Question 1

Which of the following is a characteristic of the Eurocurrency market?

Accepted Answer

A)  The Eurocurrency market is both short and medium term. 
B)  Private borrowers are the major players in the Eurocurrency market. 
C)  The Eurocurrency market is a retail, rather than wholesale, market. 
D)  The interest rates in the Eurocurrency market are about the same as in domestic markets. 
A)  The Eurocurrency market is both short and medium term. 
B)  Private borrowers are the major players in the Eurocurrency market. 
C)  The Eurocurrency market is a retail, rather than wholesale, market. 
D)  The interest rates in the Eurocurrency market are about the same as in domestic markets.

Question 2

According to U.S. tax law,if a foreign subsidiary earns income,________.

Accepted Answer

A)  its income is immediately taxable to the parent, irrespective of the type of income earned 
B)  that income is not taxable to the parent company as long as the subsidiary pays income taxes in the country where it is earned 
C)  passive income is taxable to the parent unless the parent company is a controlled foreign corporation 
D)  active income is taxable to the parent when it is remitted as a dividend 
A)  its income is immediately taxable to the parent, irrespective of the type of income earned 
B)  that income is not taxable to the parent company as long as the subsidiary pays income taxes in the country where it is earned 
C)  passive income is taxable to the parent unless the parent company is a controlled foreign corporation 
D)  active income is taxable to the parent when it is remitted as a dividend

Question 3

Assume that a Canadian exporter sells to a French importer and denominates the sale in euros,which opens the exporter up to foreign exchange risk. Also,assume that the exporter goes to its investment bank and enters into a contract with the bank to gain the right but not the obligation to deliver euros for Canadian dollars at an agreed-upon exchange rate. This is an example of a ________.

Accepted Answer

A)  lead strategy 
B)  lag strategy 
C)  foreign-currency option 
D)  forward contract 
A)  lead strategy 
B)  lag strategy 
C)  foreign-currency option 
D)  forward contract

Question 4

A price on goods and services sold by one member of a corporate family to another is known as a(n)________.

Accepted Answer

A)  transfer price 
B)  tax credit price 
C)  passive price 
D)  active price 
A)  transfer price 
B)  tax credit price 
C)  passive price 
D)  active price

Question 5

The principle by which the tax authorities allow firms to reduce their tax liability by the amount of income taxes paid to foreign governments is known as ________.

Accepted Answer

A)  transfer pricing 
B)  a tax credit 
C)  lag strategies in tax planning 
D)  passive income reductions 
A)  transfer pricing 
B)  a tax credit 
C)  lag strategies in tax planning 
D)  passive income reductions

Question 6

What is the main challenge companies face in listing ADRs in the United States?

Accepted Answer

A)  paying costly fees and tariffs 
B)  complying with SEC reporting requirements 
C)  listing shares in U.S. dollars instead of Eurodollars 
D)  conducting time-consuming performance evaluations 
A)  paying costly fees and tariffs 
B)  complying with SEC reporting requirements 
C)  listing shares in U.S. dollars instead of Eurodollars 
D)  conducting time-consuming performance evaluations

Question 7

Which of the following countries has the largest market for domestic bonds?

Accepted Answer

A)  the U.K. 
B)  the U.S. 
C)  Japan 
D)  China 
A)  the U.K. 
B)  the U.S. 
C)  Japan 
D)  China

Question 8

Subpart F income is passive and usually derived from operations in a tax-haven country.

Accepted Answer

A) True 
 B)False

Question 9

What are the major sources of internal funds for MNEs? Why do many MNEs acquire external funds through the Eurodollar market?

Accepted Answer

The major sources of internal funds for

Question 10

A translation exposure occurs when the dollar value of a receivable or payable from exports or imports changes as the exchange-rate changes.

Accepted Answer

A) True 
 B)False

Question 11

An economic exposure ________.

Accepted Answer

A)  occurs when reporting systems are inadequate 
B)  generally takes place when foreign currencies weaken against the dollar 
C)  occurs when the sourcing and costs of components change as exchange rates change 
D)  is the same as a translation exposure 
A)  occurs when reporting systems are inadequate 
B)  generally takes place when foreign currencies weaken against the dollar 
C)  occurs when the sourcing and costs of components change as exchange rates change 
D)  is the same as a translation exposure

Question 12

What is foreign currency translation exposure? How can this type of exposure affect an MNE?

