International Financial Management 9th Edition
i i i i
,MULTIPLE iCHOICE i- iChoose ithe ione ialternative ithat ibest icompletes ithe
i statement iorianswers ithe iquestion.
1) What imajor idimension isets iapart iinternational ifinance ifrom idomestic ifinance?
A) Foreign iexchange iand ipolitical irisks
B) Market iimperfections
C) Expanded iopportunity iset
D) all iof ithe ioptions
2) An iexample(s) iof ia ipolitical irisk iis
A) expropriation iof iassets.
B) adverse ichange iin itax irules.
C) the iopposition iparty ibeing ielected.
D) both ithe iexpropriation iof iassets iand iadverse ichanges iin itax irules iare icorrect.
3) Production iof igoods iand iservices ihas ibecome iglobalized ito ia ilarge iextent ias ia iresult
iof
A) natural iresources ibeing idepleted iin ione icountry iafter ianother.
B) skilled ilabor ibeing ihighly imobile.
C) multinational icorporations' iefforts ito isource iinputs iand ilocate iproduction
i anywhereiwhere icosts iare ilower iand iprofits ihigher.
D) common itastes iworldwide ifor ithe isame igoods iand iservices.
4) Recently, ifinancial imarkets ihave ibecome ihighly iintegrated. iThis idevelopment
International Financial Management 9th Edition
i i i i
, A) allows iinvestors ito idiversify itheir iportfolios iinternationally.
B) allows iminority iinvestors ito ibuy iand isell istocks.
C) has iincreased ithe icost iof icapital ifor ifirms.
D) none iof ithe ioptions
5) Japan ihas iexperienced ilarge itrade isurpluses. iJapanese iinvestors ihave iresponded ito
ithis iby
A) liquidating itheir ipositions iin istocks ito ibuy idollar-denominated ibonds.
B) investing iheavily iin iU.S. iand iother iforeign ifinancial imarkets.
C) lobbying ithe iU.S. igovernment ito idepreciate iits icurrency.
D) lobbying ithe iJapanese igovernment ito iallow ithe iyen ito iappreciate.
6) Suppose iyour ifirm iinvests i$100,000 iin ia iproject iin iItaly. iAt ithe itime ithe iexchange
irate iis
$1.25 i= i€1.00. iOne iyear ilater ithe iexchange irate iis ithe isame, ibut ithe iItalian
i government ihas iexpropriated iyour ifirm's iassets ipaying ionly i€80,000 iin
i compensation. iThis iis ian iexample iof
A) exchange irate irisk.
B) political irisk.
C) market iimperfections.
D) inone iof ithe ioptions, isince i$100,000 i= i€80,000 i× i$1.25/€1.00.
International Financial Management 9th Edition
i i i i
, 7) Suppose iyou istart iwith i$100 iand ibuy istock ifor i£50 iwhen ithe iexchange irate iis i£1
i = i$2. iOne iyear ilater, ithe istock irises ito i£60. iYou iare ihappy iwith iyour i20 ipercent ireturn
i on ithe istock, ibut iwhen iyou isell ithe istock iand iexchange iyour i£60 ifor idollars, iyou ionly
get i$45 isince ithe ipoundihas ifallen ito i£1 i= i$0.75. iThis iloss iof ivalue iis ian iexample iof
i
A) exchange irate irisk.
B) political irisk.
C) market iimperfections.
D) weakness iin ithe idollar.
8) Suppose ithat iGreat iBritain iis ia imajor iexport imarket ifor iyour ifirm, ia iU.S.-based
i MNC. iIfithe iBritish ipound idepreciates iagainst ithe iU.S. idollar,
A) your ifirm iwill ibe iable ito icharge imore iin idollar iterms iwhile ikeeping ipound iprices
stable
.
B) your ifirm imay ibe ipriced iout iof ithe iU.K. imarket, ito ithe iextent ithat iyour idollar
icosts
stay iconstant iand iyour ipound iprices iwill irise.
C) to iprotect iU.K. imarket ishare, iyour ifirm imay ihave ito icut ithe idollar iprice iof
i your igoodsito ikeep ithe ipound iprice ithe isame.
D) your ifirm imay ibe ipriced iout iof ithe iU.K. imarket, ito ithe iextent ithat iyour
i dollar icosts istay iconstant iand iyour ipound iprices iwill irise, iand ito iprotect iU.K. imarket
i share, iyour ifirm imayihave ito icut ithe idollar iprice iof iyour igoods ito ikeep ithe ipound iprice
the isame.
i
9) Suppose iMexico iis ia imajor iexport imarket ifor iyour iU.S.-based icompany iand ithe
i Mexicanipeso iappreciates idrastically iagainst ithe iU.S. idollar. iThis imeans
International Financial Management 9th Edition
i i i i
i i i i
,MULTIPLE iCHOICE i- iChoose ithe ione ialternative ithat ibest icompletes ithe
i statement iorianswers ithe iquestion.
