Question 1

Which of the following domestic financial instruments have NOT been modified for use in international financial management?

Accepted Answer

A)  currency options and futures 
B)  interest rate and currency swaps 
C)  letters of credit 
D)  All of the above are domestic financial instruments that have also been modified for use in international financial markets. 
A)  currency options and futures 
B)  interest rate and currency swaps 
C)  letters of credit 
D)  All of the above are domestic financial instruments that have also been modified for use in international financial markets.

Question 2

In determining why a firm becomes multinational there are many reasons.One reason is that the firm is a market seeker.Which of the following is NOT a reason why market-seeking firms produce in foreign countries?

Accepted Answer

A)  satisfaction of local demand in the foreign country 
B)  satisfaction of local demand in the domestic markets 
C)  political safety and small likelihood of government expropriation of assets 
D)  All of the above are market-seeking activities. 
A)  satisfaction of local demand in the foreign country 
B)  satisfaction of local demand in the domestic markets 
C)  political safety and small likelihood of government expropriation of assets 
D)  All of the above are market-seeking activities.

Question 3

A firm in the International Trade Phase of Globalization:

Accepted Answer

A)  makes all foreign payments in foreign currency units and all foreign receipts in domestic currency units. 
B)  receives all foreign receipts in foreign currency units and makes all foreign payments in domestic currency units. 
C)  bears direct foreign exchange risk. 
D)  none of the above 
A)  makes all foreign payments in foreign currency units and all foreign receipts in domestic currency units. 
B)  receives all foreign receipts in foreign currency units and makes all foreign payments in domestic currency units. 
C)  bears direct foreign exchange risk. 
D)  none of the above

Question 4

Because countries have different financial regulations and customs,it is common for MNEs to apply their domestic rules and regulations when doing financial business in a foreign country.

Accepted Answer

A) True 
 B)False

Question 5

Domestic firms do not have foreign exchange risk.

Accepted Answer

A) True 
 B)False

Question 6

For firms competing in a world characterized by oligopolistic competition,strategic motives can be subdivided into proactive and defensive investments.

Accepted Answer

A) True 
 B)False

Question 7

Interest spreads in the eurocurrency market are small for many reasons EXCEPT:

Accepted Answer

A)  Eurocurrency loans are secured loans. 
B)  Eurocurrency deposits and loans are made in amounts of $500,000 or more on an unsecured basis. 
C)  The eurocurrency is a wholesale market. 
D)  Borrowers are usually large corporations or government entities. 
A)  Eurocurrency loans are secured loans. 
B)  Eurocurrency deposits and loans are made in amounts of $500,000 or more on an unsecured basis. 
C)  The eurocurrency is a wholesale market. 
D)  Borrowers are usually large corporations or government entities.

Question 8

The concept of absolute comparative advantage's origins lie in:

Accepted Answer

A)  Adam Smith's work of 1776 
B)  David Ricardo's work of 1776 
C)  The Wealth of Nations book, published in 1887 
D)  On the Principles of Political Economy and Taxation book, published in 1817 
A)  Adam Smith's work of 1776 
B)  David Ricardo's work of 1776 
C)  The Wealth of Nations book, published in 1887 
D)  On the Principles of Political Economy and Taxation book, published in 1817

Question 9

The authors argue that financial inefficiency caused by influential insiders may prove to be an increasingly troublesome barrier to international finance.

Accepted Answer

A) True 
 B)False

Question 10

International trade might have approached the comparative advantage model in the 19th century,and it does so even more today.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is NOT a reason governments interfere with comparative advantage?

Accepted Answer

A)  Governments attempt to achieve full employment. 
B)  Governments promote economic development. 
C)  national self-sufficiency in defense-related industries 
D)  All are reasons governments interfere with comparative advantage. 
A)  Governments attempt to achieve full employment. 
B)  Governments promote economic development. 
C)  national self-sufficiency in defense-related industries 
D)  All are reasons governments interfere with comparative advantage.

Question 12

Which of the following factors of production DO NOT flow freely between countries?

Accepted Answer

A)  raw materials 
B)  financial capital 
C)  (non-military) technology 
D)  All of the above factors of production flow freely among countries. 
A)  raw materials 
B)  financial capital 
C)  (non-military) technology 
D)  All of the above factors of production flow freely among countries.

Question 13

The concept of relative comparative advantage's origins lie in:

Accepted Answer

A)  Adam Smith's work of 1776 
B)  David Ricardo's work of 1776 
C)  The Wealth of Nations book, published in 1887 
D)  On the Principles of Political Economy and Taxation book, published in 1817 
A)  Adam Smith's work of 1776 
B)  David Ricardo's work of 1776 
C)  The Wealth of Nations book, published in 1887 
D)  On the Principles of Political Economy and Taxation book, published in 1817

Question 14

Which of the following is not always understood by MNE management?

Accepted Answer

A)  Culture, history, and institutions 
B)  Political risk 
C)  Foreign exchange risk 
D)  Financial instruments 
A)  Culture, history, and institutions 
B)  Political risk 
C)  Foreign exchange risk 
D)  Financial instruments

Question 15

Comparative advantage was once the cornerstone of international trade theory,but today it is archaic,simplistic,and irrelevant for explaining investment choices made by MNEs.

