GEB 6365 Final Exam

A US investor purchased the Nikkei index during the period when the index gained 15.5 % while the exchange rate Y/$ rose from 102.50 to 114.25. What was the effective return in dollars to the US investor during the period? How much of the return was due changes in exchange rates.

- The dollar appreciated by 11.46% - The yen depreciated by 10.28%

You are given that a US company can borrow in the US at 15% while the borrowing rate in Brazil is 25%. What is the change in Brazilian currency, real, that will cause the company to be indifferent from borrowing from either market.

-8%

Compute the effective return to a US investor who purchased the TSX Index during the year when the index gained 15 % and given that the exchange rate C$/$ = 1.2105 at the beginning of the year and C$/$ = 1.2355 at the end of the year.

12.67%

You are given that the borrowing rate in the US is 10%. You expect the rupee to depreciate by 5% per year. What is the maximum rate you should be willing to pay in India to be indifferent from borrowing from either market for one year.

15.78%

A US investor purchased the Nikkei index during the period when the index rose from 11,250 to 15,575 while the exchange rate Y/$ rose from 75.55 to 102.25. What was the effective return in dollars to the US investor during the period?

2.29%

Luke, a US investor, purchase the Brazilian, BOVESPA, during the year when the index gained 12%. The exchange rate, R/$ = 4.215 at the beginning and R/$ = 4.525 at the end of the year. Compute the effective return to Luke at the end of the year.

4.33%

Which of the following countries is (are) not member(s) of the European Union?; Euro zone? a. Spain. b. Denmark. c. Ireland. d. Switzerland. e. Turkey. f. Norway. g. Finland. h. Hungary. i. Poland. j. Austria. k. Sweden.

Not in European Union: d. Switzerland. e. Turkey. f. Norway. Not in Euro zone: b. Denmark. d. Switzerland. e. Turkey. f. Norway. h. Hungary, i. Poland. k. Sweden.

Assume the following information. · US deposit rate for one year = 11% · US borrowing rate for one year = 12% · Swiss deposit rate for one year = 8% · Swiss borrowing rate for one year = 10% · Swiss franc fwd. rate = $1.0652 · Swiss franc spot rate = $1.0561 If a US exporter denominates his Swiss exports in Swiss Francs and expects to receive SF600,000 in 1 year, what will be the approximate dollar value of these exports in one year if the firm executes: (a) Forward hedge (b) Money market hedge

a) $639,120 b) $638,420.55

Compute the effective return to a US investor who purchased the FTSE Index during the year when the index gained 18 % and given the dollar price of the pound was $1.4565 at the beginning of the year and $1.4875 at the end of the year. a. 20.51% b. 15.49% c. 18% d. 15.12% e. None of the above

a. 20.51%

Franchising can be defined as: a. An agreement for the use of a trademark and assistance with business operations. b. A company owned by two other companies. c. An agreement to manage a business for a fee. d. A contract for the construction of operating facilities for a fee.

a. An agreement for the use of a trademark and assistance with business operations.

Which of the following is an example of economic exposure? a. An increase in the dollar's value hurts a U.S. firm's domestic sales because foreign competitors can increase their sales to U.S. customers. b. An increase in the pound's value increases the U.S. firm's cost of British pound payables. c. A decrease in the peso's value decreases a U.S. firm's cost of Mexican peso payables. d. A decrease in the Swiss franc's value decreases the dollar value of interest payments on a U.S. firm's Swiss franc deposit at a Swiss bank

a. An increase in the dollar's value hurts a U.S. firm's domestic sales because foreign competitors can increase their sales to U.S. customers.

Offshore Financial Centers a. Are areas that provide large amounts of funds in a currency other than their own. b. Typically, are not allowed to deal in Eurodollars. c. Are found only in industrial countries due to political stability needs. d. Are often hindered by an aggressive local regulatory climate. e. Both a and c.

a. Are areas that provide large amounts of funds in a currency other than their own.

A banker's acceptance is a draft drawn on and accepted by a / an ________. a. Bank b. Importer's Bank c. Exporter's Bank d. Importer e. Exporter

a. Bank

Internationally, the turnkey operation is the most common in: a. Construction. b. Industrial equipment manufacture. c. Airline manufacture. d. Security systems

a. Construction.

A US dollar denominated bond issued in Germany by a British borrower is a / an: a. Eurobond. b. Foreign bond. c. Domestic bond. d. Global bond. e. ECU bond.

a. Eurobond.

