Question 1  The least risky method by which firms conduct international business is:Answer Franchising.The acquisitions of existing operations.International Trade.The establishment of new subsidiaries.Licensing5 points   Question 2  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?Answer International TradeLicensingFranchisingDirect foreign investment5 points   Question 3  Which of the following does not constitute a form of direct foreign investment?Answer FranchisingInternational tradeJoint venturesAcquisitions of existing operationsEstablishment of new foreign subsidiaries5 points   Question 4  An MNC may be more exposed to agency problems if most of its shares are held by:Answer a few mutual fundsa widely dispersed set of individual investorsa few pension fundsindividual stockholders5 points   Question 5  With regard to corporate goals, an MNC is mostly concerned with maximizing ____, and a purely domestic firm is mostly concerned with maximizing ____.Answer shareholder wealth; short-term earningsshareholder wealth; shareholder wealthshort-term earnings; sales volumeshort-term earnings; shareholder wealth5 points   Question 6  ____ purchases more U.S. exports than the other countries listed here.Answer ItalySpainMexicoCanada5 points   Question 7  ____ represent aid, grants, and gifts from one country to another.Answer Transfer paymentsFactor incomeThe balance of tradeThe balance of paymentsThe capital account5 points   Question 8  The World Bank was established to:Answer enhance development solely in Asia through grants.enhance economic development through non-subsidized loans (at market interest rates).enhance economic development through low-interest rate loans (below-market rates).enhance economic development of the private sector through investment in stock of corporations.5 points   Question 9  A General Agreement on Tariffs and Trade (GATT) accord in 1993 called for:Answer increased trade restrictions outside of North America.lower trade restrictions around the world.uniform environmental standards around the world.uniform worker health laws.5 points   Question 10  The ____, an accord among 117 nations, called for lower tariffs around the world.Answer General Agreement on Tariffs and Trade (GATT)North American Free Trade Agreement (NAFTA)Single European Act of 1987European Union Accord5 points   Question 11  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:Answer obtain a 90-day forward purchase contract on Canadian dollars.obtain a 90-day forward sale contract on Canadian dollars.purchase Canadian dollars 90 days from now at the spot rate.sell Canadian dollars 90 days from now at the spot rate.5 points   Question 12  If companies can rely on stock markets to obtain funds, they will have to rely more heavily on the ____ market to raise long-term funds.Answer derivativelong-term creditmoneyforeign exchange5 points   Question 13  Futures contracts are typically ____; forward contracts are typically ____.Answer sold on an exchange; sold on an exchangeoffered by commercial banks; sold on an exchangesold on an exchange; offered by commercial banksoffered by commercial banks; offered by commercial banks5 points   Question 14  Which currency is used the most to denominate Eurobonds?Answer the British pound.the Japanese yen.the U.S. dollar.the Swiss franc.5 points   Question 15  A syndicated loan:Answer represents a loan by a single bank to a syndicate of corporations.represents a loan by a single bank to a syndicate of country governments.represents a direct loan by a syndicate of oil-producing exporters to a less developed country.represents a loan by a group of banks to a borrower.5 points   Question 16  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:Answer the Swiss demand for dollars to decrease and the dollar will depreciate against the pound.the Swiss demand for dollars to increase and the dollar will depreciate against the Swiss franc.the Swiss demand for dollars to increase and the dollar will appreciate against the Swiss franc.the Swiss demand for dollars to decrease and the dollar will appreciate against the pound.5 points   Question 17  Which of the following events would most likely result in an appreciation of the U.S. dollar?Answer U.S. inflation is very high.The Fed indicates that it will raise U.S. interest rates.Future U.S. interest rates are expected to decline.Japan is expected to increase interest rates in the near future.5 points   Question 18  When the "real" interest rate is relatively low in a given country, then the currency of that country is typically expected to be:Answer weak, since the country's quoted interest rate would be high relative to the inflation rate.strong, since the country's quoted interest rate would be low relative to the inflation rate.strong, since the country's quoted interest rate would be high relative to the inflation rate.weak, since the country's quoted interest rate would be low relative to the inflation rate.5 points   Question 19  Any event that reduces the U.S. demand for Japanese yen should result in a(n) ____ in the value of the Japanese yen with respect to ____, other things being equal.Answer increase; U.S. dollarincrease; nondollar currenciesdecrease; nondollar currenciesdecrease; U.S. dollar5 points   Question 20  The equilibrium exchange rate of pounds is $1.70. At an exchange rate of $1.72 per pound:Answer U.S. demand for pounds would exceed the supply of pounds for sale and there would be a shortage of pounds in the foreign exchange market.U.S. demand for pounds would be less than the supply of pounds for sale and there