International Finance (week 5)

The main objective of MNCs is to maximize shareholder wealth.

• True

• False

Conflict of interests between the company's shareholders and its managers is known as:

• Agency cost

• Agency problem

The following are commonly held theories regarding why companies are motivated to expand their business internationally, except?

• Comparative advantage theory

• Imperfect market theory

• Agency theory

• Product cycle theory

The summary of transactions between domestic and foreign residents for a specific country over a specified period of time is known as:

• Balance of payments

• Current account

• Capital account

High inflation, a high national income, low or no restrictions on imports, and a strong local currency tend to result in a strong demand for imports and a current account deficit.

• True

• False

When Indonesia's balance of payments is in surplus, Indonesia imports more than it exports.

• True

• False

Foreign exchange quotation which represents the number of units of a foreign currency per dollar is referred to:

• Direct quotation

• Indirect quotation

Utah Banks bid price for Canadian dollars is $.7938 and its ask price is $.81. What is the bid/ask percentage spread?

• 2%

• 3%

• 4%

• 5%

A decline in a currency’s value is often referred to as:

• depreciation

• appreciation

When a foreign currency weakens against the rupiah, the rupiah experiences:

• depreciation

• appreciation