Test Bank for International Financial Management 10th Edition by Cheol Eun, Bruce G. Resnick & Tuugi Chuluun Complete Chapters 1-16 | A+

Test Bank for International Financial Management 10th Edition by Cheol Eun, Bruce G. Resnick & Tuugi Chuluun Complete Chapters 1-16 | A+. Chapter 1 Globalization and the Multinational Firm 1) What major dimension sets apart international finance from domestic finance? A) Foreign exchange and political risks Franklyn A Plus Pass 2 B) Market imperfections C) Expanded opportunity set D) all of the options Answer: D Topic: What's Special about "International" Finance? Accessibility: Keyboard Navigation 2) An example of a political risk is A) expropriation of assets. B) adverse change in tax rules. C) the opposition party being elected. D) both the expropriation of assets and adverse changes in tax rules are correct. Answer: D Topic: What's Special about "International" Finance? Accessibility: Keyboard Navigation Franklyn A Plus Pass 3 profits higher. Answer: C D) none of the options Answer: A Topic: What's Special about "International" Finance? Accessibility: Keyboard Navigation 5) Japan has experienced large trade surpluses. Japanese investors have responded to this by A) liquidating their positions in stocks to buy dollar-denominated bonds. B) investing heavily in U.S. and other foreign financial markets. C) lobbying the U.S. government to depreciate its currency. D) lobbying the Japanese government to allow the yen to appreciate. 3) Production of goods and services has become globalized to a large extent as a result of A) natural resources being depleted in one country after another. B) skilled labor being highly mobile. C) multinational corporations' efforts to source inputs and locate production anywhere where costs are lower and D) common tastes worldwide for the same goods and services. Topic: What's Special about "International" Finance? Accessibility: Keyboard Navigation 4) Recently, financial markets have become highly integrated. This development A) allows investors to diversify their portfolios internationally. B) allows minority investors to buy and sell stocks. C) has increased the cost of capital for firms. Franklyn A Plus Pass 4 Answer: B Topic: What's Special about "International" Finance? Accessibility: Keyboard Navigation 6) Suppose your firm invests $100,000 in a project in Italy. At the time the exchange rate is $1.25 = €1.00. One year later the exchange rate is the same, but the Italian government has expropriated your firm's assets paying only €80,000 in compensation. This is an example of A) exchange rate risk. B) political risk. C) market imperfections. Answer: B D) none of the options, since $100,000 = €80,000 × $1.25/€1.00. Topic: What's Special about "International" Finance? 7) Suppose you start with $100 and buy stock for £50 when the exchange rate is £1 = $2. One year later, the stock rises to £60. You are happy with your 20 percent return on the stock, but when you sell the stock and exchange your £60 for dollars, you only get $45 since the pound has fallen to £1 = $0.75. This loss of value is an example of D) weakness in the dollar. Topic: What's Special about "International" Finance? Franklyn A Plus Pass 5 A) exchange rate risk. B) political risk. C) market imperfections. Answer: A 8) 9) Suppose Mexico is a major export market for your U.S.-based company and the Mexican peso appreciates drastically against the U.S. dollar. This means A) your company's products can be priced out of the Mexican market, as the peso price of American imports will rise following the peso's fall. B) your firm will be able to charge more in dollar terms while keeping peso prices stable. C) your domestic competitors will enjoy a period of facing lessened price competition from Mexican imports.