Question 1

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

Accepted Answer

A) the seniority of equity obligations to debt claims. 
B) the tax deductibility of dividends. 
C) the tax deductibility of equity. 
D) the seniority of debt obligations to equity claims. 
A) the seniority of equity obligations to debt claims. 
B) the tax deductibility of dividends. 
C) the tax deductibility of equity. 
D) the seniority of debt obligations to equity claims.

Question 2

Internal sources of funds for a foreign subsidiary of a MNE may come from the parent company but not from a sister subsidiary. Funding from sister subsidiaries are considered external funding.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is NOT a factor offsetting the tax advantage of debt as a source of financing?

Accepted Answer

A) Increased agency costs. 
B) Increased probability of financial distress (bankruptcy)due to fixed interest payments. 
C) Alternative tax shields to those supplied by interest payments. 
D) All of the above offset the tax advantage of debt as a source of financing. 
A) Increased agency costs. 
B) Increased probability of financial distress (bankruptcy)due to fixed interest payments. 
C) Alternative tax shields to those supplied by interest payments. 
D) All of the above offset the tax advantage of debt as a source of financing.

Question 4

The Eurocurrency market continues to thrive because it is a large international money market relatively free of governmental regulation and interference.

Accepted Answer

A) True 
 B)False

Question 5

Of the following, which is NOT identified by the authors as a country-specific environmental variable key to determining debt ratios?

Accepted Answer

A) Historical development. 
B) Taxation. 
C) Corporate governance. 
D) All of the above are key variables identified by the authors. 
A) Historical development. 
B) Taxation. 
C) Corporate governance. 
D) All of the above are key variables identified by the authors.

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 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 and principle will TropiKana pay at the end of the first year if they repay the entire loan plus interest (rounded)?

Accepted Answer

A) $1,529,750 
B) €1,529,750 
C) $1,055,000 
D) $1,477,000 
A) $1,529,750 
B) €1,529,750 
C) $1,055,000 
D) $1,477,000

Question 7

The MNE in an effort to minimize the cost of external funds should choose ________ funds to minimize ________.

Accepted Answer

A) internal; debt financing. 
B) internal; taxes and political risk. 
C) external; debt financing. 
D) external; taxes and political risk. 
A) internal; debt financing. 
B) internal; taxes and political risk. 
C) external; debt financing. 
D) external; taxes and political risk.

Question 8

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, what is the before tax cost of capital if the firm repays the entire loan plus interest (rounded)?

Accepted Answer

A) 1.73% 
B) 5.50% 
C) 10.50% 
D) 9.27% 
A) 1.73% 
B) 5.50% 
C) 10.50% 
D) 9.27%

Question 9

In theory, the MNE should support ________ debt ratios than a purely domestic firm because their cash flows are ________.

Accepted Answer

A) lower; more stable due to international diversification 
B) lower; less stable due to international diversification 
C) higher; more stable due to international diversification 
D) higher; less stable due to international diversification 
A) lower; more stable due to international diversification 
B) lower; less stable due to international diversification 
C) higher; more stable due to international diversification 
D) higher; less stable due to international diversification

Question 10

A significant advantage of borrowing foreign currency-denominated bonds is that the borrower need not worry about relative changes in the value of the home currency.

Accepted Answer

A) True 
 B)False

Question 11

For firms to raise capital in international markets, it is more important to adhere to capital structure ratios similar to those found in the United States and United Kingdom than to those in the firm's home country.

Accepted Answer

A) True 
 B)False

Question 12

MNEs situated in countries with small illiquid and segmented markets are most like

Accepted Answer

A) small domestic U.S. firms in that they must rely on internally generated funds and bank borrowing. 
B) large U.S. MNEs in that they are all MNEs and have worldwide markets and sources of financing. 
C) small domestic U.S. firms in that they have a strong niche market in the U.S. 
D) None of the above is true. 
A) small domestic U.S. firms in that they must rely on internally generated funds and bank borrowing. 
B) large U.S. MNEs in that they are all MNEs and have worldwide markets and sources of financing. 
C) small domestic U.S. firms in that they have a strong niche market in the U.S. 
D) None of the above is true.

Question 13

Financial theory has at last provided us with a single optimal capital structure for domestic firms.

Accepted Answer

A) True 
 B)False

Question 14

TropiKana Inc., a U.S firm, has just borrowed $1,000,000 to make improvements to an Italian fruit plantation and processing plant. If the interest rate is 6.00% per year, how much interest will they pay in the first year?

Accepted Answer

A) $6,000 
B) $60,000 
C) $600,000 
D) €60,000 
A) $6,000 
B) $60,000 
C) $600,000 
D) €60,000

Question 15

Moody's rates international bonds at the request of the issuer with the stipulation that Moody's will publish the ratings even if the ratings are unfavorable.

Accepted Answer

A) True 
 B)False

Question 16

A ________ is a bond underwritten by a syndicate from a single country, sold within in that country, denominated in that country's currency, but the issuer is from outside that country.

Accepted Answer

A) foreign bond 
B) Eurobond 
C) domestic bond 
D) none of the above 
A) foreign bond 
B) Eurobond 
C) domestic bond 
D) none of the above

Question 17

Of the following, which is NOT an internal source of financing for the foreign subsidiary?

