International Business
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Course Introduction
International Business explores the complexities and dynamics of conducting business in the global marketplace. The course covers key topics such as international trade theories, cross-cultural management, global marketing strategies, foreign direct investment, and the impact of political, economic, and legal environments on multinational enterprises. Students will examine the strategic challenges faced by companies operating across borders and learn how to analyze global opportunities and risks. Through case studies and real-world examples, the course emphasizes the development of practical skills necessary for effective decision-making and leadership in a diverse, interconnected world.
Recommended Textbook
International Money and Finance 8th Edition by Michael
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13 Chapters
694 Verified Questions
694 Flashcards
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Page 2
Melvin
Chapter 1: The Foreign Exchange Market
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Sample Questions
Q1) Suppose that Citibank buys a large amount of Japanese yen from Toyota and Citibank does not want to continue holding too much yen.How should Citibank adjust its buy rate and sell rate of the yen yen per dollar to "square off"?
A) Citibank has to raise both buy and sell rates.
B) Citibank has to raise the buy rate, but lower the sell rate.
C) Citibank has to lower the buy rate, but raise the sell rate.
D) Citibank has to lower both buy and sell rates.
Answer: A
Q2) Suppose that Bank of America quotes you a buy rate of $1.50 per pound and a sell rate of $1.60 per pound.If you sell 1,000 British pounds to Bank of America,Bank of America will have too many British pounds.To square off:
A) the bank has to increase both the buy and sell rates.
B) the bank has to increase the buy rate but lower the sell rate.
C) the bank has to lower the buy rate but increase the sell rate.
D) the bank has to lower both the buy and sell rates.
Answer: D
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3
Chapter 2: International Monetary Arrangements
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Sample Questions
Q1) The U.S.dollar is called a ________ because it is often used as a medium of exchange in international markets.
A) Transit currency
B) Main currency
C) Reserve currency
D) Target currency
Answer: C
Q2) Special Drawing Rights are issued by
A) The International Monetary Fund
B) The United Nations
C) The World Bank
D) The Central banks of England, Japan, and the United States
Answer: A
Q3) The International Monetary Fund was created to assist countries with balance of payment difficulties and monitor an adjustable peg system with the U.S.dollar as the anchor currency.
A)True
B)False
Answer: True
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Page 4
Chapter 3: The Balance of Payments
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Sample Questions
Q1) A decrease in the U.S.-owned deposit in foreign banks is an ________ to the U.S.capital.
A) Credit to the private capital account
B) Debit to the private capital account
C) Credit to the official capital account
D) Debit to the official capital account
Q2) If the residents of a country receive money from their relatives living abroad,it will be counted as:
A) credit in the current account
B) debit in the current account
C) credit in the capital account
D) debit in the capital account
Q3) The current account balance measures all of the following except:
A) Foreign cash payments
B) Goods imports and goods exports
C) Net receipts of investment income
D) Unilateral transfers
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Chapter 4: Forward-Looking Market Instruments
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Sample Questions
Q1) An American firm has just bought merchandise from a British firm for £50,000 on terms of 90-day payment.This firm has purchased a 3-month call option on 50,000 pounds at a strike price of $1.7 per pound and a premium cost of $0.02 per pound.On the day the option matures,the spot exchange rate is $1.8 per pound.What will be the cost of the option in U.S.dollars?
A) $1000
B) $10
C) $85,000
D) $5,000
Q2) Forward-looking market instruments are used to reduce traders' currency risk. A)True
B)False
Q3) A call option with a strike price less than the current spot price is said to be _____.
A) non-exercisable
B) in-the-money
C) out-of-the-money
D) at-the-money
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Chapter 6: Exchange Rates, interest Rates, and Interest
Parity
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Sample Questions
Q1) The real interest rate is equal to the nominal interest rate minus the expected rate of inflation.
A)True
B)False
Q2) Profit-seeking arbitrage activity ensures:
A) Covered interest rate parity.
B) Decreased competition.
C) Higher interest rates on loans.
D) Increased banking regulation.
Q3) The expected exchange rate changes will be reflected in the differences between the term structure of interest rates in two countries.
A)True
B)False
Q4) Suppose that the one-year U.S.interest rate is 5% and the equivalent one-year Swiss interest rate is 4%.According to the covered interest rate parity,there is a forward discount on the Swiss franc.
A)True
B)False
Page 7
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Chapter 7: Prices and Exchange Rates: Purchasing Power
Parity
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Sample Questions
Q1) We can expect deviations from absolute PPP because of:
A) different bundles of goods across countries
B) quotas and tariffs
C) transactions costs.
D) All of the above are correct
Q2) The equivalence of the exchange rate to the ratio of price levels between two countries is referred to as the:
A) Absolute PPP
B) Relative PPP
C) Interest rate parity
D) None of the above
Q3) Under Purchasing Power Parity,
A) S<sub>$/£</sub> = P<sub>US</sub>/P<sub>UK</sub>
B) S<sub>$/£</sub> = P<sub>UK</sub>/P<sub>US</sub>
C) S<sub>$/£</sub> = P<sub>US</sub> + P<sub>UK</sub>
D) S<sub>$/£</sub> = P<sub>US</sub> - P<sub>UK</sub>
Q4) The real exchange rate is equal to one when absolute PPP holds.