A British pound denominated bond issued in London by a U.S. company is a: a. Foreign bond/ Bulldog b. Domestic bond c. Eurobond d. Global bond

a. Foreign bond/ Bulldog

NAFTA is an example of a: a. Free trade area b. Customs union. c. Common market d. Completely integrated economic system.

a. Free trade area

Consider Firm "A" and Firm "B" that both produce the same product. Firm "A" would more likely have more stable cash flows if its percentage of foreign sales were ______ and the number of foreign countries it sold products to was _____. a. Higher; large b. Higher; small c. Lower; small d. Lower; large

a. Higher; large

Eurocurrency loans tend to be: a. Made at variable (floating) interest rates. b. Higher rate than the rate in the corresponding country c. Set by the government of the country in which the loan is being made Made only at a fixed rate.

a. Made at variable (floating) interest rates.

_________ are the means by which a company may transfer talent by using part of its personnel to assist a foreign company for a specified period for a fee. a. Management contracts b. Turnkey operations. c. Joint ventures. d. Equity alliances.

a. Management contracts

If a multinational firm were operating in environments with large differences in the legal and political systems, it would tend to have a: a. Multi-domestic strategy. b. Global strategy. c. Centralized strategy. d. Vertically integrated structure.

a. Multi-domestic strategy.

The most common reason joint ventures dissolve is because: a. Partner is dissatisfied with the venture. b. Of government expropriation. c. They become too big to manage. d. Partners replace them with managements.

a. Partner is dissatisfied with the venture.

A firm has 1,000,000-euro receivables due in 30 days, and is certain that the euro will depreciate substantially over time. Assuming that the firm is correct, the ideal strategy for the firm is to: a. Sell euros forward. b. Sell euro currency put options. c. Purchase euros currency call options. d. Purchase euros forward. e. Remain unhedged.

a. Sell euros forward.

Under a ___________, the exporter is paid once shipment has been made and the draft is presented to the buyer for payment; under a ___________, the exporter provides instructions to the buyer's bank to release shipping documents against acceptance, by the buyer, of the draft. a. Sight draft; time draft b. Sight draft; banker's acceptance c. Bill of lading; banker's acceptance d. Time draft; sight draft

a. Sight draft; time draft

Use the following information to calculate the dollar cost of using money market hedge for a £200,000 payable due in 1year by ABC company of USA. Assume the firm has no excess cash. Assume the spot rate of the pound ($/£) is $1.5715, the 1-year forward rate is $1.5825, the British borrowing and investing interest rates are 5%, and 3.5% respectively while the U.S. borrowing and investing interest rates are 4.5% and 3% respectively over the period. a) $309,810 b) $317,337 C) $320,403 d) $316,500 e) None of the previous

b) $317,337

If trade transactions handled on a draft basis are processed through banking channels, they may be. a. Documentary collections. b. "Documents against payment." c. "Documents against acceptance." d. Trade acceptances. e. All of the above.

b. "Documents against payment."

______ is a negotiable certificate issued by a US bank representing shares of stock of a foreign corporation a. Euro Certificate of Deposit. b. American Depository Receipt. c. Euro-equity Issue. d. International Depository Certificate e. Global Depository Receipt.

b. American Depository Receipt.

Import substitution is: a. An industrialization program emphasizing industries that will have export capabilities. b. An industrialization policy promoting products that would otherwise be imported. c. The quantity of imports that a given quantity of a country's exports can buy. d. The protection of strategic industries.

b. An industrialization policy promoting products that would otherwise be imported.

A company may minimize its resource commitments while still expanding abroad by engaging in: a. Internalization b. Collaborative arrangement c. Multi-domestic practice d. Foreign direct investment

b. Collaborative arrangement

Which of the following best describes a motive for collaborative arrangements that would usually apply only to international operations? a. Secure horizontal linkages b. Conform with laws requiring ownership sharing c. Specializing in one's own competencies d. Secure vertical linkage

b. Conform with laws requiring ownership sharing

An exchange of goods between two parties under two distinct contracts expressed in monetary terms is: a. Compensation arrangement. b. Counter purchase. c. Factoring. d. Accounts receivable financing. e. Barter

b. Counter purchase.

Which of the following is(are) not a form of exposure to exchange rate fluctuations? a. Transaction exposure. b. Credit exposure. c. Economic exposure. d. Translation exposure. e. Interest rate exposure

b. Credit exposure.

