Solutions for Multinational Financial Management, 12th Edition by Alan C. Shapiro.pdf

CHAPTER 19 MULTINATION m m


AL FINANCIAL MANAGEMENT
m m




(Difficulty:mEm=mEasy,mMm=mMedium,mandmTm=mTough)

MultiplemChoice:m Conceptual

Easy:
International moperations mmotivation Answer:mem Diff:mE
1. Whichmofmthemfollowingmaremreasonsmwhymcompaniesmmovemintominternationalmoper
ations?

a. Tomtakemadvantagemofmlowermproductionmcostsminmregionsmofminexpensivemlabo
r.
b. Tomdevelopmnewmmarketsmformtheirmfinishedmproducts.
c. Tombettermservemtheirmprimarymcustomers.
d. Becausemimportantmrawmmaterialsmaremlocatedmabroad.
e. Allmofmthemstatementsmabovemaremcorrect.

Multinational mfinancialmmanagement Answer:mdm Diff:mE
2. Multinational mfinancialmmanagement mrequiresmthat

a. Them effectsm ofm changingm currencym valuesm bem includedm inm financialmanalys
es.
b. Legalmandmeconomicmdifferences mbemconsidered minmfinancialmdecisions.
c. Politicalm riskm bem excludedm fromm multinationalm corporatem financialmanal
yses.
d. Statementsmamandmbmaremcorrect.
e. Allmofmthemstatementsmabovemaremcorrect.

Currencymdepreciation Answer:mam Diff:mE
3. IfmtheminflationmrateminmthemUnitedmStatesmismgreatermthanmtheminflationmratemi
nmSweden,mothermthingsmheldmconstant,mthemSwedishmcurrencymwill

a. Appreciate magainstmthemU.S.mdollar.
b. Depreciate magainstmthemU.S.mdollar.
c. Remainmunchanged magainstmthemU.S.mdollar.
d. Appreciate magainstmothermmajormcurrencies.
e. Appreciate magainstmthemdollarmandmothermmajormcurrencies.

EMU Answer:mcm Diff:mE
4. WhatmismthemcommonmcurrencymofmthemEMU?

a. U.S.mdollar.
b. Britishmpound.
c. Euro.
d. Frenchmfranc.
e. Nonemofmthemstatementsmabovemismcorrect.



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,Medium:
International mbondmmarkets Answer:mdm Diff:mM
5. Whichmofmthemfollowing mstatements mismincorrect?

a. Anym bondm soldm outsidem them countrym ofm them borrowerm ism calledm anminter
nationalmbond.
b. ForeignmbondsmandmEurobondsmaremtwomimportantmtypesmofminternationalmbonds.
c. Foreignmbondsmarembondsmsoldmbymamforeignmborrowermbutmdenominatedminmthemcu
rrencymofmthemcountryminmwhichmthemissuemismsold.
d. ThemtermmEurobondmspecificallymappliesmtomanymforeignmbondsmdenominatedminmU
.S.mcurrency.
e. Nonemofmthemstatementsmabovemismcorrect.
Interestmratemparity Answer:mam Diff:mM
6. InmJapan,m90-daymsecuritiesmhave mam4mpercent mannualizedmreturnmand m180-
daymsecuritiesmhavemam5mpercentmannualizedmreturn.m InmthemUnitedmStates,m90-
mday msecurities mhave ma m4 mpercent mannualizedmreturn mand m180-

daymsecuritiesmhavemanmannualizedmreturnmofm4.5mpercent.m Allmsecuritiesmaremo
fmequalmrisk.m JapanesemsecuritiesmaremdenominatedminmtermsmofmthemJapanesemye
n.mAssumingmthatminterestmratemparitymholdsminmallmmarkets,mwhichmofmthemfollo
wingmstatementsmismmostmcorrect?

