TEST BANK for International Financial Management 9th Edition by Cheol Eun, Bruce Resnick and Tuugi
r r r r r r r r r r r r r r
Chuluun.
TEST BANK for International Financial Management 9th
r r r r r r
r Edition by Cheol Eun, Bruce Resnick and Tuugi Chuluun.
r r r r r r r r
r ISBN-13: 9781260013870
r
Test Bank
r Page 1 r
, TEST BANK for International Financial Management 9th Edition by Cheol Eun, Bruce Resnick and Tuugi
r r r r r r r r r r r r r r
Chuluun.
MULTIPLE CHOICE - Choose the one alternative that best completes the statement or
r r r r r r r r r r r r
r answers the question.
r r
1) What major dimension sets apart international finance from domestic finance?
r r r r r r r r r
A) Foreign exchange and political risks r r r r
B) Market imperfections r
C) Expanded opportunity set r r
D) all of the optionsr r r
2) An example(s) of a political risk is
r r r r r r
A) expropriation of assets. r r
B) adverse change in tax rules. r r r r
C) the opposition party being elected.
r r r r
D) both the expropriation of assets and adverse changes in tax rules are correct.
r r r r r r r r r r r r
3) Production of goods and services has become globalized to a large extent as a result of
r r r r r r r r r r r r r r r
A) natural resources being depleted in one country after another.
r r r r r r r r
B) skilled labor being highly mobile. r r r r
C) multinational corporations' efforts to source inputs and locate production anywhere
r r r r r r r r r
r where costs are lower and profits higher.
r r r r r r
D) common tastes worldwide for the same goods and services. r r r r r r r r
4) Recently, financial markets have become highly integrated. This development
r r r r r r r r
Test Bank
r Page 2
r
, TEST BANK for International Financial Management 9th Edition by Cheol Eun, Bruce Resnick and Tuugi
r r r r r r r r r r r r r r
Chuluun.
A) allows investors to diversify their portfolios internationally.
r r r r r r
B) allows minority investors to buy and sell stocks.
r r r r r r r
C) has increased the cost of capital for firms.
r r r r r r r
D) none of the options r r r
5) Japan has experienced large trade surpluses. Japanese investors have responded to this by
r r r r r r r r r r r r
A) liquidating their positions in stocks to buy dollar-denominated bonds.
r r r r r r r r
B) investing heavily in U.S. and other foreign financial markets.
r r r r r r r r
C) lobbying the U.S. government to depreciate its currency.
r r r r r r r
D) lobbying the Japanese government to allow the yen to appreciate.
r r r r r r r r r
6) Suppose your firm invests $100,000 in a project in Italy. At the time the exchange rate is
r r r r r r r r r r r r r r r r
$1.25 = €1.00. One year later the exchange rate is the same, but the Italian government has
r r r r r r r r r r r r r r r r
r expropriated your firm's assets paying only €80,000 in compensation. This is an example of
r r r r r r r r r r r r r
A) exchange rate risk. r r
B) political risk. r
C) market imperfections. r
D) none of the options, since $100,000 = €80,000 × $1.25/€1.00.
r r r r r r r r r
Test Bank
r Page 3 r
, TEST BANK for International Financial Management 9th Edition by Cheol Eun, Bruce Resnick and Tuugi
r r r r r r r r r r r r r r
Chuluun.
7) Suppose you start with $100 and buy stock for £50 when the exchange rate is £1 = $2. One
r r r r r r r r r r r r r r r r r r
r year later, the stock rises to £60. You are happy with your 20 percent return on the stock, but when
r r r r r r r r r r r r r r r r r r r
r you sell the stock and exchange your £60 for dollars, you only get $45 since the pound has fallen to
r r r r r r r r r r r r r r r r r r r
r £1 = $0.75. This loss of value is an example of
r r r r r r r r r r
A) exchange rate risk. r r
B) political risk. r
C) market imperfections. r
D) weakness in the dollar. r r r
8) Suppose that Great Britain is a major export market for your firm, a U.S.-based MNC. If
r r r r r r r r r r r r r r r
r the British pound depreciates against the U.S. dollar,
r r r r r r r
A) your firm will be able to charge more in dollar terms while keeping pound prices
r r r r r r r r r r r r r r
stable.
B) your firm may be priced out of the U.K. market, to the extent that your dollar costs
r r r r r r r r r r r r r r r r
stay constant and your pound prices will rise.
r r r r r r r
C) to protect U.K. market share, your firm may have to cut the dollar price of your goods to
r r r r r r r r r r r r r r r r r
r keep the pound price the same.
r r r r r
D) your firm may be priced out of the U.K. market, to the extent that your dollar costs
r r r r r r r r r r r r r r r r
r stay constant and your pound prices will rise, and to protect U.K. market share, your firm may
r r r r r r r r r r r r r r r r
r have to cut the dollar price of your goods to keep the pound price the same.
r r r r r r r r r r r r r r r
9) Suppose Mexico is a major export market for your U.S.-based company and the Mexican
r r r r r r r r r r r r r
r peso appreciates drastically against the U.S. dollar. This means
r r r r r r r r
Test Bank r Page 4 r
r r r r r r r r r r r r r r
Chuluun.
