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FIN 420 EXAM 1 COST OF CAPITAL AND LEVERAGE CONCEPTS PROBLEM SET WITH ANSWERS

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FIN 420 EXAM 1 COST OF CAPITAL AND LEVERAGE CONCEPTS PROBLEM SET WITH ANSWERS

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FIN 420 EXAM 1 COST OF CAPITAL AND
LEVERAGE CONCEPTS PROBLEM SET WITH
ANSWERS

●● Exports
Answer: Goods and services sold to foreign buyers


●● Net Exports
Answer: Exports minus imports


●● Free Trade
Answer: No government restrictions on imports or exports


●● Trade Protection
Answer: Government restrictions, limits, or charges on trade


●● Absolute Advantage
Answer: Ability to produce a good using fewer resources than another
country


●● Comparative Advantage

, Answer: Ability to produce a good at lower opportunity cost than
another country


●● Opportunity Cost
Answer: Value of the next best alternative foregone


●● Balance of Payments (BOP)
Answer: Record of all international transactions of a country


●● Current Account
Answer: Trade in goods, services, income, and transfers


●● Financial Account
Answer: Foreign direct investment, portfolio investment, and other
capital flows


●● Capital Account
Answer: Capital transfers and non-produced, non-financial assets


●● Trade Deficit
Answer: Imports exceed exports


●● Trade Surplus

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