The translation method used when the functional currency is the local currency is the a. Temporal method. b. Current rate method. c. Monetary method. d. Consolidation method. e. Historical rate method.

b. Current rate method.

As a company designs its export strategy, it must: a. Avoid becoming entangled in government agencies as they rarely provide help b. Determine if it has the production capacity to deliver the product c. Use U.S. custom to determine how to get products to foreign market d. Identify several markets in which to concentrate its efforts so that it does not put all its eggs in one basket

b. Determine if it has the production capacity to deliver the product

A bond sold in a country other than the one in whose currency the bond is denominated is a / an a. Foreign bond. b. Eurobond. c. Domestic bond. d. Global bond. e. ECU bond.

b. Eurobond.

____ is the percentage of total revenues coming from exports: a. Product intensity b. Export intensity c. Manufacturing intensity d. Alliance intensity

b. Export intensity

With ___________ a company purchases a receivable at a discount with or without recourse to the exporter: a. Accounts receivable financing b. Factoring c. Banker's acceptance d. A letter of credit e. Forfeiting

b. Factoring

An importer issues a promissory note to pay for imported capital goods over a period of five years. The notes are extended to an exporter who sells them at a discount to a bank. This reflects: a. Accounts receivable financing. b. Forfaiting. c. Factoring. d. Letter of credit.

b. Forfaiting.

A US dollar denominated bond registered and sold simultaneously in US and in several different national markets is a: a. Domestic bond b. Global bond c. Foreign bond d. Eurobond

b. Global bond

A Trade Acceptance is a draft drawn on and accepted by a / an _______. a. Bank b. Importer c. Exporter d. None of the above

b. Importer

The Treaty of Maastricht: a. Is the same as the Single European Act b. Is the next step after the Single European Act in establishing European economic, monetary, and political union. c. Deals with monetary but not economic union. d. Was defeated in a special election held in all European countries.

b. Is the next step after the Single European Act in establishing European economic, monetary, and political union.

The following method cannot be used for managing translation exposure a. Forward contract. b. Option contract c. Exposure netting. d. Leading and lagging. e. Money market hedge f. Swaps Market

b. Option contract

If you have acquired the right but not the obligation to sell, you are a: a. Call writer. b. Put buyer/owner/holder. c. Futures buyer. d. Put writer. e. Call owner

b. Put buyer/owner/holder.

If you have a derivative position where you might be obligated to buy Euros you are a a. Call writer b. Put writer/seller/grantor c. Put buyer d. Futures seller

b. Put writer/seller/grantor

The rules of origin under NAFTA: a. Are redundant since NAFTA is a customs union. b. Require a North American content on products of 62.5 percent on passenger vehicles in order for a product to qualify for the tariff provisions. c. Require that products with any components manufactured outside North America cannot qualify for the reduced tariff provisions of NAFTA. d. Require that job rules in the United States apply to Mexico and Canada as well.

b. Require a North American content on products of 62.5 percent on passenger vehicles in order for a product to qualify for the tariff provisions.

Management of economic exposure a. Is least expensively accomplished with forward contracts. b. Requires an ability to spread productive activities across locations. c. Is facilitated by having centralized cash management facilities. d. Is easiest through judicious use of lead and lag strategies. e. Requires only contractual hedging methods.

b. Requires an ability to spread productive activities across locations.

A licensing agreement is a contract between the licensor and the licensee, where the licensee pays a royalty to the licensor in exchange for the granting of the: a. Rights to sell intangible property in the licensor's home country. b. Rights on intangible property for a specified period. c. Rights on tangible property for a specified period. d. Rights on tangible property for an indefinite period.

b. Rights on intangible property for a specified period.

The ....., Japanese equivalent word for trading company can trace its roots back to the late nineteenth century when Japan embarked on an aggressive modernization process. a. Chaebol b. Sogo shosha c. Keiretsu d. Maquiladora

b. Sogo shosha

A contractual situation in which several banks pool resources to make loans in order to spread risk is known as: a. Collaboration. b. Syndication. c. Euro credit. d. Eurobond. e. Multilateral banking.

b. Syndication.

Which of the following is most likely to cause a strain on a joint venture ? a. The partners have similar corporate cultures. b. The partners' contributions differ in relation to the benefits they receive from the venture. c.The partners have either complementary or the same objectives for the joint venture. d. Both partners agree that day-to-day operating control will be ceded to one of them.

b. The partners' contributions differ in relation to the benefits they receive from the venture.