Accepted Answer

Foreign currency financial statements ar

Question 13

According to 2010 data,which of the following statements about the mix of debt and equity to fund operations is true?

Accepted Answer

A)  The debt/asset ratio has risen in Japan since 2007. 
B)  A growing number of Russian firms are relying more on debt. 
C)  The equity/asset ratio fell for firms in France and Germany since 2007. 
D)  In most emerging markets, shares of stock are broadly held like in the U.S. 
A)  The debt/asset ratio has risen in Japan since 2007. 
B)  A growing number of Russian firms are relying more on debt. 
C)  The equity/asset ratio fell for firms in France and Germany since 2007. 
D)  In most emerging markets, shares of stock are broadly held like in the U.S.

Question 14

Assume a U.S. exporter sells to a British importer and denominates the sale in dollars. If the dollar rises over time against the British pound,what types of economic exposure and/or possible strategies could the exporter or importer face?

Accepted Answer

A)  The U.S. exporter has no economic risk because the sale is denominated in dollars. 
B)  The British importer has only economic risk if the dollar falls against the pound. 
C)  The U.S. exporter could lower prices in order to reduce the cost to the importer and thereby keep up sales volume. 
D)  The U.S. exporter does not face an economic exposure, but the British importer does because it must pay in dollars. 
A)  The U.S. exporter has no economic risk because the sale is denominated in dollars. 
B)  The British importer has only economic risk if the dollar falls against the pound. 
C)  The U.S. exporter could lower prices in order to reduce the cost to the importer and thereby keep up sales volume. 
D)  The U.S. exporter does not face an economic exposure, but the British importer does because it must pay in dollars.

Question 15

A Japanese company exports merchandise to a U.S. importer for ¥1,000,000 when the exchange rate is ¥107 per dollar. Payment is not due until the end of the month. At the end of the month,the exchange rate has moved to ¥105 per dollar,and the U.S. importer pays the Japanese exporter for the merchandise. From the standpoint of the U.S. importer,________.

Accepted Answer

A)  there is no transaction exposure since they will sell the merchandise in the United States for dollars 
B)  the merchandise will be carried on the books at $93,468 (rounded) 
C)  the Japanese exporter will be paid $9,524 
D)  the exposure is considered to be a translation exposure, not a transaction exposure 
A)  there is no transaction exposure since they will sell the merchandise in the United States for dollars 
B)  the merchandise will be carried on the books at $93,468 (rounded) 
C)  the Japanese exporter will be paid $9,524 
D)  the exposure is considered to be a translation exposure, not a transaction exposure

Question 16

A transaction exposure for a U.S. company ________.

Accepted Answer

A)  occurs when the dollar value of a payable from exports changes as the exchange-rate changes 
B)  generally takes place when foreign currencies weaken against the dollar 
C)  occurs when reporting systems are inadequate 
D)  does not result in a gain or loss in cash flows 
A)  occurs when the dollar value of a payable from exports changes as the exchange-rate changes 
B)  generally takes place when foreign currencies weaken against the dollar 
C)  occurs when reporting systems are inadequate 
D)  does not result in a gain or loss in cash flows

Question 17

A transaction exposure results in a foreign exchange gain or loss.

Accepted Answer

A) True 
 B)False

Question 18

What is a transfer price? Why are transfer prices used?

Accepted Answer

A major tax challenge,as well as impedim

Question 19

An option is a hedging instrument that allows one to establish a fixed exchange rate for future transactions where delivery is required.

Accepted Answer

A) True 
 B)False

Question 20

Assume that a company has a foreign subsidiary in a country with an exchange rate that is expected to strengthen against the parent company's currency. If the parent is planning the timing for the subsidiary to send a dividend to the parent,it would probably choose a lag strategy.

Accepted Answer

A) True 
 B)False

Which of the following is a characteristic of the Eurocurrency market?

According to U.S. tax law,if a foreign subsidiary earns income,________.

