International Financial Management 9th Edition
y y y y
,MULTIPLEyCHOICEy-
y Chooseytheyoneyalternativeythatybestycompletesytheystatementyoryanswersytheyquestion.
1) Whatymajorydimensionysetsyapartyinternationalyfinanceyfromydomesticyfinance?
A) Foreignyexchangeyandypoliticalyrisks
B) Marketyimperfections
C) Expandedyopportunityyset
D) allyofytheyoptions
2) Anyexample(s)yofyaypoliticalyriskyis
A) expropriationyofyassets.
B) adverseychangeyinytaxyrules.
C) theyoppositionypartyybeingyelected.
D) bothytheyexpropriationyofyassetsyandyadverseychangesyinytaxyrulesyareycorrect.
3) Productionyofygoodsyandyservicesyhasybecomeyglobalizedytoyaylargeyextentyasyayresultyof
A) naturalyresourcesybeingydepletedyinyoneycountryyafteryanother.
B) skilledylaborybeingyhighlyymobile.
C) multinationalycorporations'yeffortsytoysourceyinputsyandylocateyproductionyanyw
hereywhereycostsyareyloweryandyprofitsyhigher.
D) commonytastesyworldwideyforytheysameygoodsyandyservices.
4) Recently,yfinancialymarketsyhaveybecomeyhighlyyintegrated.yThisydevelopment
International Financial Management 9th Edition
y y y y
, A) allowsyinvestorsytoydiversifyytheiryportfoliosyinternationally.
B) allowsyminorityyinvestorsytoybuyyandysellystocks.
C) hasyincreasedytheycostyofycapitalyforyfirms.
D) noneyofytheyoptions
5) Japanyhasyexperiencedylargeytradeysurpluses.yJapaneseyinvestorsyhaveyrespondedytoythisy
by
A) liquidatingytheirypositionsyinystocksytoybuyydollar-denominatedybonds.
B) investingyheavilyyinyU.S.yandyotheryforeignyfinancialymarkets.
C) lobbyingytheyU.S.ygovernmentytoydepreciateyitsycurrency.
D) lobbyingytheyJapaneseygovernmentytoyallowytheyyenytoyappreciate.
6) Supposeyyouryfirmyinvestsy$100,000yinyayprojectyinyItaly.yAtytheytimeytheyexchangeyrateyis
$1.25y=y€1.00.yOneyyearylaterytheyexchangeyrateyisytheysame,ybutytheyItalianygovernmenty
hasyexpropriatedyyouryfirm'syassetsypayingyonlyy€80,000yinycompensation.yThisyisyanyexa
mpleyof
A) exchangeyrateyrisk.
B) politicalyrisk.
C) marketyimperfections.
D)ynoneyofytheyoptions,ysincey$100,000y=y€80,000y×y$1.25/€1.00.
International Financial Management 9th Edition
y y y y
, 7) Supposeyyouystartywithy$100yandybuyystockyfory£50ywhenytheyexchangeyrateyisy£1y=y$2.
yOneyyearylater,ytheystockyrisesytoy£60.yYouyareyhappyywithyyoury20ypercentyreturnyonytheystoc
k,ybutywhenyyouysellytheystockyandyexchangeyyoury£60yforydollars,yyouyonlyygety$45ysinceytheyp
oundyhasyfallenytoy£1y=y$0.75.yThisylossyofyvalueyisyanyexampleyof
A) exchangeyrateyrisk.
B) politicalyrisk.
C) marketyimperfections.
D) weaknessyinytheydollar.
8) SupposeythatyGreatyBritainyisyaymajoryexportymarketyforyyouryfirm,yayU.S.-
basedyMNC.yIfytheyBritishypoundydepreciatesyagainstytheyU.S.ydollar,
A) youryfirmywillybeyableytoychargeymoreyinydollarytermsywhileykeepingypoundyprices
stable
.
B) youryfirmymayybeypricedyoutyofytheyU.K.ymarket,ytoytheyextentythatyyourydollarycosts
stayyconstantyandyyourypoundypricesywillyrise.
C) toyprotectyU.K.ymarketyshare,yyouryfirmymayyhaveytoycutytheydollarypriceyofyyourygo
odsytoykeepytheypoundypriceytheysame.
D) youryfirmymayybeypricedyoutyofytheyU.K.ymarket,ytoytheyextentythatyyourydollaryco
stsystayyconstantyandyyourypoundypricesywillyrise,yandytoyprotectyU.K.ymarketyshare,yyouryfir
mymayyhaveytoycutytheydollarypriceyofyyourygoodsytoykeepytheypoundypriceytheysame.
9) SupposeyMexicoyisyaymajoryexportymarketyforyyouryU.S.-
basedycompanyyandytheyMexicanypesoyappreciatesydrasticallyyagainstytheyU.S.ydollar.yThisyme
ans
International Financial Management 9th Edition
y y y y
y y y y
,MULTIPLEyCHOICEy-
y Chooseytheyoneyalternativeythatybestycompletesytheystatementyoryanswersytheyquestion.
