International Finance Questions and answers International Finance Questions and answers, Exams of Nursing

Download International Finance Questions and answers International Finance Questions and answers and more Exams Nursing in PDF only on Docsity! International Finance Questions and answers Multinational corporations (MNCs) - CORRECT ANSWERS✅ firms that engage in some form of international business. Has a HQ in one country and subsidies in others. why do companies go abroad? - CORRECT ANSWERS✅ - to increase revenues - to reduce expenses (land, labor, capital, raw materials, taxes) -to lower governmental regulation standards -to increase global exposure what is the accepted goal of the an MNC? - CORRECT ANSWERS✅ to maximize shareholder wealth What are common finance decisions? (4) - CORRECT ANSWERS✅ 1. whether to discontinue operations in a particular country 2. Whether to pursue new business in a particular country 3. Whether to expand business in a particular country 4.How to finance expansion in a particular country International Finance Questions and answers agency problems - CORRECT ANSWERS✅ the conflict of goals between managers and shareholders agency costs - CORRECT ANSWERS✅ cost of ensuring that managers maximize shareholder wealth Costs are normally _______ for for MNCs than for purely domestic firms for several reasons: (4) - CORRECT ANSWERS✅ HIGHER: 1. monitoring managers of distant subsidiaries in foreign countries is more DIFFICULT 2. foreign subsidiary managers raised in different cultures may not follow uniform goals 3. sheer size of larger MNCs can create large agency problems 4. Some non-US managers tend to downplay the short-term effects of decisions Sarbanes-Oxley Act (SOX) - CORRECT ANSWERS✅ came from ENRON scandal; ensures a more transparent process for managers to report on the productivity and financial condition of their firm International Finance Questions and answers balance of payments - CORRECT ANSWERS✅ a summary of transactions between domestic and foreign residents for a specific country over a specified period of time. current accounts - CORRECT ANSWERS✅ a summary of the flow of funds between one specified country and all other countries due to purchases of goods and services or to the cash flows capital accounts - CORRECT ANSWERS✅ a summary of flow of funds resulting from the sale of assets between one specified country and all other countries over a specified period of time financial accounts - CORRECT ANSWERS✅ refers to special types of investment, including DFI and portfolio investment balance of trade - CORRECT ANSWERS✅ difference between total exports and imports International Finance Questions and answers merchandise exports and imports - CORRECT ANSWERS✅ tangible products that are transported between countries service exports and imports - CORRECT ANSWERS✅ tourism and other services Primary income payments (Factor income payments) - CORRECT ANSWERS✅ represents income (interest and dividend payments) received by investors on foreign investments in financial assets (securities). secondary income (Transfer payments) - CORRECT ANSWERS✅ represents aid, grants, and gifts form one country to another a trade deficit means? - CORRECT ANSWERS✅ the value of merchandise and services exported less than the the value of merchandise and services it imports. ( more coming in than going out). Capital Account - CORRECT ANSWERS✅ includes the value of financial assets transferred across country borders by people who move to a different country (includes patents and trademarks) International Finance Questions and answers the 4 key components of a financial account: - CORRECT ANSWERS✅ 1. direct foreign investment 2. portfolio investment 3. other capital investments 4. errors and omissions and reserves direct foreign investment - CORRECT ANSWERS✅ investments in fixed assets in foreign countries portfolio investments - CORRECT ANSWERS✅ Transactions involving long term financial assets (such as stocks and bonds) between countries that do NOT affect the transfer of control. other capital investments - CORRECT ANSWERS✅ transactions involving short-term financial assets (such as money market securities) between countries Errors and Omissions and Reserves - CORRECT ANSWERS✅ Measurement errors can occur when attempting to measure the value of funds transferred into or out of a country. (statistical discrepancies). International Finance Questions and answers outsourcing - CORRECT ANSWERS✅ the process of subcontracting to a third party in another country to provide supplies or services that