1. If the goal were to decrease the value of a country's currency - to fight an appreciation of the domestic currency in exchange for foreign currency - the central bank would:
a. buy its own currency in exchange for foreign currency.
b. sell its own currency in exchange for foreign currency.
c. follow a restrictive monetary policy.
d. drive real rates of interest up.
2. The capital asset pricing model (CAPM) is an approach:
a. to determine the price of equity capital.
b. used by marketers to determine the price of saleable product.
c. none of the other answers
d. that can be applied only to domestic markets.
3. Which of the following is NOT an advantage to a joint venture?
a. May be a realistic alternative when 100% foreign ownership is not allowed.
b. Possible loss of opportunity to enter the foreign market with FDI later.
c. The local partner can provide competent management at many levels.
d. The local partner understands the customs and mores of the foreign market.
4. Given the following exchange rates, what arbitrage profit is available if you have $1 million? ¥125.00/$, €1.1325/$, ¥110.35/€
a. $229.
b. $2,022
c. $566
d. There is no arbitrage profit available
5. Brimmo Motorcycles Inc., a U.S.-based firm, manufactures and sells electric motorcycles both domestically and internationally. A sudden and unexpected appreciation of the U.S. dollar should cause sales to ________ at home and ________ abroad. (Assume other factors remain unchanged.)
a. increase; increase
b. increase; decrease
c. decrease; decrease
d. decrease; increase