would be a shortage of pounds in the foreign exchange market.U.S. demand for pounds would exceed the supply of pounds for sale and there would be a surplus of pounds in the foreign exchange market.U.S. demand for pounds would be less than the supply of pounds for sale and there would be a surplus of pounds in the foreign exchange market.U.S. demand for pounds would be equal to the supply of pounds for sale and there would be a shortage of pounds in the foreign exchange market.5 points   Question 21  Currency options are commonly traded through the ____ system.Answer robotEuroGLOBEXScope5 points   Question 22  European currency options can be exercised ____; American currency options can be exercised ____.Answer any time up to the expiration date; any time up to the expiration dateany time up to the expiration date; only on the expiration dateonly on the expiration date; only on the expiration dateonly on the expiration date; any time up to the expiration date5 points   Question 23  If you have a position where you might be obligated to buy Euros, you are:Answer a call writer.a put writer.a put buyer.a futures seller.5 points   Question 24  Currency futures contracts sold on an exchange:Answer contain a commitment to the owner, and are standardized.contain a commitment to the owner, and can be tailored to the desire of the owner.contain a right but not a commitment to the owner, and can be tailored to the desire of the owner.contain a right but not a commitment to the owner, and are standardized.5 points   Question 25  If the spot rate of the euro increased substantially over a one-month period, the futures price on euros would likely ____ over that same period.Answer increase slightlydecrease substantiallyincrease substantiallystay the same5 points   Question 26  Which of the following countries have not adopted the euro?Answer GermanyItalySwitzerlandFrance5 points   Question 27  Countries that have adopted the euro must agree on a single ____ policy.Answer monetaryfiscalworker compensationforeign relations5 points   Question 28  During the period 1944-1971, the U.S. used a ____ system.Answer euro exchange ratefixeddirty floatflexible5 points   Question 29  A weak dollar is normally expected to cause:Answer high unemployment and high inflation in the U.S.high unemployment and low inflation in the U.S.low unemployment and low inflation in the U.S.low unemployment and high inflation in the U.S.5 points   Question 30  Which of the following is the most likely reason for revaluation of a currency?Answer To reduce inflation.To stimulate the local economy.To increase the amount of exports.To increase balance-of-trade surplus.5 points   Question 31  Assume that interest rate parity holds. U.S. interest rate is 13% and British interest rate is 10%. The forward rate on British pounds exhibits a ____ of ____ percent.Answer discount; 2.73premium; 2.73discount; 3.65premium; 3.655 points   Question 32  Based on interest rate parity, the larger the degree by which the foreign interest rate exceeds the U.S. interest rate, the:Answer larger will be the forward discount of the foreign currency.larger will be the forward premium of the foreign currency.smaller will be the forward premium of the foreign currency.smaller will be the forward discount of the foreign currency.5 points   Question 33  If interest rate parity exists, then ____ is not feasible.Answer forward realignment arbitragetriangular arbitragecovered interest arbitragelocational arbitrage5 points   Question 34  Points above the IRP line represent situations where:Answer covered interest arbitrage is feasible from the perspective of domestic investors and results in the same yield as investing domestically.covered interest arbitrage is feasible from the perspective of domestic investors and results in a yield above what is possible domestically.covered interest arbitrage is feasible from the perspective of foreign investors and results in a yield above what is possible in their local markets.covered interest arbitrage is not feasible for neither domestic nor foreign investors.5 points   Question 35  Which of the following is an example of triangular arbitrage initiation?Answer buying a currency at one bank's ask and selling at another bank's bid, which is higher than the former bank's ask.buying Singapore dollars from a bank (quoted at $.55) that has quoted the South African rand (SAR)/Singapore dollar (S$) exchange rate at SAR2.50 when the spot rate for the rand is $.20.buying Singapore dollars from a bank (quoted at $.55) that has quoted the South African rand/Singapore dollar exchange rate at SAR3.00 when the spot rate for the rand is $.20.converting funds to a foreign currency and investing the funds overseas.5 points    Save and Submit

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Private University, a private nonprofit educational institution located in Califor¬nia, decides to issue “Shares in Learning” certificates in a one-time offering to the public. These shares will be sold for $500 each and entitle the bearer to redeem each certificate for two undergraduate or one graduate college credit in any of its schools at any time in the future. The shares may also be resold without restric¬tion by the initial purchaser. The offering will be made via the Internet.Will the offering need to be registered with the Securities and Exchange Commission (SEC) under the Securities Act of 1933? Explain. Does your answer differ if “Shares in Learning” are issued by Private College, a proprietary for-profit institution that does business in all 50 states? Why?