A Bill of Exchange requesting a bank to pay the face amount at a future date is a: a. Banker's acceptance. b. Time draft. c. Letter of credit. d. Sight draft.

b. Time draft.

The situation in regional economic integration in which discrimination against producers from nonmember countries shifts trade to less efficient producers within the group of countries is called: a. Trade creation. b. Trade diversion. c. Common internal tariffs. d. Common external tariffs.

b. Trade diversion.

Transfer of proprietary technology is usually cheaper when transferred: a. To an unrelated company b. Within the existing corporate family c. From parent company to parent company d. To a government entity e. Through an arm-length agreement

b. Within the existing corporate family

You have an opportunity to invest in Australia at an interest rate of 8%. Moreover, you expect the Australian dollar (A$) to appreciate by 2% against US dollar. Your effective return from this investment is: a) 8.00% b) 6.00% c) 10.16% d) 5.88% e) None of the above

c) 10.16%

The forward rate of the Swiss franc is $1.0615. The spot rate of the Swiss franc is $1.0525. The following interest rates exist: U.S. Switzerland 360-day borrowing rate 6% 5% 360-day deposit rate 4% 3% You need to pay a sum of SF500,000 in 360 days. If you use a money market hedge, the amount of dollars you need in 360 days is: a. $530,750 b. $526,250 c. $541,578 d. $511,356 e. $535,853

c. $541,578

The term "Fortress Europe" refers to: a. A Strong European common defense strategy. b. Decreased competition within the Single European Market. c. A situation where European regulations might favor European companies and exclude foreign companies under the Single European Market. d. Emergence of a much stronger and competitive EU following the implementation of the Single European Market.

c. A situation where European regulations might favor European companies and exclude foreign companies under the Single European Market.

A compound duty is: a. The increase of a foreign producer's price as a result of an imposed import tax. b. A tax on the total value of goods shipped internationally c. A tax per unit, plus a tax on the value, of goods shipped internationally. d. A governmental tax on goods shipped internationally, based either on value or per unit.

c. A tax per unit, plus a tax on the value, of goods shipped internationally.

For companies that are short on resources for expansion, international collaborative arrangements may: a. Free up domestic resources that can then be shifted abroad b. Enable companies to produce with fewer resources because of hiring more efficient management c. Allow a company to expand internationally while using most of its scarce resources domestically d. Allow a company to expand domestically while using most of its scare resources internationally

c. Allow a company to expand internationally while using most of its scarce resources domestically

Exporters use an Export Management Company as part of: a. A direct selling strategy b. Risk enhancement strategy c. An indirect selling strategy d. Forwarding strategy

c. An indirect selling strategy

Export-led development refers to: a. A country's efforts to promote its exports in order to cut its trade deficits. b. An industrialization policy promoting products that would otherwise be imported. c. An industrialization program emphasizing industries that will have export capabilities. d. The use of revenue from export tariffs to provide infrastructure development

c. An industrialization program emphasizing industries that will have export capabilities.

A major pitfall in exporting is: a. That managers tend to increase their foreign travel experience and interest in foreign culture, leading to an increase in costs b. An over-commitment by top management to exporting, which tends to get too many people involved. c. An unwillingness to modify products to meet other countries' regulations or cultural preferences d. Firms concentrating on indirect exporting at the expense of direct exporting.

c. An unwillingness to modify products to meet other countries' regulations or cultural preferences

Which of the following is not a typical "documentation" required under a letter of credit? a. Sight draft b. Time draft c. Banker's acceptance d. Commercial invoice e. Bill of lading

c. Banker's acceptance

A ________ provides a summary of freight charges and conveys title to the merchandise. a. Letter of credit b. Banker's acceptance c. Bill of lading d. Bill of exchange

c. Bill of lading

A Swiss franc bond issued in Luxembourg by a British MNE is a: a. Foreign bond b. Domestic bond c. Eurobond d. Global bond

c. Eurobond

Which of the following is not a payment method used for international trade? a. Consignment b. Open account c. Factoring d. Draft e. Letter of credit

c. Factoring

Consider an exporter that sells its accounts receivables off to another firm that becomes responsible for obtaining cash from the various importers. This reflects: a. Accounts receivable financing. b. Consignment. c. Factoring. d. Letter of credit.

c. Factoring.