A price on goods and services sold by one member of a corporate family to another is known as a(n)________.

The principle by which the tax authorities allow firms to reduce their tax liability by the amount of income taxes paid to foreign governments is known as ________.

What is the main challenge companies face in listing ADRs in the United States?

Which of the following countries has the largest market for domestic bonds?

Subpart F income is passive and usually derived from operations in a tax-haven country.

What are the major sources of internal funds for MNEs? Why do many MNEs acquire external funds through the Eurodollar market?

A translation exposure occurs when the dollar value of a receivable or payable from exports or imports changes as the exchange-rate changes.

An economic exposure ________.

What is foreign currency translation exposure? How can this type of exposure affect an MNE?

According to 2010 data,which of the following statements about the mix of debt and equity to fund operations is true?

Assume a U.S. exporter sells to a British importer and denominates the sale in dollars. If the dollar rises over time against the British pound,what types of economic exposure and/or possible strategies could the exporter or importer face?

A transaction exposure for a U.S. company ________.

A transaction exposure results in a foreign exchange gain or loss.

What is a transfer price? Why are transfer prices used?

An option is a hedging instrument that allows one to establish a fixed exchange rate for future transactions where delivery is required.

Assume that a company has a foreign subsidiary in a country with an exchange rate that is expected to strengthen against the parent company's currency. If the parent is planning the timing for the subsidiary to send a dividend to the parent,it would probably choose a lag strategy.

Globalization and International Business

The Cultural Environments Facing Business

The Political and Legal Environments Facing Business

The Economic Environments Facing Businesses

Globalization and Society

International Trade and Factor Mobility Theory

Governmental Influence on Trade

Cross-National Cooperation and Agreements

Global Foreign-Exchange Markets

The Determination of Exchange Rates

The Strategy of International Business

Country Evaluation and Selection

Export and Import

Direct Investment and Collaborative Strategies

The Organization of International Business

Marketing Globally

Global Manufacturing and Supply Chain Management

International Accounting Issues

International Human Resources

Filters

Exam 19: The Multinational Finance Function

Which of the following is a characteristic of the Eurocurrency market?

According to U.S. tax law,if a foreign subsidiary earns income,________.

A price on goods and services sold by one member of a corporate family to another is known as a(n)________.

The principle by which the tax authorities allow firms to reduce their tax liability by the amount of income taxes paid to foreign governments is known as ________.

What is the main challenge companies face in listing ADRs in the United States?

Which of the following countries has the largest market for domestic bonds?

Subpart F income is passive and usually derived from operations in a tax-haven country.

What are the major sources of internal funds for MNEs? Why do many MNEs acquire external funds through the Eurodollar market?

A translation exposure occurs when the dollar value of a receivable or payable from exports or imports changes as the exchange-rate changes.

An economic exposure ________.

What is foreign currency translation exposure? How can this type of exposure affect an MNE?

According to 2010 data,which of the following statements about the mix of debt and equity to fund operations is true?

Assume a U.S. exporter sells to a British importer and denominates the sale in dollars. If the dollar rises over time against the British pound,what types of economic exposure and/or possible strategies could the exporter or importer face?

A transaction exposure for a U.S. company ________.

A transaction exposure results in a foreign exchange gain or loss.

What is a transfer price? Why are transfer prices used?

An option is a hedging instrument that allows one to establish a fixed exchange rate for future transactions where delivery is required.

Assume that a company has a foreign subsidiary in a country with an exchange rate that is expected to strengthen against the parent company's currency. If the parent is planning the timing for the subsidiary to send a dividend to the parent,it would probably choose a lag strategy.

Globalization and International Business

The Cultural Environments Facing Business

The Political and Legal Environments Facing Business

The Economic Environments Facing Businesses

Globalization and Society

International Trade and Factor Mobility Theory

Governmental Influence on Trade

Cross-National Cooperation and Agreements

Global Foreign-Exchange Markets

The Determination of Exchange Rates

The Strategy of International Business

Country Evaluation and Selection

Export and Import

Direct Investment and Collaborative Strategies

The Organization of International Business

Marketing Globally

Global Manufacturing and Supply Chain Management

International Accounting Issues

International Human Resources

Filters