International Business Review
Questions
Course Introduction
International Business explores the dynamics of operating in a global marketplace, covering topics such as cross-cultural management, international trade theories, global sourcing, foreign market entry strategies, and the impact of economic, political, and legal environments on business decisions. The course examines how businesses adapt their marketing, finance, and human resource strategies to diverse international contexts and the challenges and opportunities presented by globalization. Through case studies and practical examples, students develop a comprehensive understanding of how multinational enterprises function and compete in the international arena.
Recommended Textbook
Multinational Business Finance 15th Edition by David
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18 Chapters
1227 Verified Questions
1227 Flashcards
Source URL: https://quizplus.com/study-set/218
Page 2
K. Eiteman
Chapter 1: Multinational Financial Management: Opportunities and Challenges
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73 Verified Questions
73 Flashcards
Source URL: https://quizplus.com/quiz/3222
Sample Questions
Q1) The authors describe the multinational phase of globalization for a firm as one characterized by the:
A) ownership of assets and enterprises in foreign countries.
B) potential for international competitors or suppliers even though all accounts are with domestic firms and are denominated in dollars.
C) imports from foreign suppliers and exports to foreign buyers.
D) requirement that all employees be multilingual.
Answer: A
Q2) ________ 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
Answer: C
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Chapter 2: The International Monetary System
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61 Verified Questions
61 Flashcards
Source URL: https://quizplus.com/quiz/3223
Sample Questions
Q1) You have been hired as a consultant to the central bank for a country that has for many years suffered from repeated currency crises and depends heavily on the U.S. financial and product markets. Which of the following policies would have the greatest effectiveness for reducing currency volatility of the client country with the United States?
A) dollarization
B) an exchange rate pegged to the U.S. dollar
C) an exchange rate with a fixed price per ounce of gold
D) an internationally floating exchange rate
Answer: A
Q2) By and large, high capital mobility is forcing emerging market nations to choose between the two extremes of a free-floating exchange rate or a hard peg regime.
A)True
B)False
Answer: True
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Chapter 3: The Balance of Payments
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83 Verified Questions
83 Flashcards
Source URL: https://quizplus.com/quiz/3224
Sample Questions
Q1) Because current and financial/capital account balances use double-entry bookkeeping it is unusual to find serious discrepancies in the debits and credits.
A)True
B)False
Answer: False
Q2) A country with a managed float that wishes to WEAKEN its currency may choose to raise domestic interest rates to attract additional capital from abroad.
A)True
B)False
Answer: False
Q3) International debt security purchases and sales are defined as portfolio investments for financial account purposes because by definition debt securities do not provide the buyer with ownership or control.
A)True
B)False
Answer: True
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Chapter 4: Financial Goals and Corporate Governance
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69 Verified Questions
69 Flashcards
Source URL: https://quizplus.com/quiz/3225
Sample Questions
Q1) Agency theory states that unsystematic risk can be eliminated through diversification.
A)True
B)False
Q2) Describe the management objectives of a firm governed by the shareholder wealth maximization model and one governed by the stakeholder wealth maximization model. Give an example of how these two models may lead to different decision-making by executive management.
Q3) In finance, an efficient market is one in which:
A) prices are assumed to be correct.
B) prices adjust quickly and accurately to new information.
C) prices are the best allocators of capital in the macro economy.
D) all of the above
Q4) Systematic risk can be defined as:
A) the total risk to the firm.
B) the risk of the individual security.
C) the risk of the market in general.
D) the risk that can be systematically diversified away.
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6
Chapter 5: The Foreign Exchange Market
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69 Verified Questions
69 Flashcards
Source URL: https://quizplus.com/quiz/3226
Sample Questions
Q1) 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) "forward against spot"
B) "forspot"
C) "repurchase agreement"
D) "spot against forward"
Q2) A contract to deliver dollars for euros in six months is both "buying euros forward for dollars" and "selling dollars forward for euros."
A)True
B)False
Q3) Most transactions in the interbank foreign exchange trading are primarily conducted via telecommunication techniques and little is conducted face-to-face.
A)True
B)False
Q4) Define spot, forward, and swap transactions in the foreign exchange market and give an example of how each could be used.
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Chapter 6: International Parity Conditions
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62 Verified Questions
62 Flashcards
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Sample Questions
Q1) Empirical studies show that the Fisher Effect works best for short-term securities.
A)True
B)False
Q2) Covered interest arbitrage moves the market ________ equilibrium because ________.
A) toward; purchasing a currency on the spot market and selling in the forward market narrows the differential between the two B) toward; investors are now more willing to invest in risky securities
C) away from; purchasing a currency on the spot market and selling in the forward market increases the differential between the two D) away from; demand for the stronger currency forces up interest rates on the weaker security
Q3) All that is required for a covered interest arbitrage profit is for interest rate parity to not hold.