NAFTA deals with all the following except: a. Services. b. Intellectual property. c. Future political integration. d. Trade dispute settlement e. Free mobility of factors of production

c. Future political integration. e. Free mobility of factors of production

The probability of being an exporter ____ with company size as defined by _____ a. Increases; expenses b. Decreases; revenues c. Increases; revenues d. Decreases; return on investment e. Increases ; number of shares outstanding

c. Increases; revenues

Which of the following is typically true of an Export Management Company (EMC) ? a. Most EMCs in the United States are large, representing a wide range of products, and many companies b. It is usually a division of a manufacturing company c. It operates on a contractual basis for a manufacturer by helping obtain orders for its clients' product. d. It usually takes title to products rather than acts as agents

c. It operates on a contractual basis for a manufacturer by helping obtain orders for its clients' product.

The __________ a project's variability in cash flows, and the ___________ the correlation between the project's cash flow and MNC's cash flow, the lower the risk of the project. a. Higher; higher b. Higher; lower c. Lower; lower d. Lower; higher

c. Lower; lower

All the following are mistakes companies new to exporting most frequently make except: a. Failure to obtain qualified export counseling and to develop a master international marketing plan before starting an export business b. Insufficient commitment by top management to overcome the initial difficulties and financial requirements of exporting c. Neglecting domestic business when export business booms d. Failure to print service, sale, and warranty messages in locally-understood language

c. Neglecting domestic business when export business booms

When economic conditions of two countries are _______, then a firm would _______ its risk by operating in both counties instead of concentrating just in one. a. Highly correlated; reduce b. Not highly correlated; not reduce c. Not highly correlated; reduce d. None of the above

c. Not highly correlated; reduce

Which of the following basic methods of payments is the least secure in term of security to the exporter? a. Letter of credit b. Draft of bill of exchange c. Open account d. Cash in advance

c. Open account

Which of the following payment terms provides the supplier (exporter) with the greatest degree of protection? a. Letters of credit. b. Consignment. c. Prepayment. d. Drafts (sight/time).

c. Prepayment.

The "transfer price" refers to the: a. Value added at the final stage of production. b. External market price of firm's final product. c. Price at which intra-firm transactions take place. d. Market price of a foreign subsidiary's final product expressed in the parent currency. e. Cost of transporting components between subsidiaries located in different countries.

c. Price at which intra-firm transactions take place.

Which of the following is not an agency actively promoting international trade? a. Export-Import Bank of the U.S. b. Private Export Funding Corporation (PEFCO) c. Securities and Exchange Commission (SEC) d. Overseas Private Investment Corporation (OPIC)

c. Securities and Exchange Commission (SEC)

______ now make up about 88% of U.S. exporters, and account for a fifth of the value of U.S. exports. a. Large businesses b. Government entities c. Small businesses e. Foreign owned businesses f. Non-profit organizations

c. Small businesses

The situation in which companies achieve economies of scale as markets grow is known as: a. Trade diversion. b. Competition. c. The dynamic effects of integration. d. The static effects of integration.

c. The dynamic effects of integration.

Who bears the responsibility for payment risk in a confirmed letter of credit? a. The exporter. b. The importer. c. The issuing bank. d. The confirming bank e.The EXIM Bank.

c. The issuing bank. d. The confirming bank

_______ is not a determinant of translation exposure. a. The MNC's degree of foreign involvement b. The locations of foreign subsidiaries c. The local (domestic) earnings of the MNC d. The accounting methods used. e. The functional currency of the MNC's affiliates

c. The local (domestic) earnings of the MNC

The more a company depends on international collaborative arrangements: a. The less likely it is to lose control over operations b. The less likely it is to operate abroad c. The more likely it is to lose control over operations d. The more likely it is to use its headquarters personnel to manage operations abroad

c. The more likely it is to lose control over operations

Which of the following accurately reflects the current trend in world stock markets? a. Emerging-country markets have not been high performing due to risk. b. The market capitalization of emerging markets is growing, but its share of the world total is falling. c. The world share of the market capitalization of emerging markets is growing. d. Asian emerging markets are faltering, but Latin American markets are booming. e. EU markets now dominate global markets because of integration.

c. The world share of the market capitalization of emerging markets is growing.

Which of the following concerning translation gains and losses is true for the current rate method? a. Losses and gains tend to offset. b. Losses are recognized but gains are deferred. c. They are taken to the balance sheet. d. They are not a factor if the foreign currency strengthens against the dollar. e. They are taken to the income statement.

c. They are taken to the balance sheet.

