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| 1 | |
Suppose you start with $100 and buy stock for £50 when the exchange rate is £1 = $2. One year later, the stock rises to £60. You are happy with your 20 percent return on the stock, but when you sell the stock and exchange your £60 for dollars, you only get $45 since the pound has fallen to £1 = $0.75. This loss of value is an example of |
| | A) | Exchange Rate Risk |
| | B) | Political Risk |
| | C) | Market imperfections |
| | D) | Weakness in the dollar |
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| 2 | |
If a country unexpectedly imposes restrictions on imports, this trade barrier is an example of: |
| | A) | Exchange Rate Risk |
| | B) | Political Risk |
| | C) | Market Imperfections |
| | D) | Expanded Opportunity Set |
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| 3 | |
A domestic firm that produces and sells its products in one country |
| | A) | Is protected from foreign exchange risk. |
| | B) | Could face foreign exchange risk. |
| | C) | Can face no political risk. |
| | D) | Is an example of a market imperfection. |
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| 4 | |
The fundamental goal of sound business management is |
| | A) | Shareholder wealth maximization |
| | B) | Market share maximization |
| | C) | Globalization |
| | D) | Increasing the size of the firm |
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| 5 | |
The European Central Bank is located in |
| | A) | Düsseldorf, Germany |
| | B) | Frankfurt, Germany |
| | C) | London, England |
| | D) | Paris, France |
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| 6 | |
The theory of comparative advantage states that |
| | A) | Economic well-being in enhanced if countries produce those goods for which they have comparative advantage and then trade those goods for goods that they do not enjoy a comparative advantage in producing. |
| | B) | Economic well-being in enhanced if countries consume those goods for which they have a comparative advantage and then trade for those goods. |
| | C) | Tariffs and other protectionist measures can enhance the mercantile success of countries that adopt them. |
| | D) | Countries should first produce the goods and services that they need, and then produce goods for export. |
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| 7 | |
The euro is |
| | A) | The common currency of Europe |
| | B) | An imaginary market basket of currencies |
| | C) | An index of the value of 12 European currencies relative to the U.S. dollar |
| | D) | Pegged to the U.S. dollar at a fixed exchange rate of parity |
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| 8 | |
The North American Free Trade Agreement (NAFTA) |
| | A) | Has resulted in massive unemployment in the U.S. as jobs went to Mexico |
| | B) | Calls for the introduction of a regional currency by 2015, similar to the euro. |
| | C) | Is an agreement among the United States, Canada, and Mexico, that calls for the phasing out of tariffs and import quotas over a 15-year period. |
| | D) | Calls for the privatization of all industries over a 15-year period. |
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| 9 | |
A U.S. investor who is interested in the shares of Nokia Corporation of Finland |
| | A) | Should probably stick with U.S. companies |
| | B) | Will have an easier time than ever investigating the company, due to the ready flow of information over the Internet and the globalization of capital markets. |
| | C) | Must travel to Finland in person to buy the shares. |
| | D) | Can buy the shares but cannot bring them to the U.S. legally. |
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| 10 | |
The dominant world currency since the end of World War II has been |
| | A) | The U.S. dollar |
| | B) | The Canadian dollar |
| | C) | The British pound |
| | D) | The euro |
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