Question 1

The public pathway to raise equity capital outside of its home market includes the following EXCEPT:

Accepted Answer

A)  Euroequity issue. 
B)  Strategic Partner/Alliance. 
C)  shares sold to a specific market or exchange. 
D)  seasoned offering. 
A)  Euroequity issue. 
B)  Strategic Partner/Alliance. 
C)  shares sold to a specific market or exchange. 
D)  seasoned offering. B

Question 2

List and describe three differences and advantages of Global Registered Shares (GRS) over American Depositary Receipts (ADRs).

Accepted Answer

Depositary receipts are negotiable certificates issued by a bank to represent the underlying shares of stock held in trust at a foreign custodian bank. Those receipts traded in the U.S. and denominated in dollars are called American depositary receipts (ADR). ADRs do offer some technical advantages: dividends are received in dollars rather than a foreign currency, ADRs are in registered form rather than bearer form, transfer of ownership is done in accordance with U.S. laws, and in the event of death, probate is in the U.S. and not abroad. Taxes are easier, trading costs are typically lower, and settlement is also faster.
A global registered share (GRS) is a share of equity that is traded across borders and markets without conversion, where one share on the home exchange equals one share on the foreign exchange. If target pricing is important in key markets like that of the U.S., then the ADR offers better opportunities for a foreign firm to gain greater presence and activity. There are two fundamental arguments in favor of GRSs over ADRs, both based on pure forces of globalization:1) Investors and markets alike will continue to grow, 2) Regulations governing security trading across country markets will continue to converge towards a common set of global principles, eliminating the need for securities customized for local market attributes or requirements. Other potential distinctions include the possibility of retaining all voting rights (GRSs do by definition while some ADRs may not) and the general principle that ADRs are designed for one singular cultural and legal environment-the United States.

Question 3

Foreign bonds sold in the United States are nicknamed "Yankee bonds," foreign bonds sold in Japan are called "Samurai bonds." What are foreign bonds sold in the United Kingdom nicknamed?

Accepted Answer

A)  "Union Jacks" 
B)  "Royalty" 
C)  "Bulldogs" 
D)  "Churchill's" 
A)  "Union Jacks" 
B)  "Royalty" 
C)  "Bulldogs" 
D)  "Churchill's" C

Question 4

When a firm borrows in a foreign currency, the effective cost is the foreign interest rate plus an adjustment for changes in the exchange rate.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following was NOT identified by the authors as an alternative instrument to source equity in global markets?

Accepted Answer

A)  sale of a directed public share issue to investors in a target market 
B)  private placements under SEC rule 144a 
C)  sale of shares to private equity funds 
D)  All of the above are alternatives to source equity instruments. 
A)  sale of a directed public share issue to investors in a target market 
B)  private placements under SEC rule 144a 
C)  sale of shares to private equity funds 
D)  All of the above are alternatives to source equity instruments.

Question 6

Investment banking services include which of the following?

Accepted Answer

A)  advising when a security should be cross-listed 
B)  preparation of stock prospectuses 
C)  help to determine the price of the issue 
D)  all of the above 
A)  advising when a security should be cross-listed 
B)  preparation of stock prospectuses 
C)  help to determine the price of the issue 
D)  all of the above

Question 7

Financial practice suggests that there is a range for an optimal capital structure for a firm within an industry rather than a specific optimal ratio of debt to equity.

Accepted Answer

A) True 
 B)False

Question 8

The domestic theory of optimal capital structure does not need to be modified for MNEs.

Accepted Answer

A) True 
 B)False

Question 9

An unsponsored ADR may be initiated without the approval of the foreign firm with the underlying stock.

Accepted Answer

A) True 
 B)False

Question 10

Level ________ is the easiest standard to satisfy for issuing ADRs.

Accepted Answer

A)  144a 
B)  III 
C)  II 
D)  I 
A)  144a 
B)  III 
C)  II 
D)  I

Question 11

In general, which has the shorter maturity and is more appropriate for funding short-term inventory needs?

