1) the table below shows the bushels of wheat and the bottles of beer that north and
south dakota can produce per day of labor under two different hypothetical situations
(cases i and ii).
which state has a comparative advantage in wheat production in case ii?
a.south dakota
b.north dakota
c.neither state
2) if the difference between tax revenue and government expenditures is negative, it
implies that
a.tax revenue is insufficient to cover government spending
b.a government budget deficit exists
c.the government will be issuing new debt securities
d.all of the above
3) proceeding the asian crisis
a.it may have been implicitly assumed that the governments would come to the rescue
of their private banks should financial problems develop
b.the history of managed growth in the east asian region at least suggested that the
economic and financial system, as an integral unit, could be managed in an economic
downturn
c.both a and b
d.none of the above
4) willem duisenberg, the first president of the european central bank, defined “price
stability” as an annual inflation rate of
a.”no more than five percent.”
b.”less than but close to 2 percent.”
c.”absolutely no more than zero percent.”
d.”no more than three percent.”
5) suppose that boeing corporation exported a boeing 747 to lufthansa and billed 10
million payable in one year. the money market interest rates and foreign exchange rates
are given as follows:
assume that boeing sells a currency forward contract of 10 million for delivery in one
year, in exchange for a predetermined amount of u.s. dollar. which of the following is
(or are) true?
on the maturity date of the contract boeing will:
(i) have to deliver 10 million to the bank (the counterparty of the forward contract)
(ii) take delivery of $14.6 million
(iii) have a zero net pound exposure
(iv) have a profit, or a loss, depending on the future changes in the exchange rate, from
this british sale
a.(i) and (iv)
b.(ii) and (iv)
c.(ii), (iii), and (iv)
d.(i), (ii), and (iii)
6) a cme contract on 125,000 with september delivery
a.is an example of a forward contract
b.is an example of a futures contract
c.is an example of a put option
d.is an example of a call option
7) privatization
a.has spurred a tremendous increase in cross-border investment
b.has allowed many governments to have the funds to nationalize important industries
c.has guaranteed that new ownership will be limited to the local citizens
d.has generally decreased the efficiency of the enterprise
8) a correspondent bank relationship is established when
a.two banks maintain deposits with one another
b.two banks write to each other about the credit conditions of their countries
c.a group of banks form a syndicate to spread out the risk and cost of a large bond
offering
d.all of the above
9) firms become multinational
a.when they undertake foreign direct investments (fdi)
b.with the establishment of new production facilities in foreign countries such as
honda’s ohio plant
c.when they become involved in mergers with and acquisitions of existing foreign
businesses
d.all of the above
10) with regard to the oip,
a.the composition of the optimal international portfolio is identical for all investors,
regardless of home country
b.the composition of the optimal international portfolio are varies depending upon the
numeraire currency used to measure returns
c.the composition of the optimal international portfolio is identical for all investors,
regardless of home country, if they hedge their risk with currency futures contracts
d.both b and c
11) north korea, iran, and cuba are examples of
a.countries with low levels of political risk
b.countries with high levels of political risk
c.countries that are politically and economically isolated from the rest of the world
d.both b and c
12) with regard to the past performance of u.s.-based closed end countryfunds
a.most investors who can invest directly in foreign markets without incurring excessive
costs are advised to do so
b.navs offer superior diversification opportunities compared to the cecfs
c.both a and b
d.none of the above
13) for those investors who desire international equity exposure, webs
a.may well serve as a major alternative to such traditional tools as international mutual
funds, adrs and closed-end country funds
b.are probably overpriced relative to international mutual funds, adrs and closed-end
country funds
c.would provide no international equity exposure since they are pools of bonds
d.none of the above
14) a “primary” stock market is
a.a big internationally-important market like the nyse
b.a market where corporations issue new shares to initial investors
c.where brokers and market makers trade
d.none of the above
15) statistical discrepancy, which by definition represents errors and omissions
a.cannot be calculated directly
b.is calculated by taking into account the balance-of-payments identity
c.probably has some elements that are honest mistakes, it can’t all be money laundering
and drugs
d.all of the above
16) a forward rate agreement (fra) is a contract between two banks
a.that allows the eurobank to hedge the interest rate risk in mismatched deposits and
credits
b.in which the buyer agrees to pay the seller the increased interest cost on a notional
amount if interest rates fall below an agreed rate, and the seller agrees to pay the buyer
the increased interest cost if interest rates increase above the agreed rate
c.that is structured to capture the maturity mismatch in standard-length eurodeposits
and credits
d.all of the above
17) the central bank of the united states is
a.the new york fed
b.the federal reserve system
c.the exim bank
d.none of the abovethe u.s. does not have a central bank
18) with regard to the current exchange rate arrangement between italy and germany, it
is best characterized as
a.independent floating (market determined)
b.managed float
c.an exchange arrangement with no separate legal tender
d.pegged exchange rate within a horizontal band
19) assume that the firm will partially finance the project with a $3,000,000
interest-only 30-year loan at 10.0 percent apr with annual payments.
what is the levered after-tax incremental cash flow for year 1?
a.$4,300
b.-$202,610
c.-$95,700
d.$57,000
e.none of the above
20) as a mode of fdi entry, cross-border m&a offers two key advantages over greenfield
investments:
a.speed and access to proprietary assets
b.firms bolster their competitive positions in the world market by acquiring special
assets from other firms or using their own assets on a larger scale
c.firms can better leverage their intangible assets and on a larger scale
d.none of the above