Foreign Exchange correct answers Cash flows occur in markets with different currencies
National Capital Markets correct answers Euromarke trading e.g. issuing bonds in $'s to investors in Japan
Market Segmentation correct answers Risk may be priced deferentially across countries due to market...
IB 449 Exam 1 || with 100% Errorless Solutions.
Foreign Exchange correct answers Cash flows occur in markets with different currencies
National Capital Markets correct answers Euromarke trading e.g. issuing bonds in $'s to
investors in Japan
Market Segmentation correct answers Risk may be priced deferentially across countries due to
market imperfections such as government regulations, transaction costs, and asymmetric
information
Other Risks correct answers Cultural, political, exchange rate
Taxes correct answers Corporations and individual investors
Repatriation of cash flows
Transfer pricing
Multinational Corporation correct answers is a firm involved in producing and selling goods and
services in more than one country
Potential Reasons for a firm to become internationally diversified correct answers Raw materials
Market Share
Cost Minimization
Investor Diversification
Operating synergies
Taxes
International Monetary Fund (IMF) correct answers - Established at the Bretton Woods
COnference
- Promotes international monetary stability
- oversees exchange-rate policies in member countries
- advises developing countries about how to turn their economies around
World Bank correct answers - promotes economic development by providing loans
- usually focus on large infrastructure projects
- International Development Association extends low interest loans to poor nations
International Finance Corporation (IFC) correct answers - Finance various projects in the private
sector through loans and equity participation
- serves as a catalyst
Bank for International Settlements correct answers - Acts as the central banks for industrial
countries' central bank
- Helps banks manage and invest their foreign exchange reserves
, World Trade Organization correct answers Provides a forum for multilateral trade negotiations
and to settle trade disputes
Export-Import Bank (Eximbank) correct answers - US government agency to promote
international trade
- Finances, guarantees, and insures the export of American goods and services
Agency Costs correct answers costs that are incurred to ensure that managers act in the best
interest of shareholders
Corporate Governance:
Family sourced correct answers (HK, Indonesia, Malaysia, Singapore)
- management and ownership interlinked; family ownership
Corporate Governance:
Bank sourced correct answers (Korea, Germany)
- government authority in bank lending; lack of disclosure; family control
Corporate Governance:
Government Involvement correct answers (China, Russia)
- state ownership; lack of disclosure; concentrated ownership
Law and Corporate Governance correct answers - Ownership structure varies from country to
country
Pyramid - one controlling shareholder owns a company that may or may not be publicly traded
Recommendations by the Cadbury Committee correct answers - Boards of public firms should
include at least 3 independent directors
- CEO and Chairsperson held by two different people
- Board should meet regularly
Corporate Gov. Breakdowns Examples correct answers Samsung (illegal activity), VW
(employee rep recieves 2 mil in "special bonus)
One Tel (compensations)
Royal Ahold (1.2 B in fraud)
Tobin's Q correct answers Market value of equity + the book value of assets - book value of
equity / book value of assets
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