Which of the following concerning translation gains and losses is true for the temporal method? a. They are taken to the balance sheet. b. Losses are recognized but gains are deferred. c. They are taken to the income statement. d. They are not a factor if the foreign currency strengthens against the dollar. e. Losses and gains tend to offset.

c. They are taken to the income statement.

Which of the following is not true regarding economic exposure? a. A strong foreign currency may allow U.S.-based firms to increase their U.S. market shares at the expense of foreign exporters, who may be priced out of the U.S. market. b. A U.S. exporter whose foreign competitors are willing to reduce their profit margin during a weak-dollar period may not necessarily benefit from the exchange rate movements. c. U.S.-based MNCs can benefit from a strong dollar by increasing the volume of their exports. d. The effects of exchange rate movements on MNCs can vary with the currency of concern, since exchange rates can change by varying degrees. e. All of the above are true.

c. U.S.-based MNCs can benefit from a strong dollar by increasing the volume of their exports.

A weak dollar places ______ pressure on U.S. inflation, which in turn places _____ pressure on U.S. interest rates, which places ______ pressure on U.S. bond prices. a. Upward; downward; upward b. Upward; downward; downward c. Upward; upward; downward d. Downward; upward; upward e. Downward; downward; upward

c. Upward; upward; downward

A negative effective financing rate for a U.S. firm implies that the firm: a) Incurred a loss on the project financed with the funds. b) Paid more interest on the funds than what it would have paid if it had borrowed dollars. c) Paid less interest on the funds than what it would have paid if it had borrowed dollars. d) Paid back an amount less than originally borrowed in dollars. e) Received interest forgiveness on the loan.

d) Paid back an amount less than originally borrowed in dollars.

Assume the following information: U.S. deposit rate for 1 year = 5% U.S. borrowing rate for 1 year = 6.5% New Zealand deposit rate for 1 year = 7% New Zealand borrowing rate for 1 year = 8.5% New Zealand dollar forward rate for 1 year = $.7125 New Zealand dollar spot rate = $.7245 Also assume that a U.S. exporter denominates its New Zealand exports in NZ$ and expects to receive NZ$600,000 in 1 year. Using the information provided, what will be the approximate value of these exports in 1 year in U.S. dollars given that the firm executes a money market hedge? a. $427,500 b. $436,741 c. $428,690 d. $420,677

d. $420,677

Your company will receive C$600,000 in 90 days. The current spot rate for C$ is $.81, the 90-day forward rate for Canadian dollar is $.80 while the spot rate in 90 days is projected to be $.78. If you use a forward hedge, you will receive: a. $468,000 today. b. $468,000 in 90 days. c. $480,000 today. d. $480,000 in 90 days e. $486,000 today.

d. $480,000 in 90 days

Assume that Parker Company USA, will receive SF500,000 in 360 days. Assume the following interest rates: U.S. Switzerland 360-day borrowing rate 6% 5% 360-day deposit rate 4% 3% Assume the forward rate of the Swiss franc is $1.0615 and the spot rate of the Swiss franc is $1.0525. If Parker Company uses a money market hedge, it will receive ________ in 360 days. a. $530,750 b. $526,250 c. $511,356 d. $521,238 e. $535,853

d. $521,238

Obtain the effective return to a US investor who invests in the Indian SENSEX stock index during the year when the index gained 17.5 % but the rupee depreciated by 12% against the dollar. a. 17.5 % b. 5.5% c. 12% d. 3.4% e. 31.6%

d. 3.4%

The abolition of restrictions on factor mobility is a characteristic of: a. NAFTA. b. A free trade area c. A customs union. d. A common market

d. A common market

With _____, the exporter ships the goods to the importer while still retaining actual title to the merchandise. a. A letter of credit arrangement b. An open account arrangement c. A draft arrangement d. A consignment arrangement e. Factoring

d. A consignment arrangement

A turnkey operation is: a. The granting of rights on intangible property in return for royalties. b. An agreement to manage a business for a fee. c. An agreement for the use of trade mark and assistance with business operations. d. A contract for the construction of operating facilities for a fee.

d. A contract for the construction of operating facilities for a fee.

A common external tariff and the abolition of all internal-tariffs are characteristics of: a. NAFTA. b. The Latin America Integration Association. c. The European Free Trade Association. d. A customs union.

d. A customs union.

