The emerging market crises of 199–2002 were worsened because of rampant speculation. Do speculators cause such a crisis, or do they simply respond to market signals of weakness? How can a government manage foreign exchange speculation?
> Why did the fixed exchange rate regime of 1945–1973 eventually fail?
> What are the attributes of the ideal currency?
> What are Special Drawing Rights?
> The IMF was established by the Bretton Woods Agreement (1944). What were its original objectives?
> The United Kingdom, Denmark, and Sweden have chosen not to adopt the euro, but rather to maintain their individual currencies. What are the motivations of each of these three countries, which are also members of the European Union?
> On January 4, 1999, 11 member states of the European Union initiated the European Monetary Union (EMU) and established a single currency, the euro, which replaced the individual currencies of participating member states. Describe three of the main ways t
> How did the Argentine currency board function from 1991 to January 2002, and why did it collapse?
> High capital mobility is forcing emerging market nations to choose between free-floating regimes and currency board or dollarization regimes. What are the main outcomes of each of these regimes from the perspective of emerging market nations?
> Fixed exchange rate regimes are sometimes implemented through a currency board (Hong Kong) or through dollarization (Ecuador). What is the difference between the two approaches?
> Why would one company with interest payments due in pounds sterling want to swap those payments for interest payments due in U.S. dollars?
> Explain the assumptions and objectives of the stakeholder wealth maximization model.
> What is meant by the term “fundamental equilibrium path” for a currency value? What is “noise”?
> Explain the assumptions and objectives of the shareholder wealth maximization model.
> Why is this separation so critical to the understanding of how businesses are structured and led?
> How does ownership alter the goals and governance of a business?
> A leveraged buyout is a financial strategy in which a group of investors gain voting control of a firm and then liquidate its assets in order to repay the loans used to purchase the firm’s shares. How would leveraged buyouts be viewed by the shareholder
> In an interlocking directorate members of the board of directors of one firm also sit on the board of directors of other firms. How would interlocking directorates be viewed by the shareholder wealth maximization model compared to the corporate wealth ma
> In Germany and Scandinavia, among others, labor unions have representation on boards of directors or supervisory boards. How might such union representation be viewed under the shareholder wealth maximization model compared to the corporate wealth maximi
> “Knowledge assets” are a firm’s intangible assets, the sources and uses of its intellectual talent—its competitive advantage. What are some of the most important “knowledge assets” that create shareholder value?
> What should be the primary operational goal of an MNE?
> How can a business firm that has borrowed on a floating-rate basis use a forward rate agreement to reduce interest rate risk?
> What are the primary principles behind corporate governance reform today? Are these culturally specific in your opinion?
> Do markets appear to be willing to pay for good governance?
> What is meant by the term “overshooting”? What causes it and how is it corrected?
> What are the key differences in the goals and motivations of family ownership of a business as opposed to those of a widely held publicly traded business?
> Which assets play the most critical role in linking the major institutions which make up the global financial marketplace?
> What have been the main causes of recent corporate governance failures in the United States and Europe?
> In recent years emerging market MNEs have improved their corporate governance policies and become more shareholder-friendly. What do you think is driving this phenomenon?
> Define the following terms: a. Corporate governance b. The market for corporate control c. Agency theory d. Stakeholder capitalism
> In many countries it is common for a firm to have two or more classes of common stock with differential voting rights. In the United States the norm is for a firm to have one class of common stock with one-share-one-vote. What are the advantages and disa
> What alternative actions can shareholders take if they are dissatisfied with their company?
> From the point of view of a borrowing corporation, what are credit and repricing risks? Explain steps a company might take to minimize both.
> How would stock options granted to a firm’s management and employees be viewed by the shareholder wealth maximization model compared to the stakeholder wealth maximization model?
> How is risk defined in the shareholder wealth maximization model compared to the stakeholder wealth maximization model?
> Conglomerates are firms that have diversified into unrelated fields. How would a policy of conglomeration be viewed by the shareholder wealth maximization model compared to the stakeholder wealth maximization model?
> What are the major differences between short-term and long-term forecasts for a fixed exchange rate versus a floating exchange rate?