a. Themyen-dollarmspotmexchangemratemequalsmthemyen-
dollarmexchangemrateminmthem90-daymforwardmmarket.
b. Themyen-dollarmspotmexchangemratemequalsmthemyen-
dollarmexchangemrateminmthem180-daymforwardmmarket.
c. Themyen-dollarmexchangemrateminmthem90-daymforwardmmarketmequalsmthemyen-
dollarmexchangemrateminmthem180-daymforwardmmarket.
d. Statementsmamandmbmaremcorrect.
e. Statementsmbmandmcmaremcorrect.
Interestmratemparity Answer:mcm Diff:mM
7. Currently,mamU.S.mtradermnotesmthatminmthem6-
monthmforwardmmarket,mthemJapanesemyenmismsellingmatmampremiumm(thatmis,myoumreceivemm
oremdollarsmpermyenminmthemforwardmmarketmthanmyoumdominmthemspotmmarket),mwhilemth
emBritishmpoundmismsellingmatmamdiscount.mWhichmofmthemfollowing mstatementsmismmostm
correct?

a. Ifminterestmratemparitymholds,m6-
monthminterestmratesmshouldmbemthemsameminmthemU.S.,mBritain,mandmJapan.
b. Ifminterestmratemparitymholdsmamongmthemthreemcountries,mthemUnitedmStatesm
shouldmhavemthemhighestm6-
monthminterestmratesmandmJapanmshouldmhavemthemlowestmrates.
c. Ifminterestmratemparitymholdsmamongmthemthreemcountries, mBritainmshouldmhavem
themhighestm6-monthminterestmratesmandmJapanmshouldmhavemthemlowestmrates.
d. Ifminterestmratemparitymholdsmamongmthemthreemcountries,mJapanmshouldmhavem
themhighestm6-
monthminterestmratesmandmBritainmshouldmhavemthemlowestmrates.
e. Ifminterestmratemparitymholdsmamongmthemthreemcountries,mthemUnitedmStatesm
shouldmhavemthemhighestm6-
monthminterestmratesmandmBritainmshouldmhavemthemlowestmrates.


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, Tough:
Interestmratemparity Answer:mbm Diff:mTm R
8. Todayminmthemspotmmarket,m$1m= m1.82mSwissmfrancsmandm$1 m=m130mJapanesemyen.mInmthem9
0-
daymforwardmmarket,m$1m=m1.84mSwissmfrancsmandm$1m=m127mJapanesemyen.m Assumemthat
minterest mrate mparity mholds mworldwide. m Which mofmthe mfollowing mstatements mis mm

ostmcorrect?

a. Interestmratesmonm90-daymrisk-
freemU.S.msecuritiesmaremhighermthanmtheminterestmratesmonm90-daymrisk-
freemSwissmsecurities.
b. Interestmratesmonm90-daymrisk-
freemU.S.msecuritiesmaremhighermthanmtheminterestmratesmonm90-day mrisk-
freemJapanesemsecurities.
c. Interestmratesmonm90-daymrisk-
freemU.S.msecuritiesmequalmtheminterestmratesmonm90-daymrisk-
freemJapanesemsecurities.
d. Sinceminterestmratemparitymholdsminterestmratesmshouldmbemthemsameminmallmt
hreemcountries.
e. Statementsmamandmbmaremcorrect.


MultiplemChoice:m Problems

Easy:
Exchangemrates Answer:mbm Diff:mE
9. IfmonemSwissmfrancmcanmpurchasem$0.71mU.S.mdollar,mhowmmanymSwissmfrancsmcanmon
emU.S.mdollarmbuy?

a. 0.71
b. 1.41
c. 1.00
d. 2.81
e. 0.50

Exchangemrates Answer:mam Diff:mE
10. IfmonemU.S.mdollarmbuysm1.0279meuros,mhowmmanymdollarsmcanmyoumpurchasemformonemeu
ro?

a. 0.9729
b. 1.0000
c. 1.0279
d. 0.6100
e. 1.3145




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