Question 1

Which of the following statements is FALSE?

Accepted Answer

A) The rate of interest paid on government bonds or other securities in a country with a tradition of weak enforcement of property rights is likely not really a risk-free rate.Instead,interest rates in the country will reflect a risk premium for the possibility of default,so relations such as covered interest rate parity will likely not hold exactly. 
B) If the return difference in a segmented financial market results from a market friction such as capital controls,corporations can exploit this friction by setting up projects and raising capital in the high-return country/currency. 
C) Important macroeconomic reasons for segmented capital markets include capital controls and foreign exchange controls that create barriers to international capital flows and thus segment national markets. 
D) A segmented financial market has an important implication for international corporate finance: One country or currency has a higher rate of return than another country or currency,when the two rates are compared in the same currency. 
A) The rate of interest paid on government bonds or other securities in a country with a tradition of weak enforcement of property rights is likely not really a risk-free rate.Instead,interest rates in the country will reflect a risk premium for the possibility of default,so relations such as covered interest rate parity will likely not hold exactly. 
B) If the return difference in a segmented financial market results from a market friction such as capital controls,corporations can exploit this friction by setting up projects and raising capital in the high-return country/currency. 
C) Important macroeconomic reasons for segmented capital markets include capital controls and foreign exchange controls that create barriers to international capital flows and thus segment national markets. 
D) A segmented financial market has an important implication for international corporate finance: One country or currency has a higher rate of return than another country or currency,when the two rates are compared in the same currency.

Question 2

Which of the following statements is FALSE?

Accepted Answer

A) Other benefits from deferral arise because the firm effectively gains a real option to repatriate income at times when repatriation might be cheaper. 
B) By pooling foreign income,the firm effectively pays the combined tax rate on all foreign income. 
C) In years in which the U.S.tax rate exceeds the combined tax rate on all foreign income,the repatriation of additional income does not incur an additional U.S.tax liability,so the earnings can be repatriated tax free. 
D) Deferring repatriation of earnings lowers the overall tax burden in much the same way as deferring capital gains lowers the tax burden imposed by the capital gains tax. 
A) Other benefits from deferral arise because the firm effectively gains a real option to repatriate income at times when repatriation might be cheaper. 
B) By pooling foreign income,the firm effectively pays the combined tax rate on all foreign income. 
C) In years in which the U.S.tax rate exceeds the combined tax rate on all foreign income,the repatriation of additional income does not incur an additional U.S.tax liability,so the earnings can be repatriated tax free. 
D) Deferring repatriation of earnings lowers the overall tax burden in much the same way as deferring capital gains lowers the tax burden imposed by the capital gains tax.

Question 3

Consider the following equation:  
=  
(1 +  
)- 1
The term  
In this equation refers to:

Accepted Answer

A) the cost of capital in terms of dollars. 
B) the risk-free rate of interest on the yen. 
C) the risk-free rate of interest on the dollar. 
D) the cost of capital for the firm in terms of yen. 
A) the cost of capital in terms of dollars. 
B) the risk-free rate of interest on the yen. 
C) the risk-free rate of interest on the dollar. 
D) the cost of capital for the firm in terms of yen.

Question 4

Luther Industries,a U.S.firm,is considering an investment in Japan.The dollar cost of equity for Luther is 12%.The risk-free interest rates on dollars and yen are r$ = 5.5% and r¥ = 1.5% respectively.Luther industries is willing to assume that capital markets are internationally integrated.Luther Industries needs to know the comparable cost of equity in Japanese yen for a project with free cash flows that are uncorrelated with spot exchange rates.The yen cost of equity for Luther Industries is closest to:

Accepted Answer

A) 14.0% 
B) 12.3% 
C) 7.8% 
D) 18.5% 
A) 14.0% 
B) 12.3% 
C) 7.8% 
D) 18.5%

Question 5

Which of the following statements is FALSE?

Accepted Answer

A) In some countries,especially in the developing world,all investors do not have equal access to financial securities. 
B) Firms may face differential access to markets if there is any kind of asymmetry with respect to information about them. 
C) In some cases,a country's risk-free securities are internationally integrated but markets for a specific firm's securities are not. 
D) When countries' capital markets are not integrated we call them disintegrated capital markets. 
A) In some countries,especially in the developing world,all investors do not have equal access to financial securities. 
B) Firms may face differential access to markets if there is any kind of asymmetry with respect to information about them. 
C) In some cases,a country's risk-free securities are internationally integrated but markets for a specific firm's securities are not. 
D) When countries' capital markets are not integrated we call them disintegrated capital markets.

Which of the following statements is FALSE?

Which of the following statements is FALSE?

Consider the following equation: = (1 + )- 1 The term In this equation refers to:

Which of the following statements is FALSE?

The Corporation

Introduction to Financial Statement Analysis

Financial Decision Making and the Law of One Price

The Time Value of Money

Interest Rates

Valuing Bonds

Investment Decision Rules

Fundamentals of Capital Budgeting

Valuing Stocks

Capital Markets and the Pricing of Risk

Optimal Portfolio Choice and the Capital Asset Pricing Model

Estimating the Cost of Capital

Investor Behavior and Capital Market Efficiency

Capital Structure in a Perfect Market

Debt and Taxes

Financial Distress,managerial Incentives,and Information

Payout Policy

Capital Budgeting and Valuation With Leverage

Valuation and Financial Modeling: a Case Study

Financial Options

Option Valuation

Real Options

Raising Equity Capital

Debt Financing

Leasing

Working Capital Management

Short-Term Financial Planning

Mergers and Acquisitions

Corporate Governance

Risk Management

Filters

Exam 31: International Corporate Finance

Which of the following statements is FALSE?

Which of the following statements is FALSE?

Consider the following equation: = (1 + )- 1 The term In this equation refers to:

Which of the following statements is FALSE?

The Corporation

Introduction to Financial Statement Analysis

Financial Decision Making and the Law of One Price

The Time Value of Money

Interest Rates

Valuing Bonds

Investment Decision Rules

Fundamentals of Capital Budgeting

Valuing Stocks

Capital Markets and the Pricing of Risk

Optimal Portfolio Choice and the Capital Asset Pricing Model

Estimating the Cost of Capital

Investor Behavior and Capital Market Efficiency

Capital Structure in a Perfect Market

Debt and Taxes

Financial Distress,managerial Incentives,and Information

Payout Policy

Capital Budgeting and Valuation With Leverage

Valuation and Financial Modeling: a Case Study

Financial Options

Option Valuation

Real Options

Raising Equity Capital

Debt Financing

Leasing

Working Capital Management

Short-Term Financial Planning

Mergers and Acquisitions

Corporate Governance

Risk Management

Filters