> Define and give an example of each of the following quotes: a. Bid quote. b. Ask quote.
> Describe six arguments against a firm pursuing an active currency risk management program.
> Define the following terms: a. Hedging. b. Currency risk.
> Define the following terms: a. Foreign exchange exposure. b. The three types of foreign exchange exposure.
> Many MNEs have established transaction exposure risk management policies that mandate proportional hedging. Explain and give an example of how proportional hedging can be implemented.
> Ultimately a treasurer must choose among alternative strategies to manage transaction exposure. Explain the two main decision criteria that must be used.
> The value of an option is stated to be the sum of its intrinsic value and its time value. Explain what is meant by these terms.
> Explain why foreign currency cash balances do not cause transaction exposure.
> How would a high degree of leverage (debt/assets) be viewed by the shareholder wealth maximization model compared to the stakeholder wealth maximization model?
> What were the main causes of Argentina’s crisis of 2001–2002? What lessons were learned and what steps were taken to normalize Argentina’s economy?
> What were the main causes of Russia’s crisis of 1998? What lessons were learned and what steps were taken to normalize Russia’s economy?
> What were the main causes of Thailand’s crisis of 1997? What lessons were learned and what steps were eventually taken to normalize Thailand’s economy?
> Swings in foreign direct investment flows into and out of emerging markets contribute to exchange rate volatility. Describe one concrete historical example of this phenomenon during the last 10 years.
> Explain why infrastructure strengths have helped to offset the large BOP deficits on current account in the United States.
> You have the same information as in question 4 above, except that the pricing is for a European option. What is different? Information from Question 4: A newspaper shows the following prices for the previous day’s trading in the U.S. d
> What happens to the premium you paid for the above option in the event you decide to let the option expire unexercised? What happens to this amount in the event you decide to exercise the option?
> You read that exchange-traded American call options on pounds sterling having a strike price of 1.460 and a maturity of next March are now quoted at 3.67. What does this mean if you are a potential buyer?
> What is the basic difference between a put on British pounds sterling and a call on sterling?
> Give an example of a transaction exposure that arises from borrowing in a foreign currency.
> A newspaper shows the following prices for the previous day’s trading in the U.S. dollar-euro currency futures: What do the above terms indicate? Month December Open: 0.9124 Settlement: 0.9136 Change: +0.0027 High: 0.9147 Low: 0.90
> What are the main advantages that Trident gains by developing a multinational presence?
> Explain how a nominal effective exchange rate index is constructed.
> Define the following terms: a. The law of one price. b. Absolute purchasing power parity. c. Relative purchasing power parity.
> Some forecasters believe that foreign exchange markets for the major floating currencies are “efficient” and forward exchange rates are unbiased predictors of future spot exchange rates. What is meant by “unbiased predictor” in terms of how the forward r
> Define the terms covered interest arbitrage and uncovered interest arbitrage. What is the difference between these two transactions?
> Describe four arguments in favor of a firm pursuing an active currency risk management program.
> Define interest rate parity. What is the relationship between interest rate parity and forward rates?
> Define the international Fisher effect. To what extent do empirical tests confirm that the international Fisher effect exists in practice?
> Define the Fisher effect. To what extent do empirical tests confirm that the Fisher effect exists in practice?
> Infrastructure weakness was one of the causes of the emerging market crisis in Thailand in 1997. Define infrastructure weakness, and explain how it could affect a country’s exchange rate.
> Why would anyone write an option, knowing that the gain from receiving the option premium is fixed, but the loss, if the underlying price goes in the wrong direction, can be extremely large?
> Name the four main types of transactions from which transaction exposure arises.
> How do the motivations of individuals, both inside and outside the organization or business, define the limits of financial globalization?
> The term globalization has become very widely used in recent years. How would you define it?
