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1) the ford motor company recently acquired mazda, a japanese auto maker, and jaguar,
a british auto maker.
a.this is an example of cross-border m&a
b.this was a greenfield investment
c.both a and b
d.none of the above
2) assume that the balance-of-payments accounts for a country are recorded correctly.
balance on the current account = bca = $130 billion
balance on the capital account = bka = -$86 billion
balance on the reserves account = bra = ?
the balance on the reserves account (bra), under the pure flexible exchange regime is
a.-$44 billion
b.$44 billion
c.$216 billion
d.none of the above
3) a bank may establish a multinational operation for the reason of low marginal costs.
the underlying rationale being that
a.banks follow their multinational customers abroad to prevent the erosion of their
clientele to foreign banks seeking to service the multinational's foreign subsidiaries
b.multinational banking operations help a bank prevent the erosion of its traveler's
check, tourist, and foreign business markets from foreign bank competition
c.managerial and marketing knowledge developed at home can be used abroad with low
marginal costs
d.the foreign bank subsidiary can draw on the parent bank's knowledge of personal
contacts and credit investigations for use in that foreign market
4) during the five-year period 2007-2011, total annual worldwide fdi outflows
amounted to
a.about $1,698 million on average
b.about $1,698 billion on average
c.about $1,698 trillion on average
d.none of the above
5) if an incentive contract specifies certain accounting performance
a.that accounting number will likely be the focus of managers
b.managers will set aside the accounting goal if it conflicts with the goal of maximizing
shareholder wealth
c.managers will be unable to manipulate the gaap, so shareholders can be confident of
having their wealth maximized
6) the difference between accounting exposure and translation exposure
a.translation is about going from one language to another, accounting is just about the
numbers
b.accounting exposure and translation exposure are the same thing
c.hedging one always involves increasing the other
d.hedging one might involve increasing the other
7) calculate the increase in annual after-tax profits if the higher transfer price of $1,250
per unit is used.
assume that y pays a tax deductible tariff of 7 percent on imported merchandise.
calculate the increase in annual after-tax profits if the higher transfer price of $1,250 per
unit is used.
a.$50,000
b.$100,000
c.$125,000
d.$250,000
8) severe imperfections in the labor market lead to
a.persistent wage differentials among countries
b.persistent exchange rate volatility among countries
c.persistent interest rate differentials among countries
d.none of the above
9) when exchange rates change,
a.u.s. firms that produce domestically and sell only to domestic customers will be
unaffected
b.u.s. firms that produce domestically and sell only to domestic customers can be
affected if they compete against imports
c.u.s. firms that produce domestically and sell only to domestic customers will be
affected, but only if they borrow in foreign currency to finance their domestic
operations
d.both a and b
10) the simplest of all translation methods to apply is
a.current/noncurrent method
b.monetary/nonmonetary method
c.temporal method
d.current rate method
11) according to the "trilemma" a country can attain only two of the following three
conditions: 1) a fixed exchange rate, (2) free international flows of capital, (3) an
independent monetary policy. this difficulty is also known as
a.the incompatible trinity
b.the trilemma
c.the tobin tax
d.all three can be had at the same time
12) which of the following statements is true about product life cycle theory?
a.the theory was developed in the 1960s when the u.s. was the leader in r&d
b.the international system of production is becoming too complicated to be explained
by a simple version of the product life cycle theory
c.it predicts that over time the u.s. switches from an exporting country of new products
to an importing country
d.all of the above
13) generally, the higher the turnover ratio,
a.the less liquid the secondary stock market, indicating ease in trading
b.the more liquid the secondary stock market, indicating ease in trading
c.the more liquid the primary stock market, indicating ease in trading
d.the more efficient the stock market is
14) your firm is an italian importer of british bicycles. you have placed an order with a
british firm for £1,000,000 worth of bicycles. payment (in pounds sterling) is due in 12
months. use a money market hedge to redenominate this one-year receivable into a
euro-denominated receivable with a one-year maturity.
the following were computed without rounding. select the answer closest to yours.
a.1,225,490.20
b.1,244,212.10
c.1,250,000
d.1,219,815.78
15) country a can produce 10 yards of textiles or 6 pounds of food per unit of input.
country b can produce 8 yards of textiles or 5 pounds of food per unit of input.
a.country a is relatively more efficient than country b in the production of textiles
b.country b is relatively more efficient than country a in the production of food
c.country a has an absolute advantage over country b in the production of food and
textiles
d.all of the above
16) a liquid stock market
a.is one in which prices reflect all relevant information quickly
b.is one in which prices reflect all publicly available information quickly
c.is one in which prices reflect price and volume information quickly
d.is one in which investors can buy and sell stocks quickly at close to the current quoted
prices
17) the u.s. irs allows transfer prices to be set using comparable uncontrolled price
method. this method is difficult to apply in practice because many factors enter into the
pricing of goods and services. examples include
a.differences in the terms of sale
b.differences in quantity and or quality sold
c.differences in location or date of sale
d.all of the above
18) the random walk hypothesis suggests that
a.the best predictor of the future exchange rate is the current exchange rate
b.the best predictor of the future exchange rate is the current forward rate
c.both a and b are consistent with the efficient market hypothesis
d.none of the above