1) Whatymajorydimensionysetsyapartyinternationalyfinanceyfromydomesticyfinance?
A) Foreignyexchangeyandypoliticalyrisks
B) Marketyimperfections
C) Expandedyopportunityyset
D) allyofytheyoptions
2) Anyexample(s)yofyaypoliticalyriskyis
A) expropriationyofyassets.
B) adverseychangeyinytaxyrules.
C) theyoppositionypartyybeingyelected.
D) bothytheyexpropriationyofyassetsyandyadverseychangesyinytaxyrulesyareycorrect.
3) Productionyofygoodsyandyservicesyhasybecomeyglobalizedytoyaylargeyextentyasyayresultyof
A) naturalyresourcesybeingydepletedyinyoneycountryyafteryanother.
B) skilledylaborybeingyhighlyymobile.
C) multinationalycorporations'yeffortsytoysourceyinputsyandylocateyproductionyanyw
hereywhereycostsyareyloweryandyprofitsyhigher.
D) commonytastesyworldwideyforytheysameygoodsyandyservices.
4) Recently,yfinancialymarketsyhaveybecomeyhighlyyintegrated.yThisydevelopment
International Financial Management 9th Edition
y y y y
, A) allowsyinvestorsytoydiversifyytheiryportfoliosyinternationally.
B) allowsyminorityyinvestorsytoybuyyandysellystocks.
C) hasyincreasedytheycostyofycapitalyforyfirms.
D) noneyofytheyoptions
5) Japanyhasyexperiencedylargeytradeysurpluses.yJapaneseyinvestorsyhaveyrespondedytoythisy
by
A) liquidatingytheirypositionsyinystocksytoybuyydollar-denominatedybonds.
B) investingyheavilyyinyU.S.yandyotheryforeignyfinancialymarkets.
C) lobbyingytheyU.S.ygovernmentytoydepreciateyitsycurrency.
D) lobbyingytheyJapaneseygovernmentytoyallowytheyyenytoyappreciate.
6) Supposeyyouryfirmyinvestsy$100,000yinyayprojectyinyItaly.yAtytheytimeytheyexchangeyrateyis
$1.25y=y€1.00.yOneyyearylaterytheyexchangeyrateyisytheysame,ybutytheyItalianygovernmenty
hasyexpropriatedyyouryfirm'syassetsypayingyonlyy€80,000yinycompensation.yThisyisyanyexa
mpleyof
A) exchangeyrateyrisk.
B) politicalyrisk.
C) marketyimperfections.
D)ynoneyofytheyoptions,ysincey$100,000y=y€80,000y×y$1.25/€1.00.
International Financial Management 9th Edition
y y y y
, 7) Supposeyyouystartywithy$100yandybuyystockyfory£50ywhenytheyexchangeyrateyisy£1y=y$2.
yOneyyearylater,ytheystockyrisesytoy£60.yYouyareyhappyywithyyoury20ypercentyreturnyonytheystoc
k,ybutywhenyyouysellytheystockyandyexchangeyyoury£60yforydollars,yyouyonlyygety$45ysinceytheyp
oundyhasyfallenytoy£1y=y$0.75.yThisylossyofyvalueyisyanyexampleyof
A) exchangeyrateyrisk.
B) politicalyrisk.
C) marketyimperfections.
D) weaknessyinytheydollar.
8) SupposeythatyGreatyBritainyisyaymajoryexportymarketyforyyouryfirm,yayU.S.-
basedyMNC.yIfytheyBritishypoundydepreciatesyagainstytheyU.S.ydollar,
A) youryfirmywillybeyableytoychargeymoreyinydollarytermsywhileykeepingypoundyprices
stable
.
B) youryfirmymayybeypricedyoutyofytheyU.K.ymarket,ytoytheyextentythatyyourydollarycosts
stayyconstantyandyyourypoundypricesywillyrise.
C) toyprotectyU.K.ymarketyshare,yyouryfirmymayyhaveytoycutytheydollarypriceyofyyourygo
odsytoykeepytheypoundypriceytheysame.
D) youryfirmymayybeypricedyoutyofytheyU.K.ymarket,ytoytheyextentythatyyourydollaryco
stsystayyconstantyandyyourypoundypricesywillyrise,yandytoyprotectyU.K.ymarketyshare,yyouryfir
mymayyhaveytoycutytheydollarypriceyofyyourygoodsytoykeepytheypoundypriceytheysame.
9) SupposeyMexicoyisyaymajoryexportymarketyforyyouryU.S.-
basedycompanyyandytheyMexicanypesoyappreciatesydrasticallyyagainstytheyU.S.ydollar.yThisyme
ans
International Financial Management 9th Edition
y y y y
