End-of-Chapter 2 Problems

End-of-Chapter 2 Problems - Moore School of Business...

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1 Moore School of Business Spring 2012 University of South Carolina IBUS 401 – INTERNATIONAL FINANCIAL MANAGEMENT Answers to selected end-of-chapters problems Chapter 2 International Flow of Funds Problems assigned: 1, 2, 3, 5, 6, 8, 9, 11, 12 1. Balance of Payments. a. The current account balance is composed of (1) the balance of trade, (2) the net amount of payments of interest to foreign investors and from foreign investment, (3) payments from international tourism, and (4) private gifts and grants. b. The capital account is composed of all capital investments made between countries, including both direct foreign investment and purchases of securities with maturities exceeding one year. 2. Inflation Effect on Trade. a. A high inflation rate tends to increase imports and decrease exports, thereby increasing the current account deficit, other things equal . b. Discussion was held in class. 3. Government Restrictions. Governments can place tariffs or quotas on imports to restrict imports. They can also place taxes on income from foreign securities, thereby discouraging investors from purchasing
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This note was uploaded on 03/20/2012 for the course IBUS 401 taught by Professor Mr.guedhami during the Spring '12 term at South Carolina.

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End-of-Chapter 2 Problems - Moore School of Business...

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