were previously produced internally. impact of outsourcing - CORRECT ANSWERS✅ Increases international trade and allows MNCs to conduct operations at a lower cost but it is criticized for reducing jobs in the US. What is the annual international trade volume of the United States? - CORRECT ANSWERS✅ between 10 to 20 percent of its annual GDP what is the trade volume (exports)between the US and Canada? - CORRECT ANSWERS✅ about 20% of all US exports are to Canada what is the trade volume (exports) between the US and Mexico? - CORRECT ANSWERS✅ about 13% of all US exports are to Mexico who are the key exporters to the United States? (4) - CORRECT ANSWERS✅ Canada, China, Mexico and Japan. International Finance Questions and answers Together they are responsible for more than half of the value of all US imports. what are the factors affecting international trade flows? (6) - CORRECT ANSWERS✅ 1. cost of labor 2. inflation 3.national income 4. credit conditions 5.government policies 6. exchange rates What is the impact of government policies? (10) - CORRECT ANSWERS✅ 1. restrictions on imports 2. subsidies for exporters 3. restrictions on piracy 4.environmental restrictions 5.labor laws 6.business laws 7. tax breaks International Finance Questions and answers 8.country trade requirements 9.government ownership or subsidies 10. country security laws Policies to punish country governments (they expect to restrict imports from countries that....?) - CORRECT ANSWERS✅ 1. fail to enforce environmental laws and child labor laws 2.initiate war against another country 3.unwilling to participate in war Factors affecting Direct Foreign Investment (5) - CORRECT ANSWERS✅ 1. Changes in restrictions 2. Privatization 3. Potential economic growth 4. tax rates 5. exchange rates International Finance Questions and answers 3. Foreign investors purchase treasury debt securities and thus serve as creditors to the US government. Foreign investors are especially attracted to the US financial markets when the interest rate in their home country is __________ than that in the US. - CORRECT ANSWERS✅ substantially lower how has the US reliance on foreign funds impacted international capital flows? - CORRECT ANSWERS✅ in general, access to international funding has allowed more growth int he US economy over time but has also made the US more reliant on foreign investors. what are the 5 major objectives of the IMF (international Monetary Fund)? - CORRECT ANSWERS✅ 1. promote cooperation among countries on international monetary issues 2. promote stability in exchange rates 3. provide temporary funds to member countries attempting to correct imbalances of international payments 4. promote free mobility of capital funds across countries promote free trade (goal is to increase internationalization of business) International Finance Questions and answers established from Bretton Woods special drawing rights (SDRs) - CORRECT ANSWERS✅ the unit of account allocated to member countries to supplement currencies (financing by the IMF is measured in SDRs) compensatory financing facility (CFF) - CORRECT ANSWERS✅ one of the key duties of the IMF; it attempts to reduce the impact of export instability on countries. what is the major objective of the World Bank (international bank for reconstruction and development)? - CORRECT ANSWERS✅ its major objective is to make loans to countries to enhance economic development what does the World bank use SALs ( structural adjustment loans) for? - CORRECT ANSWERS✅ they are intended to enhance a country's long-term economic growth how are funds distributed through the World Bank? - CORRECT ANSWERS✅ they are distributed through cofinancing agreements: 1.official aid agencies, 2. export credit agencies, 3. commercial banks International Finance Questions and answers What is the major objective of the World Trade Organization (WTO) - CORRECT ANSWERS✅ to provide a forum for multilateral trade negotiations and to settle trade disputes related to the GATT accord created from the Uruguay rounds that created GATT too member countries are given voting rights that are used to make judgements about trade disputes and other issues. what is the major objective of the International Financial Corporation (IFC)? - CORRECT ANSWERS✅ to promote private enterprise within countries how? it provides loans to corporations and purchases stock; it used to obtain financing through the World Bank but can borrow int he international financial markets. what is the major objective of the International Development Association (IDA)? - CORRECT ANSWERS✅ it extends loans at low interest rates to poor nations that cannot qualify for loans from the World Bank International Finance Questions and answers What are the 2 agreements on fixed exchange rates and what did they do? - CORRECT ANSWERS✅ 1. the Bretton Woods Agreement - called for fixed exchange rates between two currencies; the US dollar became over valued so.. 2. the Smithsonian Agreement - devalued the US dollar relative to there currencies and ti varied by each currency Floating Exchange Rate System - CORRECT ANSWERS✅ governments still had difficulty regulating exchange rates so they eliminated the Smithsonian agreement and now widely traded currencies were allowed to fluctuate in accordance with market forces. Foreign exchange transactions- over-the-counter market - CORRECT ANSWERS✅ the telecommunications network where companies normally exchange one currency for another. foreign exchange dealers - CORRECT ANSWERS✅ serves as intermediaries int he foreign exchange market spot market - CORRECT ANSWERS✅ a foreign exchange transaction for immediate exchange is said to trade in the spot market. International Finance Questions and answers spot rate - CORRECT ANSWERS✅ the exchange rate in the spot market interbank market - CORRECT ANSWERS✅ trading between banks occurs in the interbank market (part of spot market structure) what are the 5 bank characteristics for foreign exchange? - CORRECT ANSWERS✅ 1. competitiveness of quote 2. speed of transaction 3. relationship with bank (speed of execution) 4.good advice about market 5. forecasting of rates bid price - CORRECT ANSWERS✅ a banks buy quote ask price - CORRECT ANSWERS✅ a banks sell quotes A banks ____________(____) for a foreign currency will always be less than its ______ (___). - CORRECT ANSWERS✅ A bank's bid price (buy quote) for a foreign currency will always be less than its ask price (sell quote). International Finance Questions and answers bid/ask spread - CORRECT ANSWERS✅ the difference between the bid and ask price. it covers the bank's cost of conducting foreign exchanges. it is usually expressed as a percentage of the ask quote: (ask rate - bid rate)/ ask rate what are the factors that affect the spread? - CORRECT ANSWERS✅ 1. order costs 2.inventory costs 3.competition 4.volume 5. currency risk order costs - CORRECT ANSWERS✅ costs of processing orders, including clearing costs and the costs of recording transactions inventory costs - CORRECT ANSWERS✅ costs of maintaining the inventory of a particular currency International Finance Questions and answers forward market - CORRECT ANSWERS✅ the over-the-counter market where forward contracts are traded how can you use the forward market to hedge the risk of exchange rates? - CORRECT ANSWERS✅ use a forward contract for a set exchange rate what are the three types of currency derivatives used by MNCs? - CORRECT ANSWERS✅ 1. forward contracts 2. currency futures contracts 3. currency option contracts currency futures contract - CORRECT ANSWERS✅ similar to forward contracts but sold on an exchange; it specifies a standard volume of a particular currency to be exchanged on a specific settlement date. future rate - CORRECT ANSWERS✅ the exchange rate at which one can purchase or sell a specified currency on the specified settlement date International Finance Questions and answers future spot rate - CORRECT ANSWERS✅ the spot rate that will exist at a future point in time and is uncertain as of today currency option contracts - CORRECT ANSWERS✅ classified as calls or puts currency put option - CORRECT ANSWERS✅ provides the right to sell a specific currency at a specific price within a specific period of time currency call option - CORRECT ANSWERS✅ provides the right to buy a specific currency at a specific price ( strike price or exercise price) within a specific period of time growth in international business has led ... - CORRECT ANSWERS✅ corporations and governments to need short-term funds denominated in a currency different from their home currency. What has caused the international money market to grow? (3) - CORRECT ANSWERS✅ 1. the need to borrow funds to pay for import denominated in a foreign currency 2. they chose to borrow in a currency in which the interest rate is lower International Finance Questions and answers 3.firms choose to borrow in a currency that is expected to depreciate against their home currency European Money Market - CORRECT ANSWERS✅ dollar deposits in banks in europe and other continents are called eurodollars or eurocurrency. origins of the european money market can be traced