STUDY NOTES & REFERENCE GUIDE
SOLUTION MANUAL
International Financial Management,
9th Edition By Cheol Eun, Bruce G. Resnick,
All Chapter 1 - 21
CourseSity ‐ Stuvia | Page 1 of 242
, STUDY NOTES & REFERENCE GUIDE
TABLE OF CONTENTS
PART ONE: Foundations of International Financial Management
Chapter 1: Globalization and the Multinational Firm
Chapter 2: International Monetary System
Chapter 3: Balance of Payments
Chapter 4: Corporate Governance Around the World
PART TWO: The Foreign Exchange Market, Exchange Rate Determination, and
Currency Derivatives
Chapter 5: The Market for Foreign Exchange
Chapter 6: International Parity Relationships and Forecasting Foreign Exchange Rates
CourseSity ‐ Stuvia | Page 2 of 242
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Chapter 7: Futures and Options on Foreign Exchange
PART THREE: Foreign Exchange Exposure and Management
Chapter 8: Management of Transaction Exposure
Chapter 9: Management of Economic Exposure Chapter
10: Management of Translation Exposure
PART FOUR: World Financial Markets and Institutions
Chapter 11: International Banking and Money Market Chapter
12: International Bond Market
Chapter 13: International Equity Markets Chapter
14: Interest Rate and Currency Swaps Chapter 15:
International Portfolio Investment
PART FIVE: Financial Management of the Multinational Firm
Chapter 16: Foreign Direct Investment and Cross-Border Acquisitions Chapter
17: International Capital Structure and the Cost of Capital Chapter 18:
International Capital Budgeting
Chapter 19: Multinational Cash Management Chapter
20: International Trade Finance
Chapter 21: International Tax Environment and Transfer Pricing
CourseSity ‐ Stuvia | Page 3 of 242
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CHAPTER 1
GLOBALIZATION AND THE MULTINATIONAL FIRM
ANSWERS & SOLUTIONS TO END-OF-CHAPTER QUESTIONS AND PROBLEMS
QUESTIONS
1. Why is it important to study international financial management?
Answer: We are now living in a world where all the major economic functions, such as
consumption, production, investment, and financing, are highly globalized. It is thus essential for
financial managers to fully understand vital international dimensions of financial management. This
global shift is in marked contrast to a situation that existed when the authors of this book were learning
finance a few decades ago. At that time, most professors customarily (and safely, to some extent)
ignored international aspects of finance. This mode of operation has become untenable since then.
2. How is international financial management different from domestic financial management?
Answer: There are three major dimensions that set apart international finance from domestic finance.
They are:
1. foreign exchange and political risks,
2. market imperfections, and
3. expanded opportunity set.
3. Discuss the major trends that have prevailed in international business during the last two decades.
Answer: The 2000s brought a rapid integration of international capital and financial markets.
Impetus for globalized financial markets initially came from the governments of major countries that had
begun to deregulate their foreign exchange and capital markets. The economic
CourseSity ‐ Stuvia | Page 4 of 242
SOLUTION MANUAL
International Financial Management,
9th Edition By Cheol Eun, Bruce G. Resnick,
All Chapter 1 - 21
CourseSity ‐ Stuvia | Page 1 of 242
, STUDY NOTES & REFERENCE GUIDE
TABLE OF CONTENTS
PART ONE: Foundations of International Financial Management
Chapter 1: Globalization and the Multinational Firm
Chapter 2: International Monetary System
Chapter 3: Balance of Payments
Chapter 4: Corporate Governance Around the World
PART TWO: The Foreign Exchange Market, Exchange Rate Determination, and
Currency Derivatives
Chapter 5: The Market for Foreign Exchange
Chapter 6: International Parity Relationships and Forecasting Foreign Exchange Rates
CourseSity ‐ Stuvia | Page 2 of 242
, STUDY NOTES & REFERENCE GUIDE
Chapter 7: Futures and Options on Foreign Exchange
PART THREE: Foreign Exchange Exposure and Management
Chapter 8: Management of Transaction Exposure
Chapter 9: Management of Economic Exposure Chapter
10: Management of Translation Exposure
PART FOUR: World Financial Markets and Institutions
Chapter 11: International Banking and Money Market Chapter
12: International Bond Market
Chapter 13: International Equity Markets Chapter
14: Interest Rate and Currency Swaps Chapter 15:
International Portfolio Investment
PART FIVE: Financial Management of the Multinational Firm
Chapter 16: Foreign Direct Investment and Cross-Border Acquisitions Chapter
17: International Capital Structure and the Cost of Capital Chapter 18:
International Capital Budgeting
Chapter 19: Multinational Cash Management Chapter
20: International Trade Finance
Chapter 21: International Tax Environment and Transfer Pricing
CourseSity ‐ Stuvia | Page 3 of 242
, STUDY NOTES & REFERENCE GUIDE
CHAPTER 1
GLOBALIZATION AND THE MULTINATIONAL FIRM
ANSWERS & SOLUTIONS TO END-OF-CHAPTER QUESTIONS AND PROBLEMS
QUESTIONS
1. Why is it important to study international financial management?
Answer: We are now living in a world where all the major economic functions, such as
consumption, production, investment, and financing, are highly globalized. It is thus essential for
financial managers to fully understand vital international dimensions of financial management. This
global shift is in marked contrast to a situation that existed when the authors of this book were learning
finance a few decades ago. At that time, most professors customarily (and safely, to some extent)
ignored international aspects of finance. This mode of operation has become untenable since then.
2. How is international financial management different from domestic financial management?
Answer: There are three major dimensions that set apart international finance from domestic finance.
They are:
1. foreign exchange and political risks,
2. market imperfections, and
3. expanded opportunity set.
3. Discuss the major trends that have prevailed in international business during the last two decades.
Answer: The 2000s brought a rapid integration of international capital and financial markets.
Impetus for globalized financial markets initially came from the governments of major countries that had
begun to deregulate their foreign exchange and capital markets. The economic
CourseSity ‐ Stuvia | Page 4 of 242