Accepted Answer

A) Equity in the form of cash from the parent firm. 
B) Equity in the form of real goods from the parent. 
C) Debt in the form of loans from the same commercial bank used by the parent. 
D) All of the above are internal sources of financing for the foreign subsidiary. 
A) Equity in the form of cash from the parent firm. 
B) Equity in the form of real goods from the parent. 
C) Debt in the form of loans from the same commercial bank used by the parent. 
D) All of the above are internal sources of financing for the foreign subsidiary.

Question 18

Of the following, which was NOT cited by the authors as a valuable function provided by the Eurocurrency market?

Accepted Answer

A) Eurocurrency deposits are an efficient and convenient money market device for holding excess corporate liquidity. 
B) Eurocurrency deposits are a tool used by the Federal Reserve to regulate the money supply of countries that peg their currency against the U.S. dollar. 
C) The Eurocurrency market is a major source of short-term bank loans to finance corporate working capital needs. 
D) All of the above were cited by the authors. 
A) Eurocurrency deposits are an efficient and convenient money market device for holding excess corporate liquidity. 
B) Eurocurrency deposits are a tool used by the Federal Reserve to regulate the money supply of countries that peg their currency against the U.S. dollar. 
C) The Eurocurrency market is a major source of short-term bank loans to finance corporate working capital needs. 
D) All of the above were cited by the authors.

Question 19

Of the following, which is NOT identified by the authors as a country-specific environmental variable key to determining debt ratios?

Accepted Answer

A) Agency costs. 
B) Government regulations. 
C) The existence of a viable corporate bond market. 
D) All of the above are key variables identified by the authors. 
A) Agency costs. 
B) Government regulations. 
C) The existence of a viable corporate bond market. 
D) All of the above are key variables identified by the authors.

Question 20

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"

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

Internal sources of funds for a foreign subsidiary of a MNE may come from the parent company but not from a sister subsidiary. Funding from sister subsidiaries are considered external funding.

Which of the following is NOT a factor offsetting the tax advantage of debt as a source of financing?

The Eurocurrency market continues to thrive because it is a large international money market relatively free of governmental regulation and interference.

Of the following, which is NOT identified by the authors as a country-specific environmental variable key to determining debt ratios?

The MNE in an effort to minimize the cost of external funds should choose funds to minimize .

In theory, the MNE should support debt ratios than a purely domestic firm because their cash flows are .

A significant advantage of borrowing foreign currency-denominated bonds is that the borrower need not worry about relative changes in the value of the home currency.

For firms to raise capital in international markets, it is more important to adhere to capital structure ratios similar to those found in the United States and United Kingdom than to those in the firm's home country.

MNEs situated in countries with small illiquid and segmented markets are most like

Financial theory has at last provided us with a single optimal capital structure for domestic firms.

TropiKana Inc., a U.S firm, has just borrowed $1,000,000 to make improvements to an Italian fruit plantation and processing plant. If the interest rate is 6.00% per year, how much interest will they pay in the first year?

Moody's rates international bonds at the request of the issuer with the stipulation that Moody's will publish the ratings even if the ratings are unfavorable.

A ________ is a bond underwritten by a syndicate from a single country, sold within in that country, denominated in that country's currency, but the issuer is from outside that country.

Of the following, which is NOT an internal source of financing for the foreign subsidiary?

Of the following, which was NOT cited by the authors as a valuable function provided by the Eurocurrency market?

Of the following, which is NOT identified by the authors as a country-specific environmental variable key to determining debt ratios?

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?

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

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

Internal sources of funds for a foreign subsidiary of a MNE may come from the parent company but not from a sister subsidiary. Funding from sister subsidiaries are considered external funding.

Which of the following is NOT a factor offsetting the tax advantage of debt as a source of financing?

The Eurocurrency market continues to thrive because it is a large international money market relatively free of governmental regulation and interference.

Of the following, which is NOT identified by the authors as a country-specific environmental variable key to determining debt ratios?

The MNE in an effort to minimize the cost of external funds should choose ________ funds to minimize ________.

In theory, the MNE should support ________ debt ratios than a purely domestic firm because their cash flows are ________.

A significant advantage of borrowing foreign currency-denominated bonds is that the borrower need not worry about relative changes in the value of the home currency.

For firms to raise capital in international markets, it is more important to adhere to capital structure ratios similar to those found in the United States and United Kingdom than to those in the firm's home country.

MNEs situated in countries with small illiquid and segmented markets are most like

Financial theory has at last provided us with a single optimal capital structure for domestic firms.

TropiKana Inc., a U.S firm, has just borrowed $1,000,000 to make improvements to an Italian fruit plantation and processing plant. If the interest rate is 6.00% per year, how much interest will they pay in the first year?

Moody's rates international bonds at the request of the issuer with the stipulation that Moody's will publish the ratings even if the ratings are unfavorable.

A ________ is a bond underwritten by a syndicate from a single country, sold within in that country, denominated in that country's currency, but the issuer is from outside that country.

Of the following, which is NOT an internal source of financing for the foreign subsidiary?

Of the following, which was NOT cited by the authors as a valuable function provided by the Eurocurrency market?

Of the following, which is NOT identified by the authors as a country-specific environmental variable key to determining debt ratios?

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?

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

The MNE in an effort to minimize the cost of external funds should choose funds to minimize .

In theory, the MNE should support debt ratios than a purely domestic firm because their cash flows are .