A)True
B)False
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8
Chapter 7: Foreign Currency Derivatives: Futures and Options
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88 Verified Questions
88 Flashcards
Source URL: https://quizplus.com/quiz/3228
Sample Questions
Q1) Which of the following statements regarding currency futures contracts and forward contracts is NOT true?
A) A futures contract is a standardized amount per currency whereas the forward contact is for any size desired.
B) A futures contract is for a fixed maturity whereas the forward contract is for any maturity you like up to one year.
C) Futures contracts trade on organized exchanges whereas forwards take place between individuals and banks with other banks via telecom linkages.
D) All of the above are true.
Q2) If the spot rate changes from $1.70/£ to $1.71/£ and there is an option with an initial premium of $0.033/£ and a delta of 0.5, then the new option premium would be:
A) $0.043/£.
B) $0.038/£.
C) $0.005/£.
D) $1.715/£.
Q3) Why are foreign currency futures contracts more popular with individuals and banks while foreign currency forwards are more popular with businesses?
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Page 9
Chapter 8: Interest Risk and Swaps
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49 Verified Questions
49 Flashcards
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Sample Questions
Q1) The single largest interest rate risk of a firm is:
A) interest sensitive securities.
B) debt service.
C) dividend payments.
D) accounts payable.
Q2) A firm with fixed-rate debt that expects interest rates to fall may engage in a swap agreement to:
A) pay fixed-rate interest and receive floating rate interest.
B) pay floating rate and receive fixed rate.
C) pay fixed rate and receive fixed rate.
D) pay floating rate and receive floating rate.
Q3) Some of the world's largest and most financially sound firms may borrow at variable rates less than LIBOR.
A)True
B)False
Q4) Counterparty risk is greater for exchange-traded derivatives than for over-the-counter derivatives.
A)True
B)False
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Chapter 9: Foreign Exchange Rate Determination and Intervention
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63 Verified Questions
63 Flashcards
Source URL: https://quizplus.com/quiz/3230
Sample Questions
Q1) As economic conditions continued to deteriorate in Argentina by the end of 2001, banks suffered increasing runs. The government, fearing that the increasing financial drain on banks would cause their collapse, closed the banks for weeks.
A)True
B)False
Q2) Which of the following did NOT contribute to the Russian currency crisis of 1998?
A) an accelerated flight of capital
B) generally deteriorating economic conditions
C) a surprisingly healthy government surplus that was neither funding internal investment nor external debt service
D) all of the above
Q3) The authors claim that random events, institutional frictions, and technical factors may cause currency values to deviate significantly from their long-term fundamental path.
A)True
B)False
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11
Chapter 10: Transaction Exposure
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64 Verified Questions
64 Flashcards
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Sample Questions
Q1) In efficient markets, interest rate parity should assure that the costs of a forward hedge and money market hedge should be approximately the same.
A)True
B)False
Q2) The effectiveness of a hedge is determined to what degree the change in spot asset's value is correlated with the equal change in the hedge asset's value to a change in the underlying spot exchange rate.
A)True
B)False
Q3) Hedging transaction exposure with option contracts allows the firm to benefit if exchange rates are favorable but protects the firm if exchange rates turn unfavorable.
A)True
B)False
Q4) Although rarely acknowledged by the firms themselves, selective hedging is essentially speculation.
A)True
B)False
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12
Chapter 11: Translation Exposure
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54 Verified Questions
54 Flashcards
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Sample Questions
Q1) If the British subsidiary of a European firm has net exposed assets of £125,000, and the pound increases in value from 1.40/£ to 1.44/£, the European firm has a translation:
A) loss of 5,000.
B) gain of 5,000.
C) gain of £5,000.
D) loss of £5,000.
Q2) If a firm's balance sheet has an equal amount of exposed foreign currency assets and liabilities and the firm translates by the temporal method, then:
A) the net exposed position is called monetary balance.
B) the change is value of liabilities and assets due to a change in exchange rates will be of equal but opposite direction.
C) Both A and B are true.
D) none of the above
Q3) Under U.S. accounting and translation practices, use of the current rate method is termed "translation" while use of the temporal method is termed "remeasurement."
A)True
B)False
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Chapter 12: Operating Exposure
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58 Verified Questions
58 Flashcards
Source URL: https://quizplus.com/quiz/3233
Sample Questions
Q1) Swap agreements are treated as off-balance sheet transactions via U.S. accounting methods.
A)True
B)False
Q2) The variability of a firm's operating cash flows is probably reduced by international diversification of its production, sourcing, and sales because exchange rate changes under disequilibrium conditions are likely to increase the firm's competitiveness in some markets while reducing it in others.
A)True
B)False
Q3) Which one of the following management techniques is likely to best offset the risk of long-run exposure to receivables denominated in a particular foreign currency?
A) Borrow money in the foreign currency in question.
B) Lend money in the foreign currency in question.
C) Increase sales to that country.
