403_Final - Youranswer Question 1 Suppose you start with...

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Your answer Question 1. Suppose you start with $100 and buy stock for £50 when the exchange rate is £1 = $2. O £60. You are happy with your 20 percent return on the stock, but when you sell the stock and you only get $45 since the pound has fallen to £1 = $0.75. This loss of value is an example of a. Exchange Rate Risk b. Political Risk c. Market imperfections d. Weakness in the dollar 2. A domestic firm that produces and sells its products in one country: a . Can have no foreign exchange risk. b. Could face foreign exchange risk. c. Can face no political risk. d. Is an example of a market imperfection. 3. The fundamental goal of sound business management is: a. Shareholder wealth maximization b. Market share maximization c. Globalization d. Increasing the size of the firm. 4. The European Central Bank is located in a. Düsseldorf, Germany b. Frankfurt, Germany c. London, England d. Paris, France. 5. The theory of comparative advantage states that a. Economic well-being in enhanced if countries produce those goods for which they have co trade those goods for goods that they do not enjoy a comparative advantage. b. Economic well-being in enhanced if countries consume those goods for which they have a then trade those goods. c. Tariffs and other protectionist measures can enhance the mercantile success of countries th d. Countries should first produce the goods and services that they need, and then produce go 6. The euro is: a. The common currency of Europe b. An imaginary market basket of currencies c. An index of the value of 12 European currencies relative to the U.S. dollar d. Pegged to the U.S. dollar at a fixed exchange rate of parity
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7. The North American Free Trade Agreement (NAFTA): a. Has resulted in massive unemployment in the U.S. as jobs went to Mexico b. Calls for the introduction of a regional currency by 2015, similar to the euro. c.
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403_Final - Youranswer Question 1 Suppose you start with...

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