Question 1

Most financial theorists believe that the optimal capital structure is a ________ with a debt to total value ratio somewhere around ________.

Accepted Answer

A) point; 50% 
B) point; 25% 
C) range; 30%-60% 
D) range; 10%-40% 
A) point; 50% 
B) point; 25% 
C) range; 30%-60% 
D) range; 10%-40% C

Question 2

Eurocredits are

Accepted Answer

A) bank loans to MNEs and others denominated in a currency other than that of the country where the bank is located. 
B) typically variable rate and tied to the LIBOR. 
C) usually for maturities of six months or less. 
D) All of the above are true. 
A) bank loans to MNEs and others denominated in a currency other than that of the country where the bank is located. 
B) typically variable rate and tied to the LIBOR. 
C) usually for maturities of six months or less. 
D) All of the above are true. D

Question 3

TropiKana Inc., a U.S firm, has just borrowed euro 1,000,000 to make improvements to an Italian fruit plantation and processing plant. If the interest rate is 5.50% per year and the Euro appreciates against the dollar from $1.40/€ at the time the loan was made to $1.45/€ at the end of the first year, how much interest will TropiKana pay at the end of the first year (rounded)?

Accepted Answer

A) $55,000 
B) $79,750 
C) $77,000 
D) $37,931 
A) $55,000 
B) $79,750 
C) $77,000 
D) $37,931 B

Question 4

One of the most important factors in making debt less expensive than equity is

Accepted Answer

A) the tax deductibility of depreciation. 
B) the tax deductibility of equity. 
C) the tax deductibility of dividends. 
D) the tax deductibility of interest. 
A) the tax deductibility of depreciation. 
B) the tax deductibility of equity. 
C) the tax deductibility of dividends. 
D) the tax deductibility of interest.

Question 5

Eurobanks are

Accepted Answer

A) banks where Eurocurrencies are deposited. 
B) major world banks that conduct a Eurocurrency business in addition to normal banking activities. 
C) financial intermediaries that simultaneously bid for time deposits in and make loans in a currency other than that of the currency of where it is located. 
D) All of the above are descriptions of a Eurobank. 
A) banks where Eurocurrencies are deposited. 
B) major world banks that conduct a Eurocurrency business in addition to normal banking activities. 
C) financial intermediaries that simultaneously bid for time deposits in and make loans in a currency other than that of the currency of where it is located. 
D) All of the above are descriptions of a Eurobank.

Question 6

TropiKana Inc., a U.S firm, has just borrowed euro 1,000,000 to make improvements to an Italian fruit plantation and processing plant. If the interest rate is 5.50% per year and the Euro depreciates against the dollar from $1.40/€ at the time the loan was made to $1.35/€ at the end of the first year, how much interest and principle will TropiKana pay at the end of the first year if they repay the entire loan plus interest (rounded)?

Accepted Answer

A) $1,477,000 
B) $1,055,000 
C) €1,424,250 
D) $1,424,250 
A) $1,477,000 
B) $1,055,000 
C) €1,424,250 
D) $1,424,250

Question 7

________ are domestic currencies of one country on deposit in a second country.

Accepted Answer

A) LIBORs 
B) Eurocurrencies 
C) Federal funds 
D) Discount window deposits 
A) LIBORs 
B) Eurocurrencies 
C) Federal funds 
D) Discount window deposits

Question 8

Portfolio diversification of domestic firms reduces risk because cash flows are not perfectly correlated. The same reasoning is often argued for MNEs diversifying into international markets.

Accepted Answer

A) True 
 B)False

Question 9

If we accept the MNE objective of minimizing the consolidated cost of capital then

Accepted Answer

A) the subsidiary's cost of capital is relevant only to the extent that it affects this overall goal. 
B) the objective of minimizing the cost of capital for each individual subsidiary may not be appropriate. 
C) the value of the MNE as a whole should be maximized. 
D) all of the above 
A) the subsidiary's cost of capital is relevant only to the extent that it affects this overall goal. 
B) the objective of minimizing the cost of capital for each individual subsidiary may not be appropriate. 
C) the value of the MNE as a whole should be maximized. 
D) all of the above

Question 10

Of the following, which is NOT considered to be an advantage to MNEs of having a financial structure adhere to local debt norms?

Accepted Answer

A) A localized financial structure reduces criticism of foreign subsidiaries that have previously used a different capital structure. 
B) A localized financial structure helps management evaluate return on equity investment relative to local competitors in the same industry. 
C) MNE have a competitive advantage over the locals, thus by using the local capital structure, the MNE is even stronger. 
D) All of the above are noted as advantages to having a localized capital structure. 
A) A localized financial structure reduces criticism of foreign subsidiaries that have previously used a different capital structure. 
B) A localized financial structure helps management evaluate return on equity investment relative to local competitors in the same industry. 
C) MNE have a competitive advantage over the locals, thus by using the local capital structure, the MNE is even stronger. 
D) All of the above are noted as advantages to having a localized capital structure.

Question 11

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 12

Not all firms have the same optimal capital structure. Factors that might influence a firm's capital structure include

Accepted Answer

A) the industry in which it operates. 
B) the volatility of its sales and operating income. 
C) the collateral value of its assets. 
D) all of the above 
A) the industry in which it operates. 
B) the volatility of its sales and operating income. 
C) the collateral value of its assets. 
D) all of the above

Question 13

Of the following, which is NOT considered to be a disadvantage to MNEs of having a financial structure adhere to local debt norms?