An international management contract is: a. The granting of rights on intangible property in return for royalties. b. An agreement for the use of a trademark and assistance with business operations. c. A contract for the construction of operating facilities for a fee. d. An agreement to manage a business for a fee.

d. An agreement to manage a business for a fee.

The infant-industry argument holds that: a. Industries producing infant products should get government subsidies and protection. b. Industries particularly important for the national economy should be subsidized. c. Government subsidies should be granted to growth industries rather than mature ones. d. An industry needs government protection from imports until it becomes competitive enough in world markets.

d. An industry needs government protection from imports until it becomes competitive enough in world markets.

A document that is a receipt for goods delivered to the common carrier for transportation, a contract for the services rendered by the carriers, and a document of title is known as a /an: a. Export license b. Commercial invoice c. Consular invoice d. Bill of lading

d. Bill of lading

A key document in international trade that is generally issued to the exporter by a common carrier and serves as a receipt, a contract, and a document of title is a: a. Draft. b. Letter of credit. c. Trade acceptance. d. Bill of lading. e. Export license.

d. Bill of lading.

The essential-industry argument holds that: a. A country should protect those industries that are essential for its long-term development b. Governments should single out important industries for governmental subsidies. c. Industries with potential export capabilities should be protected. d. Certain industries should be protected for national security reasons. e. Both a and d

d. Certain industries should be protected for national security reasons.

The document that indicates where products come from so that the applicable specific tariff schedule can be determined is called: a. Commercial invoice b. Shipper's export declaration c. Bill of lading d. Certificate of origin

d. Certificate of origin

Korean trading companies are part of the large Korean business groups called: a. Sogo Shosha b. Keiretsu c. Maquiladora d. Chaebol

d. Chaebol

The unification of fiscal and monetary policies is a characteristic of a: a. Free trade area. b. Customs union. c. Common market d. Complete economic integration.

d. Complete economic integration.

A bond sold outside the borrower's country but denominated in the currency of the country of issue is a /an a. Eurobond. b. Global bond. c. Domestic bond. d. Foreign bond. e. ECU bond.

d. Foreign bond.

The probability of being an exporter: a. Depends on whether the company establishes an international division. b. Is usually higher for smaller companies, as they are less preoccupied with the domestic market and make decisions faster. c. Is independent of the size of the company. d. Increases with the size of the company

d. Increases with the size of the company

The main issues on the table at the ongoing Doha Round include all the following except: a. Anti-dumping policies b. Protectionism in agriculture c. Intellectual property rights d. Infant industry protection e. Reducing barriers to FDI

d. Infant industry protection The Doha Round refers to a round of the World Trade Organization (WTO) negotiations to reduce agricultural subsidies, slash tariffs, reduce barriers to FDI, and strengthen intellectual property protection.

Consider a bank that acknowledges that it will make payments on behalf of a beer importer after the beer is delivered to the importer. This reflects: a. Accounts receivable financing. b. Forfaiting. c. Factoring. d. Letter of credit.

d. Letter of credit.

All the following are examples of intangible property that is commonly licensed except: a. Patents, inventions, and formulas b. Trademarks, trade names, and brand names c. Copyrights and literary and artistic compositions d. Management contracts and turnkey operations.

d. Management contracts and turnkey operations.

A cash management strategy that allows companies to reduce the amount of cash flow and move cash more quickly and efficiently is: a. Transfer pricing. b. Intra-company dividend flows. c. Intra-company loans. d. Multilateral netting. e. Factoring.

d. Multilateral netting.

Which of the following is not a trade financing method commonly used in international trade from an exporter's perspective? a. Accounts receivable financing b. Letter of credit c. Barter (payment in-kind?) / Compensation arrangement d. Open account

d. Open account

The following are functions of the letter of credit/ bill of lading except: a. Payment Instrument. b. Performance Guarantee. c. Finance Instrument. d. Receipt. e. Contract. f. Document of Title.

d. Receipt.

Foreign exchange risk management requires that in countries with high rates of inflation, a. Payables should be settled quickly. b. Excess cash should be hoarded to take advantage of increases in purchasing power c. Intra-company cash should flow into the country to take advantage of higher interest rates. d. Receivables should be collected quickly. e. Current rate method of translation should be used.

d. Receivables should be collected quickly.

A Bill of Exchange requesting the bank to pay the face amount upon presentation of documents is a: a. Banker's acceptance. b. Time draft. c. Letter of credit. d. Sight draft.

d. Sight draft.

