IBUS 401 TEST 1 Questions With 100%
Verified Solutions
Which of the following theories identifies the non-transferability of resources as a reason
for international business?
(a) theory of comparative advantage
(b) imperfect markets theory
(c) product cycle theory
(d) non of the above CORRECT ANSWERS imperfect markets theory
TRUE/FALSE: Licensing is the process by which a firm provides its technology
(copyrights, patents, trademarks, or trade names) in exchange for fees or some other
specified benefits. CORRECT ANSWERS True
TRUE/FALSE: 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. CORRECT ANSWERS TRUE
TRUE/FALSE: A centralized management style, where major decisions about a foreign
subsidiary are made by the parent company, results in an increase in agency costs.
CORRECT ANSWERS FALSE
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 CORRECT ANSWERS balance of trade
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) it could attempt to reduce its home currency's value
(b) the government could require firms to engage in outsourcing
(c) the gov't could require that its local firms pursue outsourcing
(d) all of the above are mentioned CORRECT ANSWERS it could attempt to reduce its
home currency's value
T/F: A balance of trade deficit indicates an excess of imports over exports CORRECT
ANSWERS True
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. CORRECT
ANSWERS False
, Assume that a bank's bid rate on Swiss francs is $.45 and its ask rate is $.47. Its bid-
ask percentage spread is: CORRECT ANSWERS about 4.26%
______ is not a factor that affects the bid/ask spread.
(a) order costs
(b) inventory costs
(c) volume
(d) all of the above factors affect the bid/ask spread CORRECT ANSWERS all of the
above factors affect the bid/ask spread
What are the factors that affect the bid-ask spread? CORRECT ANSWERS 1. order
costs
2. inventory costs
3. competition
4. volume
5. currency risk
If a U.S. firm desires to avoid the risk from exchange rate fluctuations, and it will need
C$200,000 in 90 days to make payment on imports from Canada, it could:
(a) obtain a 90-day forward purchase contract on Canadian dollars
(b) obtain a 90-day forward sale contract on Canadian dollars
(c) purchase Canadian dollars 90 days from now at the spot rate
(d) sell Canadian dollars 90 days from now at the spot rate CORRECT ANSWERS
obtain a 90-day forward purchase contract on Canadian dollars
T/F: A put option is the amount of percentage by which the existing spot rate exceeds
the forward rate CORRECT ANSWERS false
Futures contracts are typically ________; forward contracts are typically ________
(a) sold on an exchange; sold on an exchange
(b) offered by commercial banks; sold on an exchange
(c) sold on an exchange; offered by commercial banks
(d) offered by commercial banks; offered by commercial banks CORRECT ANSWERS
Futures contracts are typically *sold on an exchange*; forward contracts are typically
*offered by commercial banks*
T/F: In general, when speculating on exchange rate movements, the speculator will
borrow the currency that is expected to appreciate and invest the country whose
currency is expected to depreciate CORRECT ANSWERS False
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
U.S.interest rates increase while British interest rates stay the same. This would likely
cause: CORRECT ANSWERS the Swiss demand for dollars to increase and the dollar
will appreciate agents the Swiss franc
Verified Solutions
Which of the following theories identifies the non-transferability of resources as a reason
for international business?
(a) theory of comparative advantage
(b) imperfect markets theory
(c) product cycle theory
(d) non of the above CORRECT ANSWERS imperfect markets theory
TRUE/FALSE: Licensing is the process by which a firm provides its technology
(copyrights, patents, trademarks, or trade names) in exchange for fees or some other
specified benefits. CORRECT ANSWERS True
TRUE/FALSE: 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. CORRECT ANSWERS TRUE
TRUE/FALSE: A centralized management style, where major decisions about a foreign
subsidiary are made by the parent company, results in an increase in agency costs.
CORRECT ANSWERS FALSE
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 CORRECT ANSWERS balance of trade
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) it could attempt to reduce its home currency's value
(b) the government could require firms to engage in outsourcing
(c) the gov't could require that its local firms pursue outsourcing
(d) all of the above are mentioned CORRECT ANSWERS it could attempt to reduce its
home currency's value
T/F: A balance of trade deficit indicates an excess of imports over exports CORRECT
ANSWERS True
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. CORRECT
ANSWERS False
, Assume that a bank's bid rate on Swiss francs is $.45 and its ask rate is $.47. Its bid-
ask percentage spread is: CORRECT ANSWERS about 4.26%
______ is not a factor that affects the bid/ask spread.
(a) order costs
(b) inventory costs
(c) volume
(d) all of the above factors affect the bid/ask spread CORRECT ANSWERS all of the
above factors affect the bid/ask spread
What are the factors that affect the bid-ask spread? CORRECT ANSWERS 1. order
costs
2. inventory costs
3. competition
4. volume
5. currency risk
If a U.S. firm desires to avoid the risk from exchange rate fluctuations, and it will need
C$200,000 in 90 days to make payment on imports from Canada, it could:
(a) obtain a 90-day forward purchase contract on Canadian dollars
(b) obtain a 90-day forward sale contract on Canadian dollars
(c) purchase Canadian dollars 90 days from now at the spot rate
(d) sell Canadian dollars 90 days from now at the spot rate CORRECT ANSWERS
obtain a 90-day forward purchase contract on Canadian dollars
T/F: A put option is the amount of percentage by which the existing spot rate exceeds
the forward rate CORRECT ANSWERS false
Futures contracts are typically ________; forward contracts are typically ________
(a) sold on an exchange; sold on an exchange
(b) offered by commercial banks; sold on an exchange
(c) sold on an exchange; offered by commercial banks
(d) offered by commercial banks; offered by commercial banks CORRECT ANSWERS
Futures contracts are typically *sold on an exchange*; forward contracts are typically
*offered by commercial banks*
T/F: In general, when speculating on exchange rate movements, the speculator will
borrow the currency that is expected to appreciate and invest the country whose
currency is expected to depreciate CORRECT ANSWERS False
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
U.S.interest rates increase while British interest rates stay the same. This would likely
cause: CORRECT ANSWERS the Swiss demand for dollars to increase and the dollar
will appreciate agents the Swiss franc
