Download TEST 1 IBM422S 20 AUGUST 2015

TEST 1
IBM422S
Duration: 1:30
A. Mapanga
20 AUGUST 2015
Answer all questions on the answer sheet provided.
Section A
Multiple Choice Questions
10 Marks
1. Which of the following summarises the total amount of resources invested in factories,
stores, office buildings, and the like?
A. Gross capital index
B. Gross fixed capital formation
C. Gross domestic product
D. Gross national product
2. Which of the following primarily explains why developing nations are characterized by
lower percentage of cross-border mergers and acquisitions compared to developed
nations?
A. Fewer target firms to acquire in developing nations
B. Fierce opposition to mergers and acquisitions in developed nations
C. Unwillingness of foreign companies to invest in developing nations
D. Presence of import quotas in developing nations
1
3. When contemplating FDI, why do firms apparently prefer to acquire existing assets rather
than undertake greenfield investments?
A. Greenfield investments are characterized by reduced management control.
B. Mergers and acquisitions are preferred because most greenfield investments fail.
C. It is easier and less risky for a firm to build strategic assets than acquire similar assets.
D. Mergers and acquisitions are quicker to execute than greenfield investments.
4. A French wind power company gives an Indonesian company the right to produce and
sell wind turbines in return for a royalty fee on every unit sold. Which business practice is
this an example of?
A. Acquisition
B. Licensing
C. Exporting
D .Greenfield investment
5. What are the two main functions of the foreign exchange market?
A. Trading of equities of foreign companies and currency conversion
B. Reducing currency volatility and setting interest rates
C. Insuring companies against interest rate risk and enabling imports and exports
D. Currency conversion and providing some insurance against foreign exchange risk
6. A pair of shoes costs £40 in Britain. An identical pair costs $50 in the United States
when the exchange rate is £1 = $1.50. Which of the following is correct?
A. The U.S. offers a better deal.
2
B. The deal is the same in both countries.
C. Britain offers a better deal.
D. A trader can make money by buying the shoes in Britain and selling it in the U.S.
at $50.
7. An exchange rate of €1 = $1.30 indicates that:
A. $1 is worth 1.30 euros.
B. one could get 1.30 euros for $1.
C. one euro buys 1.30 dollars.
D. one euro buys 0.77 dollars.
8. The _____ helps us to compare the relative prices of goods and services in different
countries.
A. interest rate
B. GDP growth rate
C. exchange rate
D. tariff rate
9. Hedge funds ____.
A. are public investment funds that invest in corporate bonds and shares
B. make long bets rather than short bets
C. are investment funds managed by the government
D. make short bets on assets that they think will decline in value
3
10. Analysts who believe globalization of capital has serious risks argue that ____.
A. capital does not shift in and out of countries as quickly as conditions change
B. individual nations are becoming more vulnerable to speculative capital
C. deregulation of trade is helpful for the economic growth in a country
D. most of the capital that moves internationally is pursuing long term gains
SECTION B
40 Marks
11. Recently, the media reported that Namibia will soon be in a position to sell its beef in
China.
Discuss the benefits of this development to:
i)
Namibia (8)
ii)
China (7)
(15)
12. Compare and contrast currencies that are freely convertible, externally convertible, and
nonconvertible.
(5)
13. Briefly explain what you understand by Eurocurrency.
(2)
14. Explain how companies can reduce their economic exposure in a world of constantly
fluctuating exchange rates?
(3)
15. Developing and developed countries are actively seeking foreign direct investment. You have
been by the Ministry of Industrialisation, Trade and Innovation to make a presentation to prospective
investors on why Namibia is the best place to invest in.
Required: Present your arguments for the investors to consider Namibia.
GOOD LUCK!
4
(15)