International Finance
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Course Introduction
International Finance examines the principles and practices governing financial interactions between countries, including foreign exchange markets, international monetary systems, and global capital flows. The course explores the effects of exchange rate mechanisms, balance of payments, and international financial institutions on multinational corporations and governments. Students will analyze international financial instruments, risk management strategies, and the impact of globalization on financial decision-making, equipping them with the skills to navigate the complexities of a dynamic global financial environment.
Recommended Textbook
International Business 7th Edition by Ricky W. Griffin
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Page 2
Chapter 1: An Overview of International Business
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Sample Questions
Q1) Why has there been significant growth in international trade in the service sector? What role have emerging economies, such as India, played in this growth?
Answer: Some of the rapid growth in international trade in services is due to the development of the Internet and associated technologies, which makes international trade in such diverse industries as banking, consulting, education, retailing, and gambling more feasible. For example, many Canadian and U.S. companies have shifted their customer service and data entry operations to areas with lower labor costs in and outside North America. As long as the transaction can be performed electronically, the physical location of the facility is of little importance. India, for example, has a growing call-center business, providing customer care and troubleshooting services for customers of numerous MNCs throughout the world.
Q2) Exports account for about ________ of Netherland's gross domestic product?
A) 20%
B) 35%
C) 50%
D) 75 %
Answer: D
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Page 3
Chapter 2: Global Marketplaces and Business Centers
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Sample Questions
Q1) Exports accounted for about ________ percent of New Zealand's 2009 GDP.
A) 10
B) 20
C) 30
D) 40
Answer: B
Q2) ________ is the world's most populous country.
A) India
B) China
C) Indonesia
D) The United States
Answer: B
Q3) A policy that encourages economic growth through export expansion is called
A) export expansion
B) export substitution
C) export promotion
D) development stimulation
Answer: C
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Page 4
Chapter 3: Legal, Technological, Accounting, and Political Environments
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Sample Questions
Q1) How do accounting systems evolve in common law countries?
Answer: In common law countries like the United Kingdom and the United States, accounting procedures evolve via the decisions of independent standards-setting boards like the Financial Accounting Standards Board in the United States. Each board works together with professional accounting groups.
Q2) When a dispute occurs in international commerce, what questions typically need to be answered to resolve the problem? Why do some firms often avoid litigation? What alternatives to litigation are available?
Answer: The four questions that are usually asked in international dispute resolution are: which country's law applies, in which country should the issue be resolved, which technique should be used to resolve the conflict, and how will the settlement be enforced. Because of the costs and uncertainties of litigation, many international businesses seek less expensive means of settling disputes over international transactions. Often business conflicts will be resolved through alternative dispute resolution techniques, such as arbitration. Arbitration is the process by which both parties to a conflict agree to submit their cases to a private individual or body whose decision they will honor. Because of the speed, privacy, and informality of such proceedings, disputes can often be resolved more cheaply than through the court system.
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Chapter 4: The Role of Culture
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Sample Questions
Q1) Social stratification refers to how people in a society are ________.
A) sorted for housing
B) identified by families
C) paid for employment
D) categorized by attributes
Q2) From what source do cultural changes usually occur?
A) internal forces
B) external forces
C) strengths
D) weaknesses
Q3) Historically, the rigid class system and low social mobility in the United Kingdom has led to ________.
A) fewer young people seeking higher education
B) more elderly people dependent on families
C) less foreign investment in manufacturing
D) more tailored advertisements in the media
Q4) Language can provide important clues about the cultural values of a society.
A)True
B)False
Q5) Explain Hall's approach to characterizing culture.
Page 6
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Chapter 5: Ethics and Social Responsibility in International Business
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Sample Questions
Q1) What is social responsibility? What are the three main groups a global firm targets with its social responsibility efforts?
Q2) Which of the following is the most responsible approach to social responsibility?
A) obstructionist stance
B) defensive stance
C) accommodative stance
D) proactive stance
Q3) The extent to which members of an organization follow basic ethical standards of behavior is ________.
A) guanxi
B) legal compliance
C) ethical compliance
D) whistle-blowing
Q4) Compare and contrast the stereotypical behaviors of the van Tulder and van der Zwart approach to managing corporate social responsibility.
Q5) What is whistle-blowing? What risks might a whistle-blower face?
Q6) Why is it important for top management to demonstrate ethical behavior?
Q7) What are ethics? How does culture affect ethics for global organizations?
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Chapter 6: International Trade and Investment
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Sample Questions
Q1) What does the relative factor endowment theory suggest about a country's comparative advantage?
Q2) Adam Smith was best known as an advocate of ________.
A) low-cost manufacturing
B) free-market economics
C) mercantilism
D) labor unions
Q3) What is the primary focus of the new trade theory developed by Krugman, Helpman, and Lancaster?
A) protecting intellectual property rights
B) expanding research and development
C) developing economies of scale
D) exploiting the experience curve
Q4) Explain the four elements of Porter's national competitive advantage theory.