Accepted Answer

A) True 
 B)False

Question 16

Comparative advantage in the 21st century is based more on services and their cross border facilitation by telecommunications and the Internet.

Accepted Answer

A) True 
 B)False

Question 17

Typically,a "greenfield" investment abroad is considered an investment having a greater foreign presence than a joint venture with a foreign firm.

Accepted Answer

A) True 
 B)False

Question 18

MNEs must modify finance theories like cost of capital and capital budgeting because of foreign complexities.

Accepted Answer

A) True 
 B)False

Question 19

The authors describe the multinational phase of globalization for a firm as one characterized by the:

Accepted Answer

A)  ownership of assets and enterprises in foreign countries. 
B)  potential for international competitors or suppliers even though all accounts are with domestic firms and are denominated in dollars. 
C)  imports from foreign suppliers and exports to foreign buyers. 
D)  requirement that all employees be multilingual. 
A)  ownership of assets and enterprises in foreign countries. 
B)  potential for international competitors or suppliers even though all accounts are with domestic firms and are denominated in dollars. 
C)  imports from foreign suppliers and exports to foreign buyers. 
D)  requirement that all employees be multilingual.

Question 20

Comparative advantage shifts over time as less developed countries become more developed and realize their latent opportunities.

Accepted Answer

A) True 
 B)False

Which of the following domestic financial instruments have NOT been modified for use in international financial management?

In determining why a firm becomes multinational there are many reasons.One reason is that the firm is a market seeker.Which of the following is NOT a reason why market-seeking firms produce in foreign countries?

A firm in the International Trade Phase of Globalization:

Because countries have different financial regulations and customs,it is common for MNEs to apply their domestic rules and regulations when doing financial business in a foreign country.

Domestic firms do not have foreign exchange risk.

For firms competing in a world characterized by oligopolistic competition,strategic motives can be subdivided into proactive and defensive investments.

Interest spreads in the eurocurrency market are small for many reasons EXCEPT:

The concept of absolute comparative advantage's origins lie in:

The authors argue that financial inefficiency caused by influential insiders may prove to be an increasingly troublesome barrier to international finance.

International trade might have approached the comparative advantage model in the 19th century,and it does so even more today.

Which of the following is NOT a reason governments interfere with comparative advantage?

Which of the following factors of production DO NOT flow freely between countries?

The concept of relative comparative advantage's origins lie in:

Which of the following is not always understood by MNE management?

Comparative advantage was once the cornerstone of international trade theory,but today it is archaic,simplistic,and irrelevant for explaining investment choices made by MNEs.

Comparative advantage in the 21st century is based more on services and their cross border facilitation by telecommunications and the Internet.

Typically,a "greenfield" investment abroad is considered an investment having a greater foreign presence than a joint venture with a foreign firm.

MNEs must modify finance theories like cost of capital and capital budgeting because of foreign complexities.

The authors describe the multinational phase of globalization for a firm as one characterized by the:

Comparative advantage shifts over time as less developed countries become more developed and realize their latent opportunities.

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

Transaction Exposure

Translation Exposure

Operating Exposure

The Global Cost and Availability of Capital

Raising Equity and Debt Globally

Multinational Tax Management

International Trade Finance

Foreign Direct Investment and Political Risk

Multinational Capital Budgeting and Cross-Border Acquisitions

Filters

Exam 1: Multinational Financial Management: Opportunities and Challenges

Which of the following domestic financial instruments have NOT been modified for use in international financial management?

In determining why a firm becomes multinational there are many reasons.One reason is that the firm is a market seeker.Which of the following is NOT a reason why market-seeking firms produce in foreign countries?

A firm in the International Trade Phase of Globalization:

Because countries have different financial regulations and customs,it is common for MNEs to apply their domestic rules and regulations when doing financial business in a foreign country.

Domestic firms do not have foreign exchange risk.

For firms competing in a world characterized by oligopolistic competition,strategic motives can be subdivided into proactive and defensive investments.

Interest spreads in the eurocurrency market are small for many reasons EXCEPT:

The concept of absolute comparative advantage's origins lie in:

The authors argue that financial inefficiency caused by influential insiders may prove to be an increasingly troublesome barrier to international finance.

International trade might have approached the comparative advantage model in the 19th century,and it does so even more today.

Which of the following is NOT a reason governments interfere with comparative advantage?

Which of the following factors of production DO NOT flow freely between countries?

The concept of relative comparative advantage's origins lie in:

Which of the following is not always understood by MNE management?

Comparative advantage was once the cornerstone of international trade theory,but today it is archaic,simplistic,and irrelevant for explaining investment choices made by MNEs.

Comparative advantage in the 21st century is based more on services and their cross border facilitation by telecommunications and the Internet.

Typically,a "greenfield" investment abroad is considered an investment having a greater foreign presence than a joint venture with a foreign firm.

MNEs must modify finance theories like cost of capital and capital budgeting because of foreign complexities.

The authors describe the multinational phase of globalization for a firm as one characterized by the:

Comparative advantage shifts over time as less developed countries become more developed and realize their latent opportunities.

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

Transaction Exposure

Translation Exposure

Operating Exposure

The Global Cost and Availability of Capital

Raising Equity and Debt Globally

Multinational Tax Management

International Trade Finance

Foreign Direct Investment and Political Risk

Multinational Capital Budgeting and Cross-Border Acquisitions

Filters