to the eurocurrency market that developed during the 1960s and 1970s. Asian Money Market - CORRECT ANSWERS✅ centered in Hong Kong and Singapore. originated as a market involving mostly dollar-denominated deposits, was originally known as the asian dollar market the money market interest rates in any particular country are dependent on the ... - CORRECT ANSWERS✅ demand for short term funds by borrowed relative to the supply of available short-term funds that are provided by savers International Finance Questions and answers Financial institutions became cautious with their funds and were less willing to lend funds to MNCs foreign bonds - CORRECT ANSWERS✅ issues by borrower foreign to the country where the bond is placed what are the features of Eurobonds (3) - CORRECT ANSWERS✅ 1. bearer bonds 2. annual coupon payment 3. convertible or callable denominations of eurobonds - CORRECT ANSWERS✅ commonly denominated in a # of currencies underwriting process of eurobonds - CORRECT ANSWERS✅ eurobonds are underwritten by a multinational syndicate of investment banks and are simultaneously placed in many countries secondary market of eurobonds - CORRECT ANSWERS✅ eurobonds have a secondary market; the market makers are in many cases the same underwriters who sell the primary issues. International Finance Questions and answers what was the impact of the euro on the Eurobond market? - CORRECT ANSWERS✅ before the euros adoption, many countries issued bonds denominated in their local currencies; with even more bonds issued in euro denominations, the market is much larger and more liquid. syndicate loans in the credit market - CORRECT ANSWERS✅ sometimes a single bank is unwilling to or unable to lend the amount needed by an MNC or government agency. A syndicate can be formed to underwrite the loans and the lead bank is responsible for negotiating the terms with the borrower. Single European Act (4 things came from it) - CORRECT ANSWERS✅ 1. capital can flow freely throughout Europe 2. banks can offer a wide variety of lending, leasing and securities activities in the EU 3. Regulations regarding competition, mergers, and taxes are similar throughout the EU 4.a bank established in any one the EU countries has the right to expand into any or all of the other EU countries International Finance Questions and answers Basel Accord - CORRECT ANSWERS✅ banks must maintain capital equal to at least 4 percent of their assets. for this purpose, banks assets are weighted by risk Basel II Accord - CORRECT ANSWERS✅ attempts to account for difference in collateral among banks. in addition, this accord encourages banks to improve techniques for controlling operational risk, which could reduce failures in the banking system. Also plans to require banks to provide more information to existing and prospective shareholders about their exposure to different types of risk Basel III Accord - CORRECT ANSWERS✅ called for new methods of estimating risk- weighted assets that would increase the level of risk-weighted assets, and therefore require banks to maintain higher levels of capital Does the United States meet Basel Accords? - CORRECT ANSWERS✅ No; there is inconsistency in risk management International Finance Questions and answers Issuance of Stock in Foreign Markets - some US firms issue stock in foreign markets to enhance their _____ - CORRECT ANSWERS✅ global image impact of the Euro: - CORRECT ANSWERS✅ resulted in more stock offerings in Europe by US and European based MNCs Yankee stock offerings - CORRECT ANSWERS✅ non-US corporations that need large amounts of funds some times issue stock in the US American Depository Receipts (ADR) - CORRECT ANSWERS✅ certificates representing bundles of stock. ADR shares can be traded just like shares of stock Non US firms have their shares listed on the New York Stock Exchange or the Nasdaq market so that ...... - CORRECT ANSWERS✅ the shares can be easily traded in the secondary market International Finance Questions and answers effects of the Sarbanes- Oxley Act on foreign stock listings - CORRECT ANSWERS✅ many non US firms decided to place new issues of their stock int eh UK instead of in the US, so they would not have comply with the law. Integration of Stock Markets - CORRECT ANSWERS✅ stock market conditions reflect the host country's conditions. if the country is integrated, the stock market will be also the integration of international stock markets and credit markets is linked by.... - CORRECT ANSWERS✅ the key link is risk premium, which affects the rate or return required by financial institutions