Answer only two questions from each section A, B, C, D, and E.

Section A. Globalization and the Multinational Firm

1. List and describe trends in the contemporary international finance.

2. List and describe the areas of financial management.

3. Why will MNCs continue to grow profitable?

4. Briefly give examples of absolute advantage (AA) and comparative advantage (CA).

5. Describe the differences between domestic finance and international finance.

6. List the processes that a pure domestic firm moves into an MNE.

7. List and describe the requirements for the creation of value.

Section B. Financial and Corporate Governance

1. Describe issues between shareholders wealth maximization (SWM) and stakeholder capitalism model (SCM).

2. What is meant by agency problem? How to correct the agency problem?

3. List and describe the goals of corporate governance in the use of the global marketplace today.

4. List and describe the forms of corporate governance in the use of the global marketplace today.

5. What are the causes and consequences of large corporation failures such as Enron and WorldCom?

6. What did we learn from the failures in corporate governance?

C. The International Monetary System

1. What are the three requirements (rules) in the gold standard foreign exchange rate system? Briefly describe the gold standard history in US.

2. Just how many different foreign exchange rate systems are there today?

3. Describe Nixon bombshell on August 15, 1971 and its impact on international financial market.

4. Briefly describe history of the international monetary system.

5. Briefly describe history of the Eurodollar market.

6. List and briefly describe any five (5) major world currency events.

Section D. The Balance of Payments (B-O-P)

1. What is meant by the balance of payments? List the components in the current account.

2. Why is a concept of the balance of payments important for decision making by business management.

3. Show and briefly explain the equation of the balance of payments equilibrium.

4. Show, by using a diagram, the balance of payments equilibrium from the following data:

U.S. balance of payments, 20xx

(Billions of dollars)

A. Balance on Current Account -665

B. Balance on Capital Account -2

C. Financial Account 580

D. Errors and Omissions 85

D. Official Reserve 3

5. List and describe the key macroeconomic variables interact with the balance of payments.

6. Describe primary mechanisms by which capital may be moved from one country to another.

Section E. The Foreign Exchange Markets

1. List the geographical extent of the foreign exchange market, its participants, size, and the major currency composition.

2. Describe the three functions performed by the foreign exchange market.

3. Assume the following disequilibrium structure of exchange rates was observed:

US $ 1.0524 = Euro 1.00;

US$ 1.2350 = BP 1.00;

Euro 1.1738 = BP 1.00

Beginning with $ 1,000,000, show how you could earn a risk free profit by trading currencies.

4. The following outright foreign exchange rate quotations are given for the Canadian dollar ( CD )

Bid Ask_

Spot Rate CD 1.3442/$ CD 1.3452/$

3month Forward Rate CD 1.3600/$ CD 1.3650/$

a). Assume you are in the United States. Calculate forward quotes for the Canadian dollar as annual premium or discount.

b). If the risk free interest rate in the United States is 6% per year, what would you expect the risk free interest rate in Canada to be?