B6 - Process and Project Mgmt: Globalization, Financial Risk Mgmt

Question 1

NAFTA offers trading partners operating within its boundaries reductions in tariffs on products in exchange for compliance with limits on imported labor and materials used in the manufacture of those products. This practice is also know as:

Answer 1

Sourcing Requirement

Question 2

The United states has been the world’s sole economic and military superpower. The concentration of power in one country is referred to as:

Answer 2

Unipolar

Question 3

Managers that anticipate greater return for greater risk are referred to as having what attitude toward risk?

Answer 3

Risk averse

Question 4

If an investor’s certainty equivalent is greater than the expected value of an investment alternative, the investor is said to be:

Answer 4

Risk seeking

Question 5

What is certainty equivalent?

Answer 5

The point at which the investor is indifferent to risk

Question 6

The only relevant risk is:

Answer 6

Nondiversifiable Risk

Question 7

“Classify risk into two broad categories: ““DUNS””

Answer 7

“Diversifiable Risk
Unsystematic Risk (nonmarket/firm specific)
Nondiversifiable Risk
Systematic Risk”

Question 8

As inflation associated with a foreign economy increases in relation to a domestic economy, demand for the foreign currency will:

Answer 8

Fall. Inflation weakens the foreign currency in relation to the domestic currency and makes foreign products more expensive and reduces demand. Reduced demand for foreign import will reduce the demand for its currency.

Question 9

What is the effect when a foreign competitor’s currency becomes weaker compared to the U.S. dollar?

Answer 9

The foreign company will have an advantage in the U.S. market. The product becomes less expensive in U.S. dollars. The less expensive product will increase demand and result in an advantage in the U.S. market.

Question 10

If the dollar price of the euro rises:

Answer 10

The dollar depreciates against the euro

Question 11

A put is an option that gives its owner the right to do what?

Answer 11

Sell a specific security at fixed conditions of price and time

Question 12

Using a zero growth model, how do you calculate the price of a share of stock?

Answer 12

P = D/R

P = Price
D = Dividend
R = Rate of Return

Question 13

PEG Ratio

Answer 13

(P/E)/G

P = Price
E = Earnings
G = Growth rate = 100 x expected growth rate

Question 14

A financial manager that believes that his actions will cause earnings to increase and market prices to stay in proportion to increased earnings. The manager’s behavior illustrates:

Answer 14

Illusion of control