D) Increase sales in this country.
Q4) Currency swaps are exclusively for periods of time under one year.
A)True
B)False
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Chapter 13: Global Cost and Availability of Capital
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83 Verified Questions
83 Flashcards
Source URL: https://quizplus.com/quiz/3234
Sample Questions
Q1) Unsystematic risk:
A) is the remaining risk in a well-diversified portfolio.
B) is measured with beta.
C) can be diversified away.
D) all of the above
Q2) International diversification benefits may induce investors to demand foreign securities.
A)True
B)False
Q3) Refer to Instruction 13.1. At the end of the year the investor sells his stock that now has an average price per share of 57. What is the investor's average rate of return after converting the stock back into dollars?
A) -1.35%
B) 5.0%
C) -5.0%
D) -7.24%
Q4) Capital market segmentation is a financial market imperfection caused mainly by government constraints, institutional practices, and investor perceptions. List and explain three imperfections.
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Chapter 14: Funding the Multinational Firm
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95 Verified Questions
95 Flashcards
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Sample Questions
Q1) External financing includes debt from any source that is not the MNE itself and equity from any potential partner.
A)True
B)False
Q2) In addition to gaining liquidity, which of the following could also be considered a legitimate reason for cross-listing equity?
A) enhance a firm's local image
B) become more familiar with the local financial community
C) get better local press coverage
D) all of the above
Q3) Which of the following was NOT identified by the authors as an alternative instrument to source equity in global markets?
A) sale of a directed public share issue to investors in a target market
B) private placements under SEC rule 144a
C) sale of shares to private equity funds
D) All of the above are alternatives to source equity instruments.
Q4) Eurobonds offer tax anonymity.
A)True
B)False
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Chapter 15: Multinational Tax Management
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65 Verified Questions
65 Flashcards
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Sample Questions
Q1) The changing global tax environment for multinational firms has been attributed to all of the following EXCEPT:
A) rapid expansion of the global digital economy.
B) aggressiveness of governments to increase their individual tax competitiveness.
C) increase cost of capital.
D) all of the above
Q2) Refer to Instruction 15.2. If the U.S. has no bilateral trade agreement with the host country, what is the total amount of income taxes Green Valley Exporters will pay?
A) $25,000
B) $35,000
C) $51,250
D) $60,000
Q3) Among the G7 nations, the U.S. has a below average corporate income tax rate that makes it attractive for other countries to invest in the U.S.
A)True
B)False
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Chapter 16: International Trade Finance
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75 Verified Questions
75 Flashcards
Source URL: https://quizplus.com/quiz/3237
Sample Questions
Q1) Which of the following purposes is NOT served by the bill of lading?
A) It acts as a receipt.
B) It acts as a contract.
C) It acts as a document of title.
D) It acts as all of the above.
Q2) An advantage of trading with an affiliated party for an MNE, compared to an unaffiliated party, could be reduced contracting costs and less to even no need to protect against nonpayment.
A)True
B)False
Q3) Which of the following is NOT true regarding a letter of credit?
A) The importer and exporter agree on a transaction.
B) The importer applies to its local bank for the issuance of a letter of credit.
C) The exporter applies to its local bank for the issuance of a letter of credit.
D) The importer's bank cuts a sales contract based on its assessment of the creditworthiness of the importer.
Q4) What is a banker's acceptance? How are they initiated? Why are they desirable for the exporter?
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Page 18
Chapter 17: Foreign Direct Investment and Political Risk
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55 Verified Questions
55 Flashcards
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Sample Questions
Q1) Licensing is a popular form of foreign investment because it does not need a sizable commitment of funds, and political risk is often minimized.
A)True
B)False
Q2) Which of the following is NOT an advantage to exporting goods to reach international markets rather than entering into some form of FDI?
A) fewer political risks
B) greater agency costs
C) lower front-end investment
D) All of the above are advantages.
Q3) The I in OLI refers to an advantage in a firm's home market that is an:
A) internalization.
B) industry-specific advantage.
C) international abnormality.
D) none of the above
Q4) What does the OLI Paradigm propose to explain? Define each component and provide an example of each.
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Chapter 18: Multinational Capital Budgeting and Cross-Border Acquisitions
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61 Verified Questions
61 Flashcards
Source URL: https://quizplus.com/quiz/3239
Sample Questions
Q1) Which of the following changes does NOT create business opportunities for select firms to both enhance and defend their competitive positions in global markets?
A) changes in technology
B) changes in regulation
C) changes in capital markets
D) changes in management
Q2) Refer to Instruction 18.1. What is the IRR of the Velo Rapid Revolutions expansion?
A) 14.4%
B) 10.3%
C) 12.0%
D) 8.6%
Q3) For financial reporting purposes, U.S. firms must consolidate the earnings of any subsidiary that is over ________ owned.
A) 20%
B) 40%
C) 50%
D) 75%
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Page 20