IBUS 401 Final Exam USC Bullington
UPDATED ACTUAL QUESTIONS AND
CORRECT ANSWERS
Imperfect Markets Theory - CORRECT ANSWER Which of the following theories identifies
the non-transferability of resources as a reason for international business?
True - CORRECT ANSWER (T/F) Licensing is the process by which a firm provides it's
technology (copyrights, patents, trademarks, or trade names) in exchange for fees or some other
specified benefits
True - CORRECT ANSWER (T/F) The Sarbanes-Oxley Act (SOX) was enacted in 2002
required MNCs and other firms to implement an internal reporting process that could be easily
monitored by executives and the board of directors
False - CORRECT ANSWER (T/F) A centralized management style, where major decisions
about a foreign subsidiary are made by the parent company, results in an increase in agency costs
Balance of Trade - CORRECT ANSWER The primary component of the current account is the:
It could attempt to reduce its home currency value - CORRECT ANSWER Which of the
following is mentioned in the text as a possible means by which a government may attempt to
improve its balance of trade position (increase its exports or reduce its imports)
True - CORRECT ANSWER (T/F) A balance of trade deficit indicates an excess of imports
over exports
False - CORRECT ANSWER (T/F) A weakening of the U.S dollar with respect to the British
pound would likely reduce U.S. exports to the U.K. and increase U.S. imports from the U.K.
About 4.26% - CORRECT ANSWER Assume that a bank's bid rate on Swiss francs is $0.45
and its ask rate is $0.47. Its bid-ask percentage spread is:
, Order Costs
Inventory Costs
Volume - CORRECT ANSWER ______________ is a factor that affects the bid/ask spread.
Obtain a 90-day forward purchase contract on Canadian dollars - CORRECT ANSWER If a
U.S. firm desires to avoid risk from exchange rate fluctuations, and it will need C$200,000 in 90 days
to make a payment on imports from Canada, it could:
False - CORRECT ANSWER (T/F) A put option is the amount or percentage by which the
existing spot rate exceeds the forward rate
Sold on an exchange; offered by commercial banks - CORRECT ANSWER Futures contracts
are typically ______________; forward contracts are typically _____________.
False - CORRECT ANSWER (T/F) 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.
The Swiss demand for dollars to increase and the dollar will appreciate against the Swiss franc. -
CORRECT ANSWER Assume that Swiss investors have francs available to invest in
securities, and they initially view U.S. and British interest rates as equally attractive. Now assume that
the U.S. interest rates increase while the British interest rates stay the same. This would likely cause:
Nonsterilized intervention - CORRECT ANSWER Assume a central bank exchanges its
currency for other foreign currencies in the foreign exchange market, but does not adjust for the
resulting change in the money supply. This is an example of:
Exchanging dollars for foreign currency - CORRECT ANSWER Which of the following is an
example of direct intervention in foreign exchange markets?
Monetary - CORRECT ANSWER Countries that have adopted the euro must agree on a single
______________ policy
UPDATED ACTUAL QUESTIONS AND
CORRECT ANSWERS
Imperfect Markets Theory - CORRECT ANSWER Which of the following theories identifies
the non-transferability of resources as a reason for international business?
True - CORRECT ANSWER (T/F) Licensing is the process by which a firm provides it's
technology (copyrights, patents, trademarks, or trade names) in exchange for fees or some other
specified benefits
True - CORRECT ANSWER (T/F) The Sarbanes-Oxley Act (SOX) was enacted in 2002
required MNCs and other firms to implement an internal reporting process that could be easily
monitored by executives and the board of directors
False - CORRECT ANSWER (T/F) A centralized management style, where major decisions
about a foreign subsidiary are made by the parent company, results in an increase in agency costs
Balance of Trade - CORRECT ANSWER The primary component of the current account is the:
It could attempt to reduce its home currency value - CORRECT ANSWER Which of the
following is mentioned in the text as a possible means by which a government may attempt to
improve its balance of trade position (increase its exports or reduce its imports)
True - CORRECT ANSWER (T/F) A balance of trade deficit indicates an excess of imports
over exports
False - CORRECT ANSWER (T/F) A weakening of the U.S dollar with respect to the British
pound would likely reduce U.S. exports to the U.K. and increase U.S. imports from the U.K.
About 4.26% - CORRECT ANSWER Assume that a bank's bid rate on Swiss francs is $0.45
and its ask rate is $0.47. Its bid-ask percentage spread is:
, Order Costs
Inventory Costs
Volume - CORRECT ANSWER ______________ is a factor that affects the bid/ask spread.
Obtain a 90-day forward purchase contract on Canadian dollars - CORRECT ANSWER If a
U.S. firm desires to avoid risk from exchange rate fluctuations, and it will need C$200,000 in 90 days
to make a payment on imports from Canada, it could:
False - CORRECT ANSWER (T/F) A put option is the amount or percentage by which the
existing spot rate exceeds the forward rate
Sold on an exchange; offered by commercial banks - CORRECT ANSWER Futures contracts
are typically ______________; forward contracts are typically _____________.
False - CORRECT ANSWER (T/F) 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.
The Swiss demand for dollars to increase and the dollar will appreciate against the Swiss franc. -
CORRECT ANSWER Assume that Swiss investors have francs available to invest in
securities, and they initially view U.S. and British interest rates as equally attractive. Now assume that
the U.S. interest rates increase while the British interest rates stay the same. This would likely cause:
Nonsterilized intervention - CORRECT ANSWER Assume a central bank exchanges its
currency for other foreign currencies in the foreign exchange market, but does not adjust for the
resulting change in the money supply. This is an example of:
Exchanging dollars for foreign currency - CORRECT ANSWER Which of the following is an
example of direct intervention in foreign exchange markets?
Monetary - CORRECT ANSWER Countries that have adopted the euro must agree on a single
______________ policy