Accepted Answer

A) Why adhere to local standards if, as an MNE, the firm has important competitive advantages relating to capital structure? 
B) Adhering to local standards may push the MNE consolidated financial ratios out of the optimal range. 
C) A localized financial structure makes it difficult for management to compare operating results with those of local competitors. 
D) All of the above are noted as disadvantages to having a localized capital structure. 
A) Why adhere to local standards if, as an MNE, the firm has important competitive advantages relating to capital structure? 
B) Adhering to local standards may push the MNE consolidated financial ratios out of the optimal range. 
C) A localized financial structure makes it difficult for management to compare operating results with those of local competitors. 
D) All of the above are noted as disadvantages to having a localized capital structure.

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

Which financial economists are most closely associated with the financial theory of optimal capital structure?

Accepted Answer

A) Modigliani and Miller 
B) Fama, Fisher, Jensen, and Roll 
C) Black and Scholes 
D) Markowitz and Sharpe 
A) Modigliani and Miller 
B) Fama, Fisher, Jensen, and Roll 
C) Black and Scholes 
D) Markowitz and Sharpe

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

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 18

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 19

For most firms, the cost of capital decreases to a low point as the firm ________ debt financing. At some point beyond this optimal level, the cost of capital increases as the amount of debt ________.

Accepted Answer

A) decreases; increases. 
B) decreases; decreases. 
C) increases; increases. 
D) increases; decreases. 
A) decreases; increases. 
B) decreases; decreases. 
C) increases; increases. 
D) increases; decreases.

Question 20

TropiKana Inc., a U.S firm, has just borrowed euro 1,000,000 to make improvements to an Italian fruit plantation and processing plant. If the interest rate is 5.50% per year and the Euro depreciates against the dollar from $1.40/€ at the time the loan was made to $1.35/€ at the end of the first year, how much interest will TropiKana pay at the end of the first year (rounded)?

Accepted Answer

A) $55,000 
B) €74,250 
C) $74,250 
D) $77,000 
A) $55,000 
B) €74,250 
C) $74,250 
D) $77,000

Most financial theorists believe that the optimal capital structure is a with a debt to total value ratio somewhere around .

Eurocredits are

One of the most important factors in making debt less expensive than equity is

Eurobanks are

________ are domestic currencies of one country on deposit in a second country.

Portfolio diversification of domestic firms reduces risk because cash flows are not perfectly correlated. The same reasoning is often argued for MNEs diversifying into international markets.

If we accept the MNE objective of minimizing the consolidated cost of capital then

Of the following, which is NOT considered to be an advantage to MNEs of having a financial structure adhere to local debt norms?

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?

Not all firms have the same optimal capital structure. Factors that might influence a firm's capital structure include

Of the following, which is NOT considered to be a disadvantage to MNEs of having a financial structure adhere to local debt norms?

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

Which financial economists are most closely associated with the financial theory of optimal capital structure?

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

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

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.

For most firms, the cost of capital decreases to a low point as the firm debt financing. At some point beyond this optimal level, the cost of capital increases as the amount of debt .

Globalization and the Multinational Enterprise

Financial Goals and Corporate Governance

The International Monetary System

The Balance of Payments

Current Multinational Financial Challenges: the Credit Crisis of 2007-2009

The Foreign Exchange Market

International Parity Conditions

Foreign Currency Derivatives

Interest Rate and Currency Swaps

Foreign Exchange Rate Determination and Forecasting

Transaction Exposure

Operating Exposure

Translation Exposure

The Global Cost and Availability of Capital

Sourcing Equity Globally

International Portfolio Theory and Diversification

Foreign Direct Investment Theory and Political Risk

Multinational Capital Budgeting

Multinational Tax Management

Working Capital Management

International Trade Finance

Filters

Exam 16: Sourcing Debt Globally

Most financial theorists believe that the optimal capital structure is a ________ with a debt to total value ratio somewhere around ________.

Eurocredits are

One of the most important factors in making debt less expensive than equity is

Eurobanks are

________ are domestic currencies of one country on deposit in a second country.

Portfolio diversification of domestic firms reduces risk because cash flows are not perfectly correlated. The same reasoning is often argued for MNEs diversifying into international markets.

If we accept the MNE objective of minimizing the consolidated cost of capital then

Of the following, which is NOT considered to be an advantage to MNEs of having a financial structure adhere to local debt norms?

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?

Not all firms have the same optimal capital structure. Factors that might influence a firm's capital structure include

Of the following, which is NOT considered to be a disadvantage to MNEs of having a financial structure adhere to local debt norms?

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

Which financial economists are most closely associated with the financial theory of optimal capital structure?

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

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

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.

For most firms, the cost of capital decreases to a low point as the firm ________ debt financing. At some point beyond this optimal level, the cost of capital increases as the amount of debt ________.

Globalization and the Multinational Enterprise

Financial Goals and Corporate Governance

The International Monetary System

The Balance of Payments

Current Multinational Financial Challenges: the Credit Crisis of 2007-2009

The Foreign Exchange Market

International Parity Conditions

Foreign Currency Derivatives

Interest Rate and Currency Swaps

Foreign Exchange Rate Determination and Forecasting

Transaction Exposure

Operating Exposure

Translation Exposure

The Global Cost and Availability of Capital

Sourcing Equity Globally

International Portfolio Theory and Diversification

Foreign Direct Investment Theory and Political Risk

Multinational Capital Budgeting

Multinational Tax Management

Working Capital Management

International Trade Finance

Filters

Most financial theorists believe that the optimal capital structure is a with a debt to total value ratio somewhere around .

For most firms, the cost of capital decreases to a low point as the firm debt financing. At some point beyond this optimal level, the cost of capital increases as the amount of debt .