a Microsoft Word or compatible document

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InstructionsSheet

1. Write all answers and submit as a Microsoft Word or compatible document.
2. This examination contains five questions, with each question consisting of theory and math components. The questions are of equal value – 10 marks each.
3. Answer all questions. These should be typed.
4. Use headings or subheadings when responding. Example: Question 2 (a). No need to write questions during answering.

5. Please note the Microsoft Excel Math Question Generator associated with this document.Download the generator and insert your student ID and name in the relevant cells. The math questions specific to you will then be generated in the Excel sheet.

6. When submitting your response, please upload the Excel Question Generator with your student ID and names. Thus, your submission will contain at a minimum two files: your response in a Word document and the Excel Question Generator with your details.

7. If you need to make any assumption, please clearly indicate the assumption. For some math questions, there may be redundant information.
8. Just pasting Excel sheet for math response is not acceptable and may result in penalties even if the answer is correct. If you use Excel, please clearly indicate how the answer has been determined. Like, rather than writing:

New Price: A$1,200

show this way:

New Price (A$1.2/$ x $1000): A$1,200

Thus, step description should show intermediate calculation.

9. When using Word for math, show all calculation steps similarly. Please indicate the formula (where applicable), show one or more calculation steps, and finally indicate the answer.
10. There is no requirement that you need to use Excel for math. You can submit all responses, theory and math inclusive, in a Word document. If you use Excel for math, please upload that file also with your response in Word document.

11. For all theory questions, there is no word limit though the maximum recommended word length is 350 words. There is no penalty relating to word length. You can cite relevant resources and research where applicable.
12. Please respond to the questions while thinking about the related issues. Please maintain proper academic integrity. A concise to the point answer is often better than a long narrative answer.

13. A formulae sheet is attached at the end of this exam paper for your use.

14. Since this is an open book exam, specific hints or advice concerning the response are not available. The questions test your conceptual understanding and encourage critical reflection. Partial grading strategy as applied in assessments also applies for exam. So, please give your best try, and where confused make the best guess on the answer.

Late submission is disallowed.

^TOTAL50MARKS

Answerall questions

Each question is worth 10 marks (5 x 10 marks = 50 marks)

^Question110Marks

(a) Consider the various assumptions and limitations and the core concept of the theory of comparative advantage. Do you think the theory is of any value to managers of a multinational enterprise (MNE) in the modern context? Why or why not? Explain. (5marks)

(b) Classify any five of the following as a transaction reported in a sub-component of the current account, or the capital and financial accounts of the two countries involved:

1. A Japanese tourist pays for a tour package with an Australian tour operator.
2. An Australian company buys 100% shares of a German company.
3. An Australian company imports mobile phones from a U.S. seller.
4. An Australian company sells bonds to a U.S. customer.
5. An Australian resident purchases a laptop from an Australian retailer.
6. AU.S. investor purchases 2% shares of an Australian company.
7. A tourist from Japan purchases a souvenir from an Australian gift shop. (5 x 1 mark = 5 marks)

^Question2 10Marks

1. Compare among central banks, dealers, and brokers concerning their motives and operations in the foreign exchange market. (3marks)
2. Is direct invention in the foreign exchange market always effective? Explain.
   (2 marks)
3. Note the Question 2(c) in Excel Question Generator.Remember to insert your student ID in the Student Information sheet of the generator – this is compulsory. When submitting, remember to upload the question generator with your student ID inserted. (5marks)

^Question310Marks

1. Note the Question 3(a) in Excel Question Generator.Remember to insert your student ID in the Student Information sheet of the generator. (4marks)
2. Discuss the interest rate parity theory. Is the theory useful to an investor and to an MNE? Explain. (4 marks)
3. Differentiate between dollarization and currency board arrangement with relevant discussions and examples. (2 marks)

^Question410Marks

1. Note the Question 4(a) in Excel Question Generator.Remember to insert your
   student ID in the Student Information sheet of the generator. (3marks)
2. Discuss similarities and dissimilarities between cross-currency swaps and parallel loans strategies of managing operating exposure. (2marks)

(c) Note the Question 4(c) in Excel Question Generator.Remember to insert your
student ID in the Student Information sheet of the generator. (5marks)

^Question510Marks

1. Between country-specific political risks and global political risks for an MNE, which risk type is more difficult to predict and manage? Explain your views. (3 marks)
2. Note the Question 5(b) in Excel Question Generator.Remember to insert your
   student ID in the Student Information sheet of the generator. (4 marks)
3. Discuss two reasons that may cause market segmentation. Does market segmentation impact an MNE in any manner? Explain your views. (3 marks)

– Endofpaper –

List of Formula

[here, is the correlation coefficient between the return of a security and return of a market, is the standard deviation of return for the security, is the standard deviation of return for the market]

Big Mac Index Undervalue/Overvalue Calculation:

Forward Rate Calculation:

– Endofformula sheet –

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