1. A Chinese investors receives a dividend payment from a Mexican firm in which she purchased stock. What its entry on Chinese BOPs account? 1 point
2. Why might agency cost be larger for a purely domestic firm? 2 points
3. Why the existence of imperfect markets has led to the establishment of subsidiaries in foreign market?

2 points

4. Explain why a stronger dollar could enlarge the U.S balance of trade deficit? Explain why a weaker dollar could affect the U.S balance of trade deficit. 4 points
5. Canadian Racket firm that sells high quality rackets in the Canada, wants to expand internationally by selling the same racket in U.S. Which business method would this firm use to achieve its goals. Justify your answer 3 points

How might the relatively high levels of inflation, and low income in Maxico affect the peso value (Assume a constant level of U.S inflation)?