A)True
B)False
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Chapter 8: Foreign Exchange Risk and Forecasting
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Sample Questions
Q1) Suppose for two currencies the forward premium is 4% and the expected premium is 8%.Then the risk premium is:
A) -4%
B) -2%
C) 2%
D) 4%
Q2) Suppose that the 1-year forward rate of dollar per pound is $1.32,the current spot rate $/pound is $1.20,and the expected future spot rate $/pound is $1.40.The forward premium on the pound is:
A) -6.7%
B) 5.7%
C) 10%
D) 16.7%
Q3) Information exposure is a type of foreign exchange risk.
A)True
B)False
Q4) The degree to which a firm is affected by exchange rate changes is known as currency risk.
A)True
B)False
Page 9
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Chapter 9: Financial Management of the Multinational Firm
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Sample Questions
Q1) By using netting,firms are able to minimize:
A) Labor costs
B) Penalty payments
C) Transaction costs
D) Transfer prices
Q2) When the subsidiary manager is focused on meeting goals set by the parent firm,then the multinational firm is probably using an ________ style of management.
A) Multinational cash
B) Decentralized
C) Centralized
D) Goal-orientated
Q3) Assume a letter of contract is in place.If the importer does not pay the bank,then under the letter of contract the _______ is still obligated to pay the exporter.
A) Domestic government
B) Foreign government
C) Importer
D) Bank
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Chapter 10: International Portfolio Investment
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Sample Questions
Q1) What is the expected return of the proposed portfolio?
A) 9.0%
B) 9.2%
C) 19.0%
D) 19.2%
Q2) Assume that the expected returns of the four portfolios are the same but their variances are as follows.Which of these four portfolios would you select?
A) 0.015
B) 0.020
C) 0.150
D) 0.095
Q3) The smaller the variance of variability of returns on a portfolio,the more uncertain the returns on the portfolio.
A)True
B)False
Q4) The risk present in all investment opportunities is known as systematic risk.
A)True
B)False
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Chapter 12: Determinants of the Balance of Trade
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Sample Questions
Q1) Suppose the dollar is devalued.If an import contract is written in a foreign currency,then the value of U.S.imports:
A) Decrease
B) Increase
C) Stay the same
D) Not possible to answer with the given information
Q2) When the demand is ________,an increase in price will increase the total revenue.
A) Elastic
B) Inelastic
C) Contracted
D) Expanded
Q3) The J-curve illustrates which of the following?
A) The effect of a devaluation on an economy's income.
B) The immediate increase in the current account after a devaluation.
C) The gradual adjustment of the trade balance in response to a devaluation.
D) The gradual adjustment of prices after currency devaluation.
Q4) The responsiveness of quantity to changes in price refers to elasticity.
A)True
B)False
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Chapter 13: The Is-Lm-Bp Approach
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Sample Questions
Q1) If,other things being equal,a country with a flexible exchange rate increases its money supply,this will lead to _____ in the value of the country's currency,which will tend to _____ national income.
A) a depreciation; increase
B) a depreciation; decrease
C) an appreciation; increase
D) an appreciation; decrease
Q2) Suppose the central bank pursues restrictive monetary policy.Then:
A) The IS curve shifts right
B) The IS curve shifts left
C) The LM curve shifts right
D) The LM curve shifts left
Q3) "The balance of payment equilibrium implies that current account equals to zero."
A)True
B)False
Q4) The balance of payments equilibrium is where the willingness to hold money is equal to the quantity of money supply.
A)True
B)False
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Chapter 14: The Monetary Approach
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Sample Questions
Q1) Inflation from one country can be transmitted to another if a floating exchange rate is being used.
A)True
B)False
Q2) When the central bank increases the money supply,
A) the money supply curve shifts to the left and interest rate rises.
B) the money supply curve shifts to the left and interest rate falls.
C) the money supply curve shifts to the right and interest rate rises.
D) the money supply curve shifts to the right and interest rate falls.
Q3) The MABP emphasizes money demand and money supply as determinants of:
A) The balance of payments under the fixed exchange rate.
B) The balance of payments under the floating exchange rate.
C) Exchange rate movements
D) Capital flows
Q4) "Under the specie flow mechanism,a trade-surplus nation would realize gold inflows,an increase in its money supply,and a rise of domestic inflation."
A)True
B)False
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Page 14
Chapter 15: Extensions to the Monetary Approach of Exchange Rate Determination
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Sample Questions
Q1) The overshooting theory by Dornbusch is based on the assumption that:
A) covered interest parity does not hold in the short run.
B) uncovered interest parity does not hold in the short run.
C) fisher equation does not hold in the short run.
D) purchasing power parity does not hold in the short run.
Q2) "News approach describes how the equilibrium exchange rate can be achieved when government controls news about market fundamentals,profitability,and riskiness of investments."
A)True
B)False
Q3) People in the Bahamas use both Bahamian dollars and U.S.dollars to pay for goods and services.Suppose that the Fed increases money supply,causing higher inflation rate in the U.S.If the exchange rate were allowed to float,the U.S.dollar will ________ against the Bahamian dollar and Bahamians will substitute toward more __________ holding.
A) appreciate; Bahamian dollars
B) appreciate; U.S. dollars
C) depreciate; Bahamian dollars
D) depreciate; U.S. dollars
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