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IBUS 401 FINAL EXAM QUESTIONS WITH 100% CORRECT ANSWERS LATEST AND COMPLETE VERSION, Exams of Business Economics

University of South Wales(USW)Business Economics

"If a US firm desires to avoid the risk from exchange rate fluctuations, and it is receiving 100,00 euros in 90 days, it could: - CORRECT ANSWER=> obtain a 90-day forward sale on euros" "T/F: A put option is the amount or percentage by which the existing spot rate exceeds the forward rate - CORRECT ANSWER=> false" "An increase in US interest rates relative to German interest rates would likely ________ the US demand for euros and _______ the supply of euros for sale - CORRECT ANSWER=> reduce; increase" "If US inflation suddenly increased while European inflation stayed the same, there would be: - CORRECT ANSWER=> an increased US demand for euros and a decreased supply of euros for sale" "Which of the following are considered as a factors affecting exchange rates? - CORRECT ANSWER=> - Interest, Inflation, Income, Government Interventions, Expectations"

Typology: Exams

2024/2025

Available from 03/27/2025

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IBUS 401 FINAL EXAM QUESTIONS
WITH 100% CORRECT ANSWERS
LATEST AND COMPLETE VERSION
"If a US firm desires to avoid the risk from exchange rate fluctuations, and it is receiving 100,00
euros in 90 days, it could: - CORRECT ANSWER=> obtain a 90-day forward sale on euros"
"T/F: A put option is the amount or percentage by which the existing spot rate exceeds the
forward rate - CORRECT ANSWER=> false"
"An increase in US interest rates relative to German interest rates would likely ________ the US
demand for euros and _______ the supply of euros for sale - CORRECT ANSWER=> reduce;
increase"
"If US inflation suddenly increased while European inflation stayed the same, there would be: -
CORRECT ANSWER=> an increased US demand for euros and a decreased supply of euros for
sale"
"Which of the following are considered as a factors affecting exchange rates? - CORRECT
ANSWER=> - Interest, Inflation, Income, Government Interventions, Expectations"
"What are the 6 ways firms engage in international business? - CORRECT ANSWER=> 1.
International Trade
2. Licensing
3. Franchising
4. Joint Ventures
5. Acquisition of foreign entities
6. Establishing new foreign subsidiaries"
"What are the financial derivatives used to hedge payables or receivables? - CORRECT ANSWER=>
- Forward Contract
- Futures Contract
- Call Option
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Partial preview of the text

Download IBUS 401 FINAL EXAM QUESTIONS WITH 100% CORRECT ANSWERS LATEST AND COMPLETE VERSION and more Exams Business Economics in PDF only on Docsity!

IBUS 401 FINAL EXAM QUESTIONS

WITH 100% CORRECT ANSWERS

LATEST AND COMPLETE VERSION

"If a US firm desires to avoid the risk from exchange rate fluctuations, and it is receiving 100, euros in 90 days, it could: - CORRECT ANSWER=> obtain a 90-day forward sale on euros" "T/F: A put option is the amount or percentage by which the existing spot rate exceeds the forward rate - CORRECT ANSWER=> false" "An increase in US interest rates relative to German interest rates would likely ________ the US demand for euros and _______ the supply of euros for sale - CORRECT ANSWER=> reduce; increase" "If US inflation suddenly increased while European inflation stayed the same, there would be: - CORRECT ANSWER=> an increased US demand for euros and a decreased supply of euros for sale" "Which of the following are considered as a factors affecting exchange rates? - CORRECT ANSWER=> - Interest, Inflation, Income, Government Interventions, Expectations" "What are the 6 ways firms engage in international business? - CORRECT ANSWER=> 1. International Trade

