MGMT 4670
Midterm Review

1)  Describe the four reasons outlined in the text why a firm may want, or need, to exchange currency.

2)  Discuss the following:
a)    The Purchasing Power Parity Theory
b)    The Fisher Effect
c)    The International Fisher Effect
d)    The Interest Rate Parity Theory
e)    The Forward Rate as an Unbiased Predictor of Future Spot Rates
What are the underlying assumptions of each, and does the empirical evidence support their conclusions?

3)  Discuss the implications for forecasting foreign exchange rates in the context of each of the efficient market and inefficient market perspectives.  What are fundamental and technological analyses?

4)  What is meant by the “convertibility” of currency?  Discuss the differing degrees of convertibility and why a government would prefer each.

5)  Describe the evolution and nature of the “Gold Standard.”  What were the historical imperatives that led to the “Bretton Woods” agreement, and what were the outcomes of the meeting in New Hampshire?

6)  Describe why the Bretton Woods system collapsed.  What took its place, and what were the steps that led to our current system?

7)  Compare and contrast the various fixed and floating exchange rate systems.  What are the benefits and drawbacks of each?

8)  Describe, compare, contrast, and give an example of each:
a)  Free trade area
b)  Customs union
c)  Common market
d)  Economic union
e)  Political union
9)  What are the political and economic justifications for regional economic integration?  What are the impediments to such integration?  What are the opportunities and threats to managers?

What are trade creation and trade diversion?  Explain using examples of each.

11)  What are the various forms of foreign exchange risk exposure?  Describe the various forms of "hedging" firms might employ to mitigate each.

12)  Describe the four multinational strategies discussed in class.  What is the strategic intent of each, and under which conditions is each most likely to succeed?

13)  What is meant by vertical differentiation?  What are the four main arguments for centralization?  What are the five main arguments for decentralization?

14)  What is meant by horizontal differentiation?

15)  What is meant by matching structure to strategy?  Briefly describe the various structures outlined in the text.  Which structures are best suited for which strategies?

16)  What are “integrating” mechanisms?  Describe several of the various formal and informal mechanisms used in business.

17)  What are the IMF and the World Bank?  How have they evolved over the years, and what are the implications of their policies and missions?

18)  Describe interdependence, control systems and performance ambiguity.  What are their effects on the four multi-country strategies described in the text?  What are the effects of the various aspects of strategy and architecture on those same strategies?

19)  What are the various entry modes into international markets available to a firm?  What are the costs and benefits of each, and when is each most appropriate?

20)  Describe the growth of the international capital market.  What are the factors that are driving the growth, and what are the benefits and risks to investors and borrowers?

21)  Describe the evolution and nature of the Eurocurrency market.  What is the attraction to investors and borrowers?  What are the risks?  How has the Eurocurrency market served to accelerate the growth of the international capital market?

22)  Compare and contrast Eurobonds and foreign bonds.