1) What imajor idimension isets iapart iinternational ifinance ifrom idomestic ifinance?
A) Foreign iexchange iand ipolitical irisks
B) Market iimperfections
C) Expanded iopportunity iset
D) all iof ithe ioptions
2) An iexample(s) iof ia ipolitical irisk iis
A) expropriation iof iassets.
B) adverse ichange iin itax irules.
C) the iopposition iparty ibeing ielected.
D) both ithe iexpropriation iof iassets iand iadverse ichanges iin itax irules iare icorrect.
3) Production iof igoods iand iservices ihas ibecome iglobalized ito ia ilarge iextent ias ia iresult
iof
A) natural iresources ibeing idepleted iin ione icountry iafter ianother.
B) skilled ilabor ibeing ihighly imobile.
C) multinational icorporations' iefforts ito isource iinputs iand ilocate iproduction
i anywhereiwhere icosts iare ilower iand iprofits ihigher.
D) common itastes iworldwide ifor ithe isame igoods iand iservices.
4) Recently, ifinancial imarkets ihave ibecome ihighly iintegrated. iThis idevelopment
International Financial Management 9th Edition
i i i i
, A) allows iinvestors ito idiversify itheir iportfolios iinternationally.
B) allows iminority iinvestors ito ibuy iand isell istocks.
C) has iincreased ithe icost iof icapital ifor ifirms.
D) none iof ithe ioptions
5) Japan ihas iexperienced ilarge itrade isurpluses. iJapanese iinvestors ihave iresponded ito
ithis iby
A) liquidating itheir ipositions iin istocks ito ibuy idollar-denominated ibonds.
B) investing iheavily iin iU.S. iand iother iforeign ifinancial imarkets.
C) lobbying ithe iU.S. igovernment ito idepreciate iits icurrency.
D) lobbying ithe iJapanese igovernment ito iallow ithe iyen ito iappreciate.
6) Suppose iyour ifirm iinvests i$100,000 iin ia iproject iin iItaly. iAt ithe itime ithe iexchange
irate iis
$1.25 i= i€1.00. iOne iyear ilater ithe iexchange irate iis ithe isame, ibut ithe iItalian
i government ihas iexpropriated iyour ifirm's iassets ipaying ionly i€80,000 iin
i compensation. iThis iis ian iexample iof
A) exchange irate irisk.
B) political irisk.
C) market iimperfections.
D) inone iof ithe ioptions, isince i$100,000 i= i€80,000 i× i$1.25/€1.00.
International Financial Management 9th Edition
i i i i
, 7) Suppose iyou istart iwith i$100 iand ibuy istock ifor i£50 iwhen ithe iexchange irate iis i£1
i = i$2. iOne iyear ilater, ithe istock irises ito i£60. iYou iare ihappy iwith iyour i20 ipercent ireturn
i on ithe istock, ibut iwhen iyou isell ithe istock iand iexchange iyour i£60 ifor idollars, iyou ionly
get i$45 isince ithe ipoundihas ifallen ito i£1 i= i$0.75. iThis iloss iof ivalue iis ian iexample iof
i
A) exchange irate irisk.
B) political irisk.
C) market iimperfections.
D) weakness iin ithe idollar.
8) Suppose ithat iGreat iBritain iis ia imajor iexport imarket ifor iyour ifirm, ia iU.S.-based
i MNC. iIfithe iBritish ipound idepreciates iagainst ithe iU.S. idollar,
A) your ifirm iwill ibe iable ito icharge imore iin idollar iterms iwhile ikeeping ipound iprices
stable
.
B) your ifirm imay ibe ipriced iout iof ithe iU.K. imarket, ito ithe iextent ithat iyour idollar
icosts
stay iconstant iand iyour ipound iprices iwill irise.
C) to iprotect iU.K. imarket ishare, iyour ifirm imay ihave ito icut ithe idollar iprice iof
i your igoodsito ikeep ithe ipound iprice ithe isame.
D) your ifirm imay ibe ipriced iout iof ithe iU.K. imarket, ito ithe iextent ithat iyour
i dollar icosts istay iconstant iand iyour ipound iprices iwill irise, iand ito iprotect iU.K. imarket
i share, iyour ifirm imayihave ito icut ithe idollar iprice iof iyour igoods ito ikeep ithe ipound iprice
the isame.
i
9) Suppose iMexico iis ia imajor iexport imarket ifor iyour iU.S.-based icompany iand ithe
i Mexicanipeso iappreciates idrastically iagainst ithe iU.S. idollar. iThis imeans
International Financial Management 9th Edition
i i i i