  1. Licensing
  2. Franchising
  3. Joint Ventures
  4. Acquisition of foreign entities
  5. Establishing new foreign subsidiaries" "What are the financial derivatives used to hedge payables or receivables? - CORRECT ANSWER=>
  • Forward Contract
  • Futures Contract
  • Call Option
  • Put Option" "A primary result of the Bretton Woods Agreement was: - CORRECT ANSWER=> establishing that exchange rates of most major currencies were to be allowed to fluctuate 1% above or below their initially set values" "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: - CORRECT ANSWER=> non-sterile intervention" "T/F: The establishment of the euro allows for more consistent economic conditions across countries but eliminates the power of any individual European country to solve local economic problems with its own unique monetary policy - CORRECT ANSWER=> true" "If interest rate parity exists, then _______ is not feasible - CORRECT ANSWER=> covered interest arbitrage" "According to interest rate parity (IRP): - CORRECT ANSWER=> the forward rate differs from the spot rate by a sufficient amount to offset the interest rate differential between two currencies" "Given a home country and a foreign country, purchasing power parity (PPP) suggests that: - CORRECT ANSWER=> a home currency will depreciate if the current home inflation rate exceeds the current foreign inflation rate" "According to the international Fisher effect, if US investors expect a 5% rate of domestic inflation over one year, and a 2% rate of inflation in European countries that use the euro, and require a 3% real return on investments over one year, the nominal interest rate on one-year US Treasury securities would be: - CORRECT ANSWER=> 8% (nominal = real + expected inflation)" "Which of the following techniques would best represent the use of today's forward exchange rate to forecast the future exchange rate? - CORRECT ANSWER=> market-based forecasting" "Which of the following forecasting techniques would best represent the sole use of historical currency values of the euro to predict the euro's future currency value? - CORRECT ANSWER=> technical forecasting"

"T/F: MNCs commonly consider direct foreign investment because it can improve their profitability and enhance shareholder wealth - CORRECT ANSWER=> true" "If a US parent is setting up a French subsidiary, and funds from the subsidiary will be periodically sent to the parent, the ideal situation from the parent's perspective is a ________ after the subsidiary is established - CORRECT ANSWER=> strengthening euro" "Other things being equal, firms from a particular home country will engage more in international acquisitions if they expect foreign currencies to ______ against their home currency, and if their cost of capital is relatively _____ - CORRECT ANSWER=> appreciate; low" "T/F: Assuming that a subsidiary is wholly owned, a subsidiary's perspective is appropriate in attempting to determine whether a project will enhance the firm's value - CORRECT ANSWER=> false" "T/F: From an acquirer's perspective, the ideal conditions would be a weak foreign currency at the time of acquisition and a strengthening of the foreign currency over time as funds are remitted back to the parent - CORRECT ANSWER=> true" "T/F: An international acquisition may be preferable to the establishment of a new subsidiary because the firm can immediately expand its international business and benefit from existing customer relationships - CORRECT ANSWER=> true" "When an MNC assesses targets among countries, it would prefer a country where the growth potential for its industry is ______ and the competition within the industry is _________ - CORRECT ANSWER=> high; not excessive" "A firm's cost of ________ reflect an opportunity cost: what the existing shareholders could have earned if they had received the earnings as dividends and invested the funds themselves - CORRECT ANSWER=> retained earnings" "Capital asset pricing theory would most likely suggest that the cost of capital is generally ______ for _______ - CORRECT ANSWER=> lower; MNCs" "T/F: There is an advantage to using equity rather than debt financing because dividend payments are tax deductible - CORRECT ANSWER=> false"

“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 - CORRECT ANSWER=> false" "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 ___________. - CORRECT ANSWER=> increase; appreciate" "Assume that an American firm wants to engage in international business without major investment in the foreign country. Which method is least appropriate in this situation? - CORRECT ANSWER=> direct foreign investment" "Saller Co. has a subsidiary in Mexico. The expected cash flows in pesos to be received in the future from this subsidiary have no changed since last month, but the valuation of Saller Co. has declined since last month. What could've caused this decline in value? - CORRECT ANSWER=> depreciation of the Mexican peso" "Recently, the US experienced an annual balance of trade representing a _________ - CORRECT ANSWER=> deficit" "The primary component of the current account is the: - CORRECT ANSWER=> balance of trade" "The demand for US exports tends to increase when: - CORRECT ANSWER=> the currencies of foreign countries strengthen against the dollar" "In recent years, the US had had a relatively (compared to other countries) _______ balance of trade _____ with China - CORRECT ANSWER=> large; deficit" "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 ANSWER=> about 4.26% =(A-B/A)" "The international money market primarily concentrates on: - CORRECT ANSWER=> short-term lending (one year or less)"