IBUS 401 Final Exam USC Questions
And Answers | Guaranteed Success
Imperfect Markets Theory CORRECT ANSWERS Which of the following theories
identifies the non-transferability of resources as a reason for international business?
True CORRECT ANSWERS (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 ANSWERS (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 ANSWERS (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 ANSWERS The primary component of the current account
is the:
It could attempt to reduce its home currency value CORRECT ANSWERS 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 ANSWERS (T/F) A balance of trade deficit indicates an excess of
imports over exports
False CORRECT ANSWERS (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 ANSWERS 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 ANSWERS ______________ is a factor that affects the bid/ask
spread.
Obtain a 90-day forward purchase contract on Canadian dollars CORRECT ANSWERS
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 ANSWERS (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 ANSWERS Futures
contracts are typically ______________; forward contracts are typically
_____________.
False CORRECT ANSWERS (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 ANSWERS 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 ANSWERS 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 ANSWERS Which of the following is
an example of direct intervention in foreign exchange markets?
Monetary CORRECT ANSWERS Countries that have adopted the euro must agree on
a single ______________ policy
Buy dollars with foreign currency CORRECT ANSWERS It has been argued that the
exchange rate can be used as a policy tool. Assume that the U.S. government would
like to reduce inflation. Which of the following is an appropriate action given this
scenario?
Locational arbitrage CORRECT ANSWERS Due to __________, market forces should
realign the spot rate of a currency among banks.
Triangular Arbitrage CORRECT ANSWERS Due to _______, market forces should
realign cross exchange rates between two foreign currencies based on the spot
exchange rates of the two currencies against the U.S. dollar.
Covered Interest Arbitrage CORRECT ANSWERS If interest rate parity exists, then
_________ is not feasible.
Covered Interest Arbitrage CORRECT ANSWERS * Due to __________, market forces
should realign the relationship between the interest rate differential of two currencies
And Answers | Guaranteed Success
Imperfect Markets Theory CORRECT ANSWERS Which of the following theories
identifies the non-transferability of resources as a reason for international business?
True CORRECT ANSWERS (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 ANSWERS (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 ANSWERS (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 ANSWERS The primary component of the current account
is the:
It could attempt to reduce its home currency value CORRECT ANSWERS 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 ANSWERS (T/F) A balance of trade deficit indicates an excess of
imports over exports
False CORRECT ANSWERS (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 ANSWERS 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 ANSWERS ______________ is a factor that affects the bid/ask
spread.
Obtain a 90-day forward purchase contract on Canadian dollars CORRECT ANSWERS
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 ANSWERS (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 ANSWERS Futures
contracts are typically ______________; forward contracts are typically
_____________.
False CORRECT ANSWERS (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 ANSWERS 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 ANSWERS 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 ANSWERS Which of the following is
an example of direct intervention in foreign exchange markets?
Monetary CORRECT ANSWERS Countries that have adopted the euro must agree on
a single ______________ policy
Buy dollars with foreign currency CORRECT ANSWERS It has been argued that the
exchange rate can be used as a policy tool. Assume that the U.S. government would
like to reduce inflation. Which of the following is an appropriate action given this
scenario?
Locational arbitrage CORRECT ANSWERS Due to __________, market forces should
realign the spot rate of a currency among banks.
Triangular Arbitrage CORRECT ANSWERS Due to _______, market forces should
realign cross exchange rates between two foreign currencies based on the spot
exchange rates of the two currencies against the U.S. dollar.
Covered Interest Arbitrage CORRECT ANSWERS If interest rate parity exists, then
_________ is not feasible.
Covered Interest Arbitrage CORRECT ANSWERS * Due to __________, market forces
should realign the relationship between the interest rate differential of two currencies