Q5) What is the most likely characteristic of a firm that gains a first-mover advantage?
A) government contractor
B) significant capital
C) natural resources
D) niche marketer
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Chapter 7: The International Monetary System and the Balance of Payments
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Sample Questions
Q1) The Smithsonian agreement established a fixed exchange rate system.
A)True
B)False
Q2) Dell Computers invests excess cash balances overnight in a London bank to earn a higher interest rate than it could earn in a New York bank. Dell is most likely making a(n)
A) international currency investment
B) short-term portfolio investment
C) long-term portfolio investment
D) foreign direct investment
Q3) The ________ establishes the rules by which countries value and exchange their currencies.
A) international monetary system
B) OECD
C) World Bank
D) Federal Reserve
Q4) What was the purpose and result of the Plaza Accord?
Q5) What was the Triffin Paradox?
Q6) What is an SDR? How are SDRs used?
Q7) What is the official settlements balance? Page 9
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Page 10
Chapter 8: Foreign Exchange and International Financial Markets
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Sample Questions
Q1) Why does arbitrage most likely exist?
Q2) The ________ represents the marketplace's aggregate prediction of the spot price of the currency rate in the future.
A) forward price
B) spot price
C) exchange rate
D) par value
Q3) If the British pound is selling at $1.7775 spot on September 3, and at a 90-day forward rate of $1.7661, then ________.
A) the pound is selling at a forward premium
B) the pound is selling at a forward discount
C) an investor should buy a call option
D) speculators should buy put options
Q4) A person normally purchases items using the indirect exchange rate.
A)True
B)False
Q5) Why is the foreign exchange market moving online?
Q6) In 2007, the Canadian dollar fell against the U.S. dollar.
A)True
B)False Page 11
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Chapter 9: Formulation of National Trade Policies
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Sample Questions
Q1) Which theory specifically addresses the needs of individual industries?
A) strategic trade theory
B) economic development programs
C) industrial policy
D) public choice analysis
Q2) A(n) ________ is a promise by a country to limit its export of a good to another country to a pre-specified amount or percentage of the affected market.
A) tariff rate quota
B) export promise
C) voluntary export restraint
D) embargo
Q3) Which of the following would LEAST likely be used as a subsidy to entice firms to locate or expand facilities in a particular community?
A) quotas
B) free land
C) workforce training
D) reduced utility rates
Q4) Explain how a maquiladora operates.
Q5) Why do governments impose tariffs?
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Chapter 10: International Cooperation Among Nations
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Sample Questions
Q1) A ________ is a factory in which very little transformation of a product is undertaken.
A) maquiladora
B) screwdriver plant
C) greenfield operation
D) global shipping platform
Q2) Which organization is responsible for controlling the Eurozone's money supply, interest rates, and inflation?
A) European Central Bank
B) European Commission
C) European Parliament
D) European Court of Justice
Q3) Eurozone participants have agreed to limit their annual government deficits to no more than ________ of their GDPs.
A) 3 percent
B) 5 percent
C) 7 percent
D) 9 percent
Q4) How can international businesspeople protect themselves from adverse EU regulations?
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Chapter 11: International Strategic Management
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Sample Questions
Q1) What are the three sources of competitive advantage available to international businesses?
Q2) A firm using a ________ strategy would most likely have a matrix structure, project teams, and informal management networks to transfer knowledge among subsidiaries.
A) multidomestic strategy
B) home replication strategy
C) transnational strategy
D) global strategy
Q3) A conglomerate refers to firms comprising unrelated businesses.
A)True
B)False
Q4) Which strategy calls for a firm to target specific types of products for certain customer groups or regions?
A) focus strategy
B) single-business strategy
C) related diversification strategy
D) unrelated diversification strategy
Q5) Why did Toyota initially struggle in the Chinese market?
Q6) Explain the purpose of a mission statement.
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Chapter 12: Strategies for Analyzing and Entering Foreign Markets
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Sample Questions
Q1) LVMH uses all of the following entry methods in its international operations except
A) acquiring small foreign firms
B) entering licensing agreements
C) establishing franchises
D) exporting products
Q2) What is the difference between a B-O-T project and a turnkey project? What are the benefits of each to an international business?
Q3) Compu-Mart, a U.S. firm, entered the Chinese market by buying a controlling interest in Three-Star, a Chinese electronics firm. What is the most likely disadvantage Compu-Mart will face as a result of this acquisition?
A) becoming vulnerable to Chinese tariffs
B) creating competition with Three-Star
C) assuming the liabilities of Three-Star
D) complying with Chinese building codes
Q4) What is the difference between a brownfield strategy and a greenfield strategy? Do you think one strategy is better than the other? Explain.
Q5) Name five critical factors in assessing new market opportunities.
Page 16
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Chapter 13: International Strategic Alliances
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Sample Questions
Q1) Which of the following is not considered one of the primary pitfalls of strategic alliances?
