast the Fisher Effect and the International Fisher Effect.                .
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    31.When consumer tastes and preferences differ significantly between countries, there is low pressure for local responsiveness.      32.A multinational firm may need to delegate marketing functions to national subsidiaries to be responsive to local differences in distribution channels.      33.Threats of protectionism, economic nationalism, and local content rules dictate that international businesses manufacture locally.      34.Pressures.
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    61.Analysts who believe globalization of capital has serious risks argue that ____.    A. capital does not shift in and out of countries as quickly as conditions change   B. individual nations are becoming more vulnerable to speculative capital   C. deregulation of trade is helpful for the economic growth in a country   D. most of the capital that moves internationally.
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  Essay Questions  86.What is international monetary system? What are the major trading currencies?            87.Explain the floating exchange rate regime. Give examples.            88.Compare and contrast a pegged exchange system with a dirty float system of exchange rates.            89.How does a fixed exchange rate system work?            90.What is gold standard? What was the major advantage of the.
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  100.What is a currency board? Why do countries choose this type of system? What are the disadvantages of this type of arrangement?            101.Compare currency crisis, banking crisis, and foreign debt crisis.            102.Recent policies of the IMF have drawn a lot of criticism. Discuss these criticisms.                .
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  Essay Questions  84.What is a capital market? Define market makers.            85.Explain various types of capital market loans.            86.Explain how equity loans and debt loans differ in terms of attractiveness to businesses.            87.How does a global capital market, as compared to a purely domestic market, benefit investors?                .
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    51.Which of the following involves borrowing in one currency where interest rates are low, and then using the proceeds to invest in another currency where interest rates are high?    A. Carry trade   B. Swing trade   C. Channel trade   D. Price action trade     52.Assume that the interest rate on borrowings in Japan is 1 percent, while the interest rate on.
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  102.Describe the factors that make the Eurobond market attractive.            103.Write a brief note on foreign exchange risks and the cost of capital.            104.How can a borrower hedge against unpredictable movements in exchange rates?            105.How does the growth in the global capital markets affect investing firms?              .
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    11.The risk associated with a portfolio increases as the investor increases the number of stocks in her portfolio.      12.Investors can reduce the level of risk by diversifying a portfolio internationally.      13.Systematic risk refers to the movements in a stock portfolio's value that are attributable to macroeconomic forces affecting all firms in an.
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  103.Describe the state of economic integration in Africa. What factors have hindered the process?            104.Discuss the opportunities arising from the creation of the EU for international businesses.            105.Describe the disadvantages of economic integration for international businesses. How can firms protect themselves from these threats?              .
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    21.Learning effects tend to be more significant when a technologically simple task is repeated.      22.One of the sources of economies of scale is the ability to spread fixed costs over a large volume.      23.Moving up the experience curve allows a firm to reduce its cost of creating value and increase its profitability.      24.Once.
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  91.With the help of an example, explain how balance-of-trade equilibrium is maintained under the gold standard.            92.What is the Bretton Woods agreement? How was it different from the gold standard?            93.Identify the multinational institutions that were established at the Bretton Woods agreement. What were their roles in the international monetary system?                .
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    71.Those in favor of floating exchange rate claim that ____.    A. uncertainty in monetary markets dampens the growth of international trade   B. inflation is beneficial to a country if it is controlled closely   C. trade imbalances can be adjusted by using floating exchange rates   D. governments can have rigid control over monetary markets by using floating rates     72.Which of.
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    31.The International Fisher Effect has proven to have substantial power at predicting short-run changes in spot exchange rates.      32.There is no evidence that psychological factors play an important role in determining the expectations of market traders as to likely future exchange rates.      33.The efficient market school argues that investing in exchange rate.
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    31.Depositors are not protected against bank failures in the Eurocurrency market.      32.Investors who purchase a fixed-rate bond receive cash payoffs only at maturity.      33.Foreign bonds are sold within the borrower's country and are denominated in the currency of the country in which they are issued.      34.Foreign bonds sold in the United States are.
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  89.What is a currency swap?            90.Where is the foreign exchange market located? What is the nature of the market? Is the market growing or shrinking on a global basis?            91.Discuss the nature of the foreign exchange market. How fast has it been growing? Where are the most important trading centers?            92.What is the.
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    41.The impact of currency exchange rates on the reported financial statements of a company is called economic exposure.      42.A lag strategy involves attempting to collect foreign currency receivables early when a foreign currency is expected to depreciate and paying foreign currency payables before they are due when a currency is expected.
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    11.The fixed exchange rate system established at Bretton Woods failed due to speculative pressures on the U.S. dollar.      12.Gold was declared as the formal reserve asset in the Jamaica agreement of 1976.      13.IMF members were permitted to sell their own gold reserves at the market price in the Jamaica agreement.      14.The value of.
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  95.Explain economist Martin Feldstein's concepts of "hot money" and "patient money."            96.What is a Eurocurrency?            97.What are the financial advantages that make the Eurocurrency market attractive to both depositors and borrowers?                .
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    61.Which of the following is a function of World Bank?    A. Implementing a rigid fixed exchange rate regime   B. Promoting gold standard across the world   C. Lending money to governments for development   D. Implementing a flexible fixed exchange rate regime     62.Which of the following is a factor that initiated the collapse of the fixed exchange rate system?    A. Worsening of Great.
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  True / False Questions  1.A firm's strategy can be defined as the actions that managers take to attain the goals of the firm.      2.The preeminent strategic goal for most firms is to maximize the value of the firm for its owners.      3.Profit growth is measured by the percentage increase in net profits over.
