INTERNATIONAL FINANCIAL MANAGEMENT (CH. 1–4)

Which theory explains international business due to non-transferability of resources?

Imperfect markets theory

A disadvantage of licensing is:

Difficulty ensuring quality control

The most risky method(s) of international business is/are:

Acquisitions & Establishing new subsidiaries

An increase in the trade deficit places ______ pressure on currency value:

Downward

Increased use of quotas is expected to:

Increase current account balance if no retaliation

The imperfect markets theory suggests:

Markets are not perfectly competitive

Multinational corporations (MNCs) exist primarily to:

Maximize shareholder wealth globally

Licensing disadvantage includes:

Loss of control over operations

A current account deficit means:

Imports > exports

A trade surplus results in:

Net inflow of funds

Capital inflows increase when:

Domestic interest rates rise

If foreign investors buy U.S. securities, this causes:

Dollar appreciation

Balance of payments includes:

Current + capital account

Government restrictions on trade usually:

Reduce trade flows

The foreign exchange market allows:

Currency exchange

Spot market refers to:

Immediate currency exchange

The bid price is always:

Lower than ask price

The bid-ask spread covers:

Bank profit and costs

A forward contract is:

Agreement for future exchange

Eurobonds are:

Bonds issued in foreign currency outside country of origin

ADRs represent:

Bundles of stock traded in U.S.

International money markets are used for:

Short-term financing

International credit markets provide:

Medium-term loans

Syndicated loans are:

Loans from multiple banks

Currency appreciation means:

Value increases

Currency depreciation means:

Value decreases

Exchange rates are determined by:

Supply and demand

If demand for a currency increases:

Value increases

Inflation in a country usually causes:

Currency depreciation

Higher domestic interest rates lead to:

Currency appreciation

Expectations of future currency appreciation lead to:

Higher demand

A cross-exchange rate is:

Rate between two foreign currencies

If currency A rises more than currency B vs USD:

A appreciates vs B

The carry trade involves:

Borrowing low interest currency and investing high interest currency

A strong economy usually leads to:

Currency appreciation