Consequences of globalization


Problem 1. Which statement best explains the consequences of globalization?

a. balance of payments

b. creation of supply and demand

c. increase in market share

d. under the counter trade

e. long term cash management

Problem 2. Expropriation is taking of foreign property, with or without compensation by a government.

a. True

b. False

Problem 3. Which of the following is a stage in the global evolution of organizations?

a. creation of capital account

b. importing

c. commercial banking

d. franchising

e. forfaiting

Problem 4. Global funds are mutual funds that can be invested anywhere in the world, including the United States.

a. True

b. False

Problem 5. Which of the following best exemplifies the relationship among the international flow of goods, services, and capital, the balance of payments and domestic economic behavior?

interest rate, depreciation rate, and cross rate
inflation, tax rate, and deflation rate
exchange rate, parity condition, and country risk
interest rate, currency rate, devaluation
interest rate, inflation, and exchange rate

Problem 6. Emerging markets are encompasses the stock markets in first world nations.

a. True

b. False

Problem 7. Which techniques are used to conduct country risk analysis?

a. Inspection visits and standard deviation

b. Delphi and multiple regression analysis

c. Checklist and flowchart

d. Sensitivity analysis and PPP

e. Exchange rate risk and regression analysis

Problem 8. A tax haven is a nation with a moderate level of taxation and liberal tax incentives.

a. True

b. False

Problem 9. Which of the following derivatives could be used in speculation and hedging in the foreign market?

a. Forward market

b. Option

c. Internet

d. Money market

e. Capital market

Problem 10. Total corporate risk includes systematic but not unsystematic risk.

a. True

b. False

Problem 11. Which of the following is not an international risk consideration:

a. Terrorism

b. Poverty

c. Historical exchange rate

d. Cross-cultural risks

e. Cyber attacks

Problem 12. A foreign exchange market is a market place where one currency is exchanged for another.

a. True

b. False

Problem 13. The following are all strategies to avoid expropriation except:

a. Borrow locally

b. Divestiture

c. Hire local labor

d. Hedging

e. Buy insurance

Problem 14. Transaction exposure is the extent to which a given exchange rate change will change the value of foreign currency denominated transactions already entered into.

a. True

b. False

Problem 15. Which of the following is a capital source unique to global finance?

a. Russian mafia

b. African capital markets

c. US Treasury bills

d. Transfer pricing

e. Blocked funds

Problem 16. Forward contracts can only be negotiated between two banks.

a. True

b. False

Problem 17. You are an entrepreneur and wish to open a restaurant in Mexico. Which of the following would be the best source of capital to fund your venture?

a. Small business administration

b. Your credit union

c. Your bank

d. Latin American capital markets

e. International Monetary Fund (IMF)

Problem 18. Hedging is the use of financial derivatives contracts to protect against unexpected rate change movements.

a. True

b. False

Problem 19. International Company, an American company, wants to borrow money for its expansion in Australia. Recommended an optimal financing strategy for International Company In order to minimize currency volatility in repaying the loan:

a. Borrow locally

b. Borrow in the Euro market

c. Borrow in America

d. Borrow in Latin America

e. Borrow in Asia

Problem 20. A spot market is a market place to purchase or sell future currency contracts.

a. True

b. False

Problem 21. Parity conditions economic relationship that should apply to,

a. spot rates

b. inflation rates

c. interest rates

d. all of the above

Problem 22. Which of the following is an international finance risk factor?

a. political

b. temperature

c. balance of payments

d. interest rate parity

e. call option

Problem 23. Which statement best explains the drivers of globalization?

a. joint ventures

b. access to raw materials

c. the war on terror

d. trade barriers

e. licensing agreements

Problem 24. Which of the following short-term cash management technique can be used to make a foreign investment decision:

a. Cash budgeting

b. Lockbox

c. Inflation

d. Deflation

e. Depreciation

Problem 25. Your foreign investment strategy is to maximize shareholder's wealth. A terrorist attack has just occurred in the host country. Which of the following would you use to modify your investment strategy?

a. Counter-trade

b. Expansion

c. Diversity

d. Forfeiting

e. Wholly owned subsidiary

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Finance Basics: Consequences of globalization
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