Fin 435 Spring 2010 Sample Old Exams 9-27-2010

Fin 435 Spring 2010 Sample Old Exams 9-27-2010 - Chapter 1:...

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Chapter 1: Globalization and The Multinational Firm 1. List 3 unique aspects of international business (no need to explain) - Expanded opportunity set and comparative advantage - Additional Risks (Exchange risk, Political risk) - Market imperfections 2. Differentiate between absolute advantage and comparative advantage. => Absolute advantage is based on the production efficiency for each industry between the two countries, while comparative advantage is comparing the production efficiency across industries between the two countries. 3. Country A has an opportunity cost of 2 yards of textiles per one pound of food, and Country B has an opportunity cost of 3 yards of textiles per one pound of food. Determine the comparative advantage, and explain how free trade could enhance the well-beings of these countries. (You may want to make up numbers to construct the input-output table). => Assuming that each country has the same amount of resources (100) and each country splits its resources evenly between the two products, A may have 50 pounds of food and 100 yards of textiles (note that we satisfy 2 yards of textiles per one pound of food), and B may have 50 pounds of food and 150 yards of textile. Since B has a comparative advantage in the production of textiles, B can get specialized in the textile production and A can get specialized in the food production. In this case, the world production of textiles can be increased from 250 yards to 300 yards, while the world production of food remains the same at 100 pounds. 4. a) How many SFs can you get for 20 dollars if SF/$=1.5? b) If $ value doubles, then how much SF is up against $? c) yen/$ was 201.6 in 1948 and it is now 108.2. How much yen has appreciated from 1948? d) yen/$ = 108.2, BP/$ = 0.548. What is the BP/yen? => a) $20*1.5 (SF/$) = 30 SFs b) $1/SF -> $0.5/SF => (0.5 – 1)/1 = -0.,5 It is up -50% c) So=1/201.6, S1=1/108.2, 86.32% exactly d) yen/$ = 108.2, BP/$ = 0.5480 .5480 BP/$ * 1/108.2 $/Yen = .005065 5. Differentiate between: a) Linear vs. log scales b) Standard deviation vs. coefficient of variation 1
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=> a) Linear scales evaluate an absolute value change, whereas logarithm scales evaluate the percent change. b) Both are measure of dispersion of a set of data from its mean, but coefficient of variation is considered as a better tool to evaluate volatility as it is independent of the level (Absolute measure of volatility, relative measure of volatility & level free. Example: standard deviation tends to large for a variable with a greater magnitude, while coefficient of variation is looking at a % change. A fat person tends to have a greater change in the weight (gaining or losing 5 pounds is a everyday event) than a thin person. To be fair, we need to make it a level free. That is what percentage of weight (instead of how many pounds) each person gain or lose a day). 6. (a) How many SFs can you get for 20 dollars if $/SF=0.8?
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This note was uploaded on 02/16/2012 for the course BUSINESS 331 taught by Professor Rhee during the Spring '12 term at Strayer.

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Fin 435 Spring 2010 Sample Old Exams 9-27-2010 - Chapter 1:...

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