Question 1

The process of purchasing goods from a foreign supplier and shipping them to the firm's home country is known as:

Accepted Answer

The process of purchasing goods from a foreign supplier and bringing them to the firm's home country is known as importing. Foreign exchange refers to the conversion of one currency into another currency, while exporting refers to the process of sending goods from one country to another. Therefore, the correct answer is C.

Question 2

A government corporation that assists U.S. investments in developing countries by providing loans, investment services, and political risk insurance is:

Accepted Answer

The Overseas Private Investment Corporation (OPIC) is a government corporation that assists U.S. investments in developing countries by providing loans, investment services, and political risk insurance. MIGA is also a government agency that provides political risk insurance to investors, but it focuses on foreign direct investment in emerging markets. WTO and GATT are international organizations focused on promoting free trade and reducing trade barriers, but they do not provide loans or investment services.

Question 3

Export Management Companies work with individual exporters by acting as:

Accepted Answer

Export Management Companies (EMCs) act as consultants for individual exporters by providing services such as market research, legal assistance, and international trade documentation. While they may work with freight forwarders and customs brokers, their primary role is to advise exporters on how to enter and succeed in international markets.

Question 4

The simultaneous buying and selling of a foreign currency in two or more markets in order to take advantage of price differences:

Accepted Answer

Arbitrage is the practice of buying and selling a foreign currency in different markets simultaneously to make a profit from the difference in its price. This is typically done by taking advantage of inefficiencies in the market, such as pricing discrepancies or time lags between different exchanges. Forex options, futures contracts, and forward contracts are all different types of financial instruments used in foreign exchange trading, but they are not directly related to the practice of arbitrage.

Question 5

The risks of exporting, licensing, and direct foreign investment can be reduced through the use of:

Accepted Answer

The risks of exporting, licensing, and direct foreign investment can be reduced through the use of international bankers, commercial insurance companies, and freight forwarders. International bankers can help with financing and minimizing currency exchange risks. Commercial insurance companies can provide coverage for political risks, natural disasters, and other potential liabilities. Freight forwarders can ensure that goods are transported safely and efficiently. Using all of these resources can help companies mitigate risks and increase their chances of success in foreign markets.

Question 6

An agreement by a foreign seller to include as part of the sale in the foreign nation the use of parts or services from local suppliers in order to satisfy local content requirements is known as:

Accepted Answer

The agreement described is an offset agreement, which is a type of trade agreement where the buying country requires the seller to invest a certain amount of money in the buying country's economy. In this case, the requirement is for the use of local suppliers to satisfy local content requirements. A buy-back agreement (A) involves a seller agreeing to buy back products or materials from the buyer, typically after a certain period of time. A switch agreement (C) does not relate to international trade, and a protocol agreement (D) refers to a formal agreement that outlines a process or procedure.

Question 7

Countertrade arrangements between and among sovereign nations are known as:

Accepted Answer

Countertrade arrangements between and among sovereign nations are known as clearing agreements. Clearing agreements are a type of countertrade where goods and services are traded without the use of currency. Instead, transactions are settled through the exchange of goods or services of equal value. This type of arrangement is often used when countries have limited access to foreign currency or when they want to develop trade relationships with each other. Framework agreements, performance agreements, and import entitlement agreements are not specific to countertrade arrangements between sovereign nations, and do not accurately describe the type of arrangement being referred to in the question.

Question 8

Differences in the rules and remedies in the civil, common, and socialist legal systems that can give rise to unexpected liabilities in international business transactions is known as:

Accepted Answer

Legal risk refers to the possibility of unexpected liabilities arising due to differences in the legal systems of the countries involved in an international business transaction. Civil, common, and socialist legal systems have different rules and remedies, which can create legal uncertainties for businesses operating in multiple countries. This can lead to unexpected legal disputes, penalties, or fines, which can increase the overall risk of doing business in a foreign country.

Question 9

Describe the general methods of conducting international business (exporting, etc.) and discuss The risks associated with each method.

Accepted Answer

The answer of Describe the general methods of conducting international...

Question 10

Describe why the risks to a firm increase as the level of penetration into a foreign market increase.

Accepted Answer

The answer of Describe why the risks to a firm...

Question 11

Describe the difference between indirect and direct exporting and the advantages of each. Discuss the various third parties available to exporters that help facilitate the export process and minimize a firm's risks.

Accepted Answer

The answer of Describe the difference between indirect and direct...

Question 12

Discuss the three types of currency risk and describe how an international businessperson might minimize or overcome those risks.

Accepted Answer

The answer of Discuss the three types of currency risk...

Question 13

Discuss the various political risks facing the international businessperson and how one might minimize those risks.

Accepted Answer

The answer of Discuss the various political risks facing the...

Quiz 1: Introduction to International Business Transactions