> Use Checkpoint to answer the following questions: a. Using Form/Line Finder, locate directions for line 35 on Form 1040 for 2015. What is the paragraph number and topic? b. For the last few years, certain real property was eligible for expensing under §
> Use Checkpoint to answer the following questions regarding the ability to expense advanced mine safety equipment. a. Using “expense mine safety equipment” as keywords (not in quotation marks), search FTC and determine which paragraph provides an introduc
> Use the Checkpoint Federal Practice Area Indexes to answer the following questions: a. Which federal primary source materials have indexes? b. In the FTC Topic Index, determine which paragraph(s) discuss the manufacturer’s excise tax on racing car tires
> Use the Checkpoint Federal Practice Area to answer the following questions: a. What is the title of IRC § 178? b. What regulations were issued on this code section? What are their titles? c. What code section is added to Reg. § 1.178-1(a) by the proposed
> Use the Tool Tab in Checkpoint to answer the following questions: a. What is the 1040 Tax Tool under Tax designed to do? b. George and Martha are twins, both about to become tax accountants and broke. However, with their new tax jobs starting soon, Marth
> Use the CCH IntelliConnect Citator to evaluate the 290th revenue ruling issued in 1955. a. What is its complete Cumulative Bulletin citation? Is this revenue ruling still valid? b. What tax issue does the revenue ruling address? c. List the citations of
> Use CCH IntelliConnect Citator to answer the following questions: a. Find the discontinued Miscellaneous MS 347; 1950-1 C.B. 281 ruling. (Hint: Use Cumulative Bulletin citation to find it.) What is its current standing and why? b. Find court decision 93
> Use the CCH IntelliConnect Citator to evaluate the 1956 William George Tax Court case. a. What is the citation for the case? b. What is the title of the paragraph where George is annotated? c. What Code section is related to the George case? d. A revenue
> Use the CCH IntelliConnect Citator to answer the following questions regarding Notice 2010-10: a. Where is the notice located in the Internal Revenue Bulletin? b. Where is the notice annotated? c. What other notice has Notice 2010-10 been cited in?
> Use the CCH IntelliConnect Federal Tax to answer the following questions: a. Find the Code Sections Added Amended or Repealed under Federal Tax Legislation. What public laws (numbers) amended the code in the current year? b. Is a former IRS employee elig
> Use Checkpoint to answer the following questions: a. Select the Estate Planning Practice Area. Which templates are available for Code & Regs? Now select the Payroll Practice Area. Indicate any differences in the templates available for IRC & Regs. b. Sel
> Use the IntelliConnect Citations to answer the following questions: a. What does IRS Notice 2016-55 discuss? On what date was it issued? b. Who is the author of “New Temporary Regulations Restrain Inversions” in TAXES—The Tax Magazine, Vol. 94, No. 10? c
> Using CCH IntelliConnect, perform a keyword search on the topic of making an election to defer the determination of whether an activity is not engaged in for profit (hobby) until after the fourth year. Use the following terms: “hobby election defer.” a.
> Select three different primary sources, one from each area of tax law (legislative, administrative, and judicial), and provide a specific example of a source that is available in IntelliConnect.
> Name at least two practice areas in IntelliConnect and describe the contents briefly.
> Compare and contrast primary and editorial materials and explain the ways in which each can be important to a tax researcher.
> Explain what “due process” means with respect to taxing out-of-state businesses.
> Compare and contrast the general organization of an annotated tax database with that of a topical tax database.
> Describe the four common search methods used in CCH IntelliConnect.
> Why would a practitioner need a tax service when most primary tax sources are available for free on the Internet?
> Why are tax journals and newsletters generally not cited as authority in professional tax research? When would it be appropriate to cite tax journals or newsletters as authority?
> Use the Checkpoint Federal Practice Area, Go To in the left sidebar to answer the following questions: a. When selecting USTR Code Section, what are the choices given for the first and the second selections that must be made (blue circles 1 and 2)? b. Wh
> In what way is finding an article on point with a practitioner’s tax issue similar to hiring someone to do the research?
> Citators do not provide all information related to a case. What kind of information do citators not provide?
> Distinguish between the following terms: cited case, citing case, citation, and cites.
> Why does the researcher need to determine the precedential value of a case?
> Explain how a citation search differs from using a citator.
> Why should a contents search typically be left to a more experienced researcher?
> Describe the different constitutionality challenges with regard to federal and state taxes.
> List the three significant editorial services provided by Checkpoint and discuss the differences between them.
