INTERNATIONAL FINANCE FINAL EXAM|QUESTIONS WITH 100% CORRECT ANSWERS |GRADED A

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What's unique about international finance? Correct Answer -foreign exchange risk -political risk -market imperfections -expanded opportunity set What is foreign exchange risk? Correct Answer -fo... reign currency profits may decrease or evaporate in dollar terms due to unanticipated, unfavorable exchange rate movements -doesn't exist in a domestic setting What is political risk? Correct Answer -sovereign governments have the right to regulate the movement of goods, capital, and people across their borders -laws may change in unexpected ways -changes in rules/regulations can change the value of your investment What are market imperfections? Correct Answer -legal restrictions on movement of goods, people, and money -amplification of domestic issues -transactions costs get heightened -additional shipping costs -tax systems vary around the world What is an expanded opportunity set? Correct Answer -take advantage of growth opportunities in foreign markets (especially if local markets have become saturated) -must adapt to other legal, institutional, and cultural environments What are common goals for international finance? Correct Answer -most developed economics have shareholder wealth maximization while developing have stakeholder -no matter the other goals, they cannot be achieved in the long term if the maximization of shareholder wealth is not given due consideration What are some trends in the globalization of the world economy? Correct Answer -trade liberalization and economic integration -emergence of globalized financial markets -privatization What is trade liberalization and economic integration as a trend in the globalization of the world economy? Correct Answer -international trade has increased about twice as fast as world GDP -increased spillover effects (crisis in one market spills over to another market) from foreign markets: can be economic, supply chain, political, positive or negative [Show More]

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