IBUS 401 Final Exam Questions with Detailed Answers
Updated 2025
/. For the MNC, agency costs are typically:
a. nonexistent.
b. larger than agency costs of a small purely domestic firm.
c. smaller than agency costs of a small purely domestic firm.
d. the same as agency costs of a small purely domestic firm. - Answer-B
/.The valuation of an MNC should rise when an event causes the expected cash flows
from foreign to ____ and when foreign currencies denominating these cash flows are
expected to____.
A. Decrease, appreciate
B. Increase, appreciate
C. Decrease, depreciate
D. Increase, depreciate - Answer-B
/.Which of the following theories identifies the nontransferability of resources as a
reason for international business?
a. theory of comparative advantage.
b. imperfect markets theory.
c. product cycle theory.
d. none of the above - Answer-C
/.The United States typically has a balance-of-trade surplus in its trade with:
A. China
B. Japan
C. China AND Japan
D. none of these are correct - Answer-D
/.which of the following is mentioned in the text as a possible means by which the
government may attempt to improve its balance-of-trade position (increase its exports or
reduce its imports)?
A. the government could attempt to reduce its home currency's value
B. the government could require firms to engage in outsourcing
C. the government could provide subsidies to importers
D. all of these are mentioned - Answer-A
/.The primary component of the current account is the:
A. Balance of trade
B. Balance of money market flows
C. Balance of capital market flows
D. Unilateral transfers - Answer-A
, /.Any event that reduces the U.S. demand for Japanese Yen should result in a(n)
_______ in the value of the Japanese Yen with respect to _______, other things being
equal
A. increase; the U.S. dollar
B. increase; non dollar currencies
C. decrease; non dollar currencies
D. decrease; the U.S. dollar - Answer-D
/.Assume that a bank's bid rate on Swiss francs is $.45 and its ask rate is $.47. its bid-
ask percentage spread is:
A. About 4.44%
B. About 4.26%
C. About 4.03%
D. About 4.17% - Answer-B
/.according to the text, the forward rate is commonly used for:
A. hedging
B. immediate transactions
C. previous transactions
D. bond transactions - Answer-A
/.The international money market primarily concentrates on:
A. Short-term lending (one year or less)
B. Medium-term lending
C. Long- term lending
D. Placing bonds with investors
E. Placing newly issued stock in foreign markets - Answer-A
/.In general, when speculating on exchange rate movements, the speculator will borrow
the currency that is expected to appreciate and invest in the country whose currency is
expected to depreciate.
a. True
b. False - Answer-B
/.Which of the following is not mentioned in the text as a factor affecting exchange
rates?
A. Relative interest rates
B. Relative inflation rates
C. Government controls
D. Expectations
E. All of the above are mentioned in the text as factors affecting exchange rates -
Answer-E
/.If US inflation suddenly increased while European inflation stayed the same, there
would be:
a. an increased US demand for euros and an increased supply of euros for sale
Updated 2025
/. For the MNC, agency costs are typically:
a. nonexistent.
b. larger than agency costs of a small purely domestic firm.
c. smaller than agency costs of a small purely domestic firm.
d. the same as agency costs of a small purely domestic firm. - Answer-B
/.The valuation of an MNC should rise when an event causes the expected cash flows
from foreign to ____ and when foreign currencies denominating these cash flows are
expected to____.
A. Decrease, appreciate
B. Increase, appreciate
C. Decrease, depreciate
D. Increase, depreciate - Answer-B
/.Which of the following theories identifies the nontransferability of resources as a
reason for international business?
a. theory of comparative advantage.
b. imperfect markets theory.
c. product cycle theory.
d. none of the above - Answer-C
/.The United States typically has a balance-of-trade surplus in its trade with:
A. China
B. Japan
C. China AND Japan
D. none of these are correct - Answer-D
/.which of the following is mentioned in the text as a possible means by which the
government may attempt to improve its balance-of-trade position (increase its exports or
reduce its imports)?
A. the government could attempt to reduce its home currency's value
B. the government could require firms to engage in outsourcing
C. the government could provide subsidies to importers
D. all of these are mentioned - Answer-A
/.The primary component of the current account is the:
A. Balance of trade
B. Balance of money market flows
C. Balance of capital market flows
D. Unilateral transfers - Answer-A
, /.Any event that reduces the U.S. demand for Japanese Yen should result in a(n)
_______ in the value of the Japanese Yen with respect to _______, other things being
equal
A. increase; the U.S. dollar
B. increase; non dollar currencies
C. decrease; non dollar currencies
D. decrease; the U.S. dollar - Answer-D
/.Assume that a bank's bid rate on Swiss francs is $.45 and its ask rate is $.47. its bid-
ask percentage spread is:
A. About 4.44%
B. About 4.26%
C. About 4.03%
D. About 4.17% - Answer-B
/.according to the text, the forward rate is commonly used for:
A. hedging
B. immediate transactions
C. previous transactions
D. bond transactions - Answer-A
/.The international money market primarily concentrates on:
A. Short-term lending (one year or less)
B. Medium-term lending
C. Long- term lending
D. Placing bonds with investors
E. Placing newly issued stock in foreign markets - Answer-A
/.In general, when speculating on exchange rate movements, the speculator will borrow
the currency that is expected to appreciate and invest in the country whose currency is
expected to depreciate.
a. True
b. False - Answer-B
/.Which of the following is not mentioned in the text as a factor affecting exchange
rates?
A. Relative interest rates
B. Relative inflation rates
C. Government controls
D. Expectations
E. All of the above are mentioned in the text as factors affecting exchange rates -
Answer-E
/.If US inflation suddenly increased while European inflation stayed the same, there
would be:
a. an increased US demand for euros and an increased supply of euros for sale