Accepted Answer

A)  commercial paper 
B)  Euro-Medium-Term notes (EMTNs) 
C)  the international bond market 
D)  all of the above 
A)  commercial paper 
B)  Euro-Medium-Term notes (EMTNs) 
C)  the international bond market 
D)  all of the above

Question 12

Eurobonds offer tax anonymity.

Accepted Answer

A) True 
 B)False

Question 13

A multinational firm that proceeds to raise capital outside of its domestic market is ultimately in search of an issuance - the IPO or SPO. But often issuances must be preceded by listings, in which the shares are traded on an exchange and, therefore, in a specific country market. The listing serves the following purposes EXCEPT:

Accepted Answer

A)  gaining name recognition. 
B)  reducing the compliance costs. 
C)  gaining visibility. 
D)  preparing the market for an issuance. 
A)  gaining name recognition. 
B)  reducing the compliance costs. 
C)  gaining visibility. 
D)  preparing the market for an issuance.

Question 14

In early stages of a foreign subsidiary's life, local host country debt is the only possible source of funding.

Accepted Answer

A) True 
 B)False

Question 15

Eurocurrencies are NOT the same as the euro developed for the common European currency.

Accepted Answer

A) True 
 B)False

Question 16

The Euro-medium-term-note (EMTN) has filled a substantial niche market in global financing. What are the distinguishing characteristics of the EMTN and why is it such a popular form of financing for MNEs?

Accepted Answer

EMTNs have maturity between the long-liv

Question 17

Which of the following is the typical order of sourcing capital abroad?

Accepted Answer

A)  an international bond issue, then cross-listing the outstanding issues on other exchanges, then an international bond issue in the target market 
B)  an international bond issue in the target market, then cross-listing the outstanding issues on other exchanges, then an international bond issue 
C)  an international bond issue in less prestigious markets, then an international bond issue in the target market, and ultimately a eurobond issue 
D)  cross-listing the outstanding issues on other exchanges, then an international bond issue, then an international bond issue in the target market 
A)  an international bond issue, then cross-listing the outstanding issues on other exchanges, then an international bond issue in the target market 
B)  an international bond issue in the target market, then cross-listing the outstanding issues on other exchanges, then an international bond issue 
C)  an international bond issue in less prestigious markets, then an international bond issue in the target market, and ultimately a eurobond issue 
D)  cross-listing the outstanding issues on other exchanges, then an international bond issue, then an international bond issue in the target market

Question 18

Multinationals often strive to maximize the amount of equity from the parent company in foreign subsidiaries in order to reduce capital risk.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is the typical first step sourcing capital abroad?

Accepted Answer

A)  an international bond issue placed on a more prestigious foreign market 
B)  an international bond issue in the eurobond market 
C)  an international bond issue placed on a less prestigious foreign market 
D)  issue equity in one of the less prestigious markets to attract the attention of international investors first 
A)  an international bond issue placed on a more prestigious foreign market 
B)  an international bond issue in the eurobond market 
C)  an international bond issue placed on a less prestigious foreign market 
D)  issue equity in one of the less prestigious markets to attract the attention of international investors first

Question 20

Eurobonds are usually issued in registered form.

Accepted Answer

A) True 
 B)False

The public pathway to raise equity capital outside of its home market includes the following EXCEPT:

List and describe three differences and advantages of Global Registered Shares (GRS) over American Depositary Receipts (ADRs).

Foreign bonds sold in the United States are nicknamed "Yankee bonds," foreign bonds sold in Japan are called "Samurai bonds." What are foreign bonds sold in the United Kingdom nicknamed?

When a firm borrows in a foreign currency, the effective cost is the foreign interest rate plus an adjustment for changes in the exchange rate.

Which of the following was NOT identified by the authors as an alternative instrument to source equity in global markets?

Investment banking services include which of the following?