TEST BANK for International Financial Management 9th
r r r r r r
r Edition by Cheol Eun, Bruce Resnick and Tuugi Chuluun.
r r r r r r r r
r ISBN-13: 9781260013870
r
Test Bank
r Page 1 r
, TEST BANK for International Financial Management 9th Edition by Cheol Eun, Bruce Resnick and Tuugi
r r r r r r r r r r r r r r
Chuluun.
MULTIPLE CHOICE - Choose the one alternative that best completes the statement or
r r r r r r r r r r r r
r answers the question.
r r
1) What major dimension sets apart international finance from domestic finance?
r r r r r r r r r
A) Foreign exchange and political risks r r r r
B) Market imperfections r
C) Expanded opportunity set r r
D) all of the optionsr r r
2) An example(s) of a political risk is
r r r r r r
A) expropriation of assets. r r
B) adverse change in tax rules. r r r r
C) the opposition party being elected.
r r r r
D) both the expropriation of assets and adverse changes in tax rules are correct.
r r r r r r r r r r r r
3) Production of goods and services has become globalized to a large extent as a result of
r r r r r r r r r r r r r r r
A) natural resources being depleted in one country after another.
r r r r r r r r
B) skilled labor being highly mobile. r r r r
C) multinational corporations' efforts to source inputs and locate production anywhere
r r r r r r r r r
r where costs are lower and profits higher.
r r r r r r
D) common tastes worldwide for the same goods and services. r r r r r r r r
4) Recently, financial markets have become highly integrated. This development
r r r r r r r r
Test Bank
r Page 2
r
, TEST BANK for International Financial Management 9th Edition by Cheol Eun, Bruce Resnick and Tuugi
r r r r r r r r r r r r r r
Chuluun.
A) allows investors to diversify their portfolios internationally.
r r r r r r
B) allows minority investors to buy and sell stocks.
r r r r r r r
C) has increased the cost of capital for firms.
r r r r r r r
D) none of the options r r r
5) Japan has experienced large trade surpluses. Japanese investors have responded to this by
r r r r r r r r r r r r
A) liquidating their positions in stocks to buy dollar-denominated bonds.
r r r r r r r r
B) investing heavily in U.S. and other foreign financial markets.
r r r r r r r r
C) lobbying the U.S. government to depreciate its currency.
r r r r r r r
D) lobbying the Japanese government to allow the yen to appreciate.
r r r r r r r r r
6) Suppose your firm invests $100,000 in a project in Italy. At the time the exchange rate is
r r r r r r r r r r r r r r r r
$1.25 = €1.00. One year later the exchange rate is the same, but the Italian government has
r r r r r r r r r r r r r r r r
r expropriated your firm's assets paying only €80,000 in compensation. This is an example of
r r r r r r r r r r r r r
A) exchange rate risk. r r
B) political risk. r
C) market imperfections. r
D) none of the options, since $100,000 = €80,000 × $1.25/€1.00.
r r r r r r r r r
Test Bank
r Page 3 r
, TEST BANK for International Financial Management 9th Edition by Cheol Eun, Bruce Resnick and Tuugi
r r r r r r r r r r r r r r
Chuluun.
7) Suppose you start with $100 and buy stock for £50 when the exchange rate is £1 = $2. One
r r r r r r r r r r r r r r r r r r
r year later, the stock rises to £60. You are happy with your 20 percent return on the stock, but when
r r r r r r r r r r r r r r r r r r r
r you sell the stock and exchange your £60 for dollars, you only get $45 since the pound has fallen to
r r r r r r r r r r r r r r r r r r r
r £1 = $0.75. This loss of value is an example of
r r r r r r r r r r
A) exchange rate risk. r r
B) political risk. r
C) market imperfections. r
D) weakness in the dollar. r r r
8) Suppose that Great Britain is a major export market for your firm, a U.S.-based MNC. If
r r r r r r r r r r r r r r r
r the British pound depreciates against the U.S. dollar,
r r r r r r r
A) your firm will be able to charge more in dollar terms while keeping pound prices
r r r r r r r r r r r r r r
stable.
B) your firm may be priced out of the U.K. market, to the extent that your dollar costs
r r r r r r r r r r r r r r r r
stay constant and your pound prices will rise.
r r r r r r r
C) to protect U.K. market share, your firm may have to cut the dollar price of your goods to
r r r r r r r r r r r r r r r r r
r keep the pound price the same.
r r r r r
D) your firm may be priced out of the U.K. market, to the extent that your dollar costs
r r r r r r r r r r r r r r r r
r stay constant and your pound prices will rise, and to protect U.K. market share, your firm may
r r r r r r r r r r r r r r r r
r have to cut the dollar price of your goods to keep the pound price the same.
r r r r r r r r r r r r r r r
9) Suppose Mexico is a major export market for your U.S.-based company and the Mexican
r r r r r r r r r r r r r
r peso appreciates drastically against the U.S. dollar. This means
r r r r r r r r
Test Bank r Page 4 r