A) mutual trust
B) loss of autonomy
C) partner incompatibility
D) changing circumstances
Q2) A ________ is a special type of strategic alliance in which two or more firms join together to create a new business entity that is legally separate and distinct from its parents.
A) joint venture
B) licensing agreement
C) franchising arrangement
D) greenfield strategy
Q3) All of the following are standard approaches to strategic alliance management EXCEPT ________.
A) shared management agreements
B) assigned arrangements
C) delegated arrangements
D) consensual arrangements
Q4) What is a comprehensive alliance?
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Chapter 14: International Organization Design and Control
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Sample Questions
Q1) ________ is the process of monitoring ongoing performance and making necessary changes to keep the organization moving toward its performance goals.
A) Coordination
B) Control
C) Implementation
D) Execution
Q2) Which of the following is not an advantage of the functional design?
A) Expertise can be transferred easily between functional areas.
B) Managers can maintain centralized control over functional operations.
C) Attention is focused on key areas of the firm.
D) Coordination between divisions is simplified.
Q3) Which design assigns worldwide responsibility for specific products or product groups to separate operating divisions within a firm?
A) global area design
B) global functional design
C) global product design
D) global hybrid design
Q4) What is the focus of operations control?
Q5) What is coordination?
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Chapter 15: Leadership and Employee Behavior in International Business
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Sample Questions
Q1) Which of the following personality traits describes a person whose behavior is gentle, cooperative, understanding, and good-natured?
A) agreeableness
B) openness
C) conscientiousness
D) emotional stability
Q2) John just found out that he did not get the promotion he wanted. He isn't upset because he believes fate just wasn't on his side. What personality trait best explains John's views in this situation?
A) internal locus of control
B) external locus of control
C) self-efficacy
D) conscientiousness
Q3) The composition of a team plays a minimal role in team dynamics.
A)True
B)False
Q4) What are the theoretical approaches to motivation?
Q5) Explain the difference between needs and values.
Q6) How are managers affected by bounded rationality?
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Chapter 16: International Marketing
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Sample Questions
Q1) Timex is working to adapt its advertising campaign for a market in Europe. What element of the marketing mix is being addressed in this example?
A) product
B) pricing
C) promotion
D) place
Q2) The geocentric approach calls for customization of the international marketing mix.
A)True
B)False
Q3) The marketing mix involves a firm's product, price, promotion, and place.
A)True
B)False
Q4) Firms frequently change product labeling to reflect local cultures.
A)True
B)False
Q5) Firms that use two-tiered pricing are vulnerable to charges of dumping.
A)True
B)False
Q6) Why are synergies and coordination important in international marketing?
Page 20
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Chapter 17: International Operations Management
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Sample Questions
Q1) Patricia, a manager at Global Airways, has the responsiblity of deciding how many passengers Global Airways can serve at a given time. Patricia is most likely involved with
A) operations management
B) services production planning
C) capacity planning
D) service operations management
Q2) What organization has developed and refined an international set of quality guidelines?
A) American Society for Quality Control
B) World Trade Organization
C) International Standards Organization
D) International Organization for Standardization
Q3) Ben works as an operations manager at Fulsom Manufacturing, an MNE with facilities in Asia and the U.S. Which of the following activities is most likely NOT an aspect of Ben's job?
A) determining where to obtain resources
B) deciding where to build sales offices
C) selecting proper accounting methods
D) choosing inventory control methods
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Chapter 18: International Financial Management
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Sample Questions
Q1) More than 70 percent of developing country exports are invoiced in ________.
A) U.S. dollars
B) euros
C) Japanese yen
D) Swiss francs
Q2) Why do exporters and importers sometimes choose to use a third country's currency for their financial transactions?
Q3) What are the major forms of payment for international transactions?
Q4) When does a firm face transaction exposure?
Q5) Suppose that Saks Fifth Avenue agrees on April 10th to buy 5 million Swiss francs' worth of Rolex watches from Rolex's Swiss manufacturer, payable upon delivery on October 10th. Given the potential that the Swiss franc rises in value against the dollar, which partner experiences this transaction exposure?
Q6) Which type of country relies most on countertrade?
Q7) How can firms reduce their translation exposure?
A) go naked
B) use a balance sheet hedge
C) buy forward currency
D) acquire an offsetting asset
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Chapter 19: International Human Resource Management and Labor Relations
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Sample Questions
Q1) Who typically heads up an international division?
A) third country nationals
B) host country nationals
C) parent country nationals
D) primary country nationals
Q2) A firm's international division is usually located in ________.
A) the home country
B) the importing country
C) a centrally located country
D) the country with the highest foreign sales
Q3) In the ________ stage of acculturation, the new culture seems exciting and interesting.
A) honeymoon
B) acceptance
C) adaptation
D) biculturalism
Q4) Explain expatriate failure.
Q5) What are the four phases of acculturation?
Page 23
Q6) How can a firm improve its staff's expertise as export sales increase early in the internationalization process?
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Page 24