Financial practice suggests that there is a range for an optimal capital structure for a firm within an industry rather than a specific optimal ratio of debt to equity.

The domestic theory of optimal capital structure does not need to be modified for MNEs.

An unsponsored ADR may be initiated without the approval of the foreign firm with the underlying stock.

Level ________ is the easiest standard to satisfy for issuing ADRs.

In general, which has the shorter maturity and is more appropriate for funding short-term inventory needs?

Eurobonds offer tax anonymity.

In early stages of a foreign subsidiary's life, local host country debt is the only possible source of funding.

Eurocurrencies are NOT the same as the euro developed for the common European currency.

The Euro-medium-term-note (EMTN) has filled a substantial niche market in global financing. What are the distinguishing characteristics of the EMTN and why is it such a popular form of financing for MNEs?

Which of the following is the typical order of sourcing capital abroad?

Multinationals often strive to maximize the amount of equity from the parent company in foreign subsidiaries in order to reduce capital risk.

Which of the following is the typical first step sourcing capital abroad?

Eurobonds are usually issued in registered form.

Multinational Financial Management: Opportunities and Challenges

The International Monetary System

The Balance of Payments

Financial Goals and Corporate Governance

The Foreign Exchange Market

International Parity Conditions

Foreign Currency Derivatives: Futures and Options

Interest Risk and Swaps

Foreign Exchange Rate Determination and Intervention

Transaction Exposure

Translation Exposure

Operating Exposure

Global Cost and Availability of Capital

Multinational Tax Management

International Trade Finance

Foreign Direct Investment and Political Risk

Multinational Capital Budgeting and Cross-Border Acquisitions

Filters

Exam 14: Funding the Multinational Firm

The public pathway to raise equity capital outside of its home market includes the following EXCEPT:

List and describe three differences and advantages of Global Registered Shares (GRS) over American Depositary Receipts (ADRs).

Foreign bonds sold in the United States are nicknamed "Yankee bonds," foreign bonds sold in Japan are called "Samurai bonds." What are foreign bonds sold in the United Kingdom nicknamed?

When a firm borrows in a foreign currency, the effective cost is the foreign interest rate plus an adjustment for changes in the exchange rate.

Which of the following was NOT identified by the authors as an alternative instrument to source equity in global markets?

Investment banking services include which of the following?

Financial practice suggests that there is a range for an optimal capital structure for a firm within an industry rather than a specific optimal ratio of debt to equity.

The domestic theory of optimal capital structure does not need to be modified for MNEs.

An unsponsored ADR may be initiated without the approval of the foreign firm with the underlying stock.

Level ________ is the easiest standard to satisfy for issuing ADRs.

In general, which has the shorter maturity and is more appropriate for funding short-term inventory needs?

Eurobonds offer tax anonymity.

In early stages of a foreign subsidiary's life, local host country debt is the only possible source of funding.

Eurocurrencies are NOT the same as the euro developed for the common European currency.

The Euro-medium-term-note (EMTN) has filled a substantial niche market in global financing. What are the distinguishing characteristics of the EMTN and why is it such a popular form of financing for MNEs?

Which of the following is the typical order of sourcing capital abroad?

Multinationals often strive to maximize the amount of equity from the parent company in foreign subsidiaries in order to reduce capital risk.

Which of the following is the typical first step sourcing capital abroad?

Eurobonds are usually issued in registered form.

Multinational Financial Management: Opportunities and Challenges

The International Monetary System

The Balance of Payments

Financial Goals and Corporate Governance

The Foreign Exchange Market

International Parity Conditions

Foreign Currency Derivatives: Futures and Options

Interest Risk and Swaps

Foreign Exchange Rate Determination and Intervention

Transaction Exposure

Translation Exposure

Operating Exposure

Global Cost and Availability of Capital

Multinational Tax Management

International Trade Finance

Foreign Direct Investment and Political Risk

Multinational Capital Budgeting and Cross-Border Acquisitions

Filters