Exam 19: International Managerial Finance

Both theory and empirical evidence indicate that the capital structures of MNCs differ from those of purely domestic firms.

In the international context, the nominal interest rate is the stated interest rate charged on financing when only the MNC parent's currency is involved.

A political risk that might affect all foreign firms in a host country is termed a ________ risk; a political risk that might affect only an individual firm or specific industry in a host country is termed a ________ risk.

When more units of a foreign currency are required to buy one dollar, the currency is said to have appreciated with respect to the dollar.

In the international context, the ________ interest rate involves only the MNC parent's currency, while the ________ interest rate includes any forecast appreciation or depreciation of a foreign currency relative to that of the MNC parent.

Because of their access to the international bond and equity markets, MNCs may have lower long-term financing costs, thus resulting in differences between the capital structures of these firms and those of purely domestic companies.

As a foreign exchange hedging tool, currency swaps ________.

For foreign bonds, interest rates are usually not directly correlated with the domestic rates prevailing in the respective countries.

The ________ is a significant economic force currently made up of 28 nations with a population of more than 500 million that permits free trade within the countries that make up this group.

Macro political risk is the risk faced by all foreign firms in a host country related to political change, revolution, or the adoption of new policies by the government of host country.

NAFTA is a treaty establishing free trade and open markets among Europe and the United States.

Exchange rate risk hedging tools include forward contracts, options, interest rate swaps, currency swaps, and hybrid securities.

The existence of ________ allows multinationals to take advantage of unregulated financial markets to invest and raise short-term funds in a variety of countries and to protect themselves from foreign exchange exposure.

Micro political risk is the risk faced by all foreign firms in a host country related to political change, revolution, and the adoption of new policies by the government of host country.

A partnership between a multinational company and a foreign investor in which contractually specified amounts of money and expertise are contributed by the participants for stated proportions of ownership and profit is a ________.

Which of the following is considered to be a major or hard currency?

A U.S-based MNC has a subsidiary in China where the local currency is the Renminbi (RMB). The balance sheets and income statements of the subsidiary are presented in the table below. On December 31, 2014, the exchange rate was 8.27 RMB/US$. Assume the local currency figures in the statement below remain the same on December 31, 2015. Calculate the U.S. dollar translated figures for the two ending time periods assuming that between December 31, 2014 and December 31, 2015, the Chinese government revalues (appreciates) the RMB by 20 percent. Translation of Income Statement Translation of Balance Sheet

Foreign bonds are sold primarily in ________.

Which of the following is a positive approach of coping with political risk?

Although several economic and political factors can influence foreign exchange rate movements, by far the most important explanation for long-term changes in exchange rates is a differing inflation rate between two countries.