A U.S. government agency that provides service assistance to companies interested in export is: a. The Department of Defense b. U.S. Customs c. The Export Trade Agency d. The International Trade Administration e. Ministry of International Trade and Industry

d. The International Trade Administration

At the conclusion of the Uruguay Round the secretariat was replaced with the World Trade Organization (WTO). This is important because: a. Regional trading blocs such as NAFTA, EU, and ASEAN are more likely to cooperate with the WTO than with a GATT secretariat. b. European Union members, particularly France, threatened to boycott future GATT rounds because of WTO passage. c. GATT was no longer viable since its functions are now carried out by such regional trading blocs as NAFTA, EU, and ASEAN. d. The WTO will have more authority to enforce trade agreements signed under GATT's auspices.

d. The WTO will have more authority to enforce trade agreements signed under GATT's auspices.

The "twin deficits" in the USA mean: a. The U.S. deficits in both trade and capital accounts b. The deficits of the federal and state governments c. The deficits of the federal government and big business d. The deficits of the federal government and the U.S. current account deficits

d. The deficits of the federal government and the U.S. current account deficits

An optimum tariff is: a. A tax assessed on goods shipped internationally on a per-unit basis. b. A tax assessed on goods shipped internationally as a percentage of the goods' value. c. A percentage tax on the total value of goods shipped internationally, which is argued to impose a higher percentage on the goods' manufactured portion of value. d. The lowering of a foreign producer's price as a result of an imposed import tax.

d. The lowering of a foreign producer's price as a result of an imposed import tax.

A (n) ________ allows the first beneficiary to transfer all or part of the original letter of credit (LC) to a third party; a (n) ________ allows the original beneficiary of the LC to pledge the amount in the LC to the end supplier. a. Revocable LC; irrevocable LC b. Regular LC; standby LC c. Assignment of proceeds; transferable LC d. Transferable LC; assignment of proceeds

d. Transferable LC; assignment of proceeds

The process of restating foreign currency financial statements from one currency into another is known as a. Consolidation. b. Conversion. c. Functional currency restatement. d. Translation. e. Rebalancing.

d. Translation.

Construction, performed under contract involving facilities that are transferred to the owner when they are ready to begin operating are known as: a. Strategic alliances. b. Joint ventures. c. Locally responsive operations. d. Turnkey operations.

d. Turnkey operations.

Obtain the effective return to a US investor who invests in the Indian SENSEX stock index during the year when the index gained 17.5 % but the rupee appreciated by 12% against the dollar. a. 19.5 % b. 5.5% c. 12% d. 3.4% e. 31.6%

e. 31.6%

The Most-favored-nation (MFN) Clause of GATT refers to: a. GATT-member countries that maintain favorable conditions for trade. b. Countries favored in trade concessions. c. The granting of no special trade concessions to any nation d. Bilateral trade concessions applied to members of the same trading bloc. e. A requirement that a trade concession that is granted to one country must be granted to all member countries.

e. A requirement that a trade concession that is granted to one country must be granted to all member countries.

Which of the following is not true? a. Transaction exposure is the degree to which the value of future cash transactions can be affected by exchange rate fluctuations. b. Economic exposure is the degree to which a firm's present value of future cash flows can be influenced by exchange rate fluctuations. c. Translation exposure is the exposure of an MNC's consolidated financial statements to exchange rate fluctuations. d. Economic exposure includes transaction exposure. e. All of the above are true.

e. All of the above are true.

Indirect exporting occurs when: a. A company sells to an intermediary in its own country. Intermediary then sells the goods to the international market and takes on the responsibility b. A company's products are used as components in other products that are subsequently exported. c. Government restrictions prevent the direct exporting of goods. d. Customs agents inadvertently allow goods to enter a (foreign) country. e. Both a and b

e. Both a and b

Terms of trade refers to: a. The quantity of imports that a given quantity of a country's exports can buy. b. Specific requirements placed on imports at the port of entry. c. Terms agreed upon by two countries to regulate bilateral trade between them. d. The ratio of export prices to import prices (Px/Pm). e. Both a and d.

e. Both a and d.

The process of combining financial statements of different subsidiaries into one statement is known as a. Multilateral reporting. b. Translation. c. Functional currency restatement. d. Conversion. e. Consolidation.

e. Consolidation.

Dumping is: a. The underpricing of exports. b. The overpricing of imports. c. The promotion of exports. d. The limiting of imports. e. Exports at prices below "fair market price" f. Both a and e

f. Both a and e