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    21.Arbitrage opportunities abound in the foreign exchange markets and they tend to be available for long periods of time.      22.Although a foreign exchange transaction can involve any two currencies, most transactions involve pounds on one side.      23.If the law of one price were true for all goods and services, the purchasing power.
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    61.If the demand for dollars outstrips its supply and if the supply of Japanese yen is greater than the demand for it, what will happen?    A. The dollar will appreciate against the yen   B. The dollar will depreciate against the yen   C. The exchange rates will remain the same   D. The yen will appreciate against the dollar     62.The _____.
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  103.Discuss the criticism that IMF is exacerbating a problem called moral hazard.            104.How can international companies reduce their economic exposure in a world of constantly fluctuating exchange rates?            105.Do you think businesses can influence government policies? Explain your answer.                  .
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  Chapter 10 The Foreign Exchange Market   True / False Questions  1.The foreign exchange market is a market for converting the currency of one country into that of another country.      2.Currency fluctuations can make seemingly profitable trade and investment deals unprofitable and vice versa.      3.The rate at which one currency is converted into another is known.
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    21.Exchange rates are determined by the government under a pure "free float" system.      22.A country valuates its currency without attaching it to a reference currency under the pegged exchange rate regime.      23.The great virtue claimed for a pegged exchange rate is that it imposes monetary discipline on a country and leads to.
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  True / False Questions  1.A capital market brings together those who want to invest money and those who want to borrow money.      2.Market makers are companies that make large investments in governmental bonds.      3.Commercial banks perform a direct connection function in capital markets.      4.An investor purchases the right to receive a specified fixed stream.
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  True / False Questions  1.The international monetary system refers to the institutional arrangements that govern exchange rates.      2.A pegged exchange rate means the value of a currency is fixed relative to a reference currency.      3.A dirty float occurs when a country uses pegged exchange rates to value its currency.      4.The gold standard called for.
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    11.R&D, production, marketing and sales, and customer service are all examples of primary activities.      12.Support activities are always less important than the primary activities in achieving a competitive advantage.      13.Top management should be viewed as part of the firm's infrastructure.      14.Global expansion offers companies the opportunity to generate greater profits than companies that.
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  Essay Questions  85.With the help of an example, explain how a tourist participates in the foreign exchange market.            86.What are the main uses of foreign exchange markets for international business?            87.What is the difference between a spot exchange rate and a forward exchange rate?            88.What is meant by the phrases ‘the dollar is selling.
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    41.Borrowers can hedge against foreign exchange risks by entering into a forward contract.      42.Entering into a forward contract will lower the borrower's cost of capital.      43.The forward exchange market does not provide adequate coverage for long-term borrowings.        Multiple Choice Questions  44.A _____ brings together those who want to invest money and those who want.
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    31.A foreign debt crisis is a situation in which a country cannot service its foreign debt obligations.      32.The IMF made pegging Mexican peso to the dollar, a condition for lending money to the Mexican government in the 1980s.      33.Government projects were a factor behind the investment boom in most Southeast Asian economies.      34.The.
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    51.A purely domestic capital market faces the problem of ____.    A. foreign exchange risk   B. limited liquidity   C. lack of regulation   D. deregulated markets     52.The cost of capital is the ____.    A. interest received on investments made by the company   B. price of borrowing money   C. difference between cost of inputs and outputs   D. total value of raw materials that a company uses     53.As investors increase the number.
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    11.When two parties agree to exchange currency and execute the deal at some specific time in the future, a forward exchange occurs.      12.To minimize the risk of an unanticipated change in exchange rates, a company can protect itself by entering into a forward exchange contract.      13.If $1 bought more yen with a.
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    71.Which of the following is a drawback of the Eurocurrency market?    A. Increased governmental controls   B. High reserve ratio requirements   C. Low interest rates on deposits   D. Exposure to foreign exchange risk     72.Which of the following is true of fixed-rate bonds?    A. Returns from fixed-rate bonds are dependent on the profitability of the issuing company.   B. Investors get back the face value of.
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    41.It is easy for a business to get adequate insurance coverage for exchange rate changes that might occur several years in the future.      42.An effective business strategy to reduce economic exposure is to contract out high value-added manufacturing.      43.Countries that require substantial loans from the IMF to survive will endure a sharp.
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  100.What is countertrade? Why would a firm engage in countertrade?            101.What is transaction exposure? How can transaction exposure be minimized?            102.Describe translation exposure. How can translation exposure be minimized?                .
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  96.Consider the role of investor psychology and bandwagon effects on how well PPP and the International Fisher Effect explain short-term movements in exchange rates.            97.Discuss the two schools of thought on exchange rate forecasting.            98.Explain the difference between fundamental analysis and technical analysis.            99.Compare and contrast currencies that are freely convertible, externally convertible,.
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  97.How will EU countries benefit from the establishment of a single currency? What, if any, are the costs of a single currency?            98.Debate the ratification of the North American Free Trade Agreement.            99.Discuss why NAFTA's most significant impact has been a political one, not an economic one.                .
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    41.Research has shown that in the modern multinational enterprise, core competencies and skills typically reside in the home country.      42.For transnational enterprises to be successful, they must focus on leveraging the skills found at their subsidiaries around the world.      43.Enterprises that pursue an international strategy tend to decentralize control over marketing and.
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  100.Explain how Mercosur has changed over time. What are the implications of these changes?            101.Discuss the Free Trade Area of the Americas. What is hindering its progress? What is the position of the U.S. on the agreement? How does Brazil feel about the FTAA?            102.What is ASEAN? What is its basic goal?.
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