MBUS 308 Extra Credit Final Exam ACTUAL Questions and CORRECT Answers
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Course
MBUS 308 Extra Credit
Institution
MBUS 308 Extra Credit
MBUS 308 Extra Credit Final Exam
ACTUAL Questions and CORRECT
Answers
relative PPP - CORRECT ANSWER- exchange rates move by the same proportion
everywhere
interest rate parity - CORRECT ANSWER- interest rate difference between 2 countries is
the difference in forward exchange rate
MBUS 308 Extra Credit Final Exam
ACTUAL Questions and CORRECT
Answers
relative PPP - CORRECT ANSWER✔✔- exchange rates move by the same proportion
everywhere
interest rate parity - CORRECT ANSWER✔✔- interest rate difference between 2 countries is
the difference in forward exchange rate
exchange rate risk - CORRECT ANSWER✔✔- risk due to operating in countries with
variable exchange rates (risk from changes in exchange rates between difference currencies)
two main sources that can cause exchange rate risk - CORRECT ANSWER✔✔- 1. monetary
policy
2. traders
political risk - CORRECT ANSWER✔✔- risk related to the rules of the game (rules of trade)
things that can result in political risk, things that can change the rules of the game -
CORRECT ANSWER✔✔- regime change, asset forfeiture (your stuff is seized), tax changes,
nationalization (government can come and take over your land)
this can be why you shouldn't invest in Zimbabwe.
international fisher effect - CORRECT ANSWER✔✔- real interest rates across countries is
equal
-if interest rates are high in one country, you'll invest in that country
-if real interest rates =, the nominal interest rate - inflation will be the same in both countries
-all difference in nominal interest rates is due to inflation
, triangle arbitrage - CORRECT ANSWER✔✔- trades in 3 or more currencies that earn a
profit due to unequal implied exchange rates
-overtime causes exchange rates to converge into identical implied rates
merger - CORRECT ANSWER✔✔- two or more companies combine (they don't need to be
publicly traded, but often are). the legal identity of one company is preserved. the legal
identities are destroyed
example of merger - CORRECT ANSWER✔✔- Google bought Waze, now its a subsidiary &
just a portion of Google
consolidation - CORRECT ANSWER✔✔- when 2 or more firms combine resulting in a new
legal entity and destroying both previous entities
consolidation example - CORRECT ANSWER✔✔- Comcast and Verizon combine into one
new cable company called Cable4U
benefits of acquisition - CORRECT ANSWER✔✔- improving corporate culture, savings on
marketing/administrative costs, enter new market, reduce competition (this is why the
government doesn't allow some mergers of two huge companies, i.e. Apples and Windows are
not allowed to merge), economies of scale (reducing average per unit cost), complementary
resources, tax advantages (don't really need to know examples of this), diversification
(portfolios, getting into other industries), vertical integration (keeping things inside the firm)
equity carve out divestiture - CORRECT ANSWER✔✔- creating a new company from an
IPO (initial public offering) sale of a subunit
spin off divestiture - CORRECT ANSWER✔✔- creating a new company from a sub unit,
giving the stock in the new company to existing shareholders (old company is maintained)
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