an
,Multinational Business Finance, 16e (Eiteman/Stonehill/Moffett)
]+ ]+ ]+ ]+
Chapter 1 Multinational Financial Management: Opportunities and Challenges
]+ ]+ ]+ ]+ ]+ ]+
1.1 The Global Financial Marketplace
]+ ]+ ]+
1) Financial globalization has NOT resulted in:
]+ ]+ ]+ ]+ ]+
A) continuing imbalances of balance of payments.
]+ ]+ ]+ ]+ ]+
B) an increase in quantity and speed in the flow of capital across the world.
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
C) capital markets less open and a decrease in the availability of capital for many organizations.
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
D) uniform ways of ownership, control, and governance across the worl
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
d.Answer: D
+
] ]+
Diff: 1 ]+
L.O.: 1.1 The Global Financial MarketplaceSkil
]+ ]+ ]+ ]+ ]+ +
]
l: Recognition
]+
AACSB: Application of knowledge
] + ]+ ]+
2) Financial globalization has NOT resulted in:
]+ ]+ ]+ ]+ ]+
A) continuing imbalances of balance of payments.
]+ ]+ ]+ ]+ ]+
B) an increase in quantity and speed in the flow of capital across the world.
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
C) capital markets more open and an increase in the availability of capital for ma
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
nyorganizations.
+
]
D) an increase in the flow of capital into and out of industrialized market
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
s.Answer: C
+
] ]+
Diff: 1 ]+
L.O.: 1.1 The Global Financial MarketplaceSkil
]+ ]+ ]+ ]+ ]+ +
]
l: Recognition
]+
AACSB: Application of knowledge
] + ]+ ]+
3) The institutions of global finance are:
]+ ]+ ]+ ]+ ]+
A) central banks. ]+
B) commercial banks. ]+
C) investment banks. ]+
D) All of the above are institutions of global financ
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
e.Answer: D
+
] ]+
Diff: 1 ]+
L.O.: 1.1 The Global Financial MarketplaceSkil
]+ ]+ ]+ ]+ ]+ +
]
l: Recognition
]+
AACSB: Application of knowledge
] + ]+ ]+
1
Copyright © 2023 Pearson Education, In
]+ ]+ ]+ ]+ ]+
c.
,4) A major cost avoided in the eurocurrency markets is the payment of deposit insurance fee
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
s,such as:
+
] ]+
A) Federal Deposit Insurance Corporation — FDIC.
]+ ]+ ]+ ]+ ]+
B) Office of the Comptroller of the Currency — OCC.
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
C) International Monetary Fund — IMF. ]+ ]+ ]+ ]+
D) World Bank — ]+ ]+
WB.Answer: A
]+ +
] ]+
Diff: 2 ]+
L.O.: 1.1 The Global Financial MarketplaceSkil
]+ ]+ ]+ ]+ ]+ +
]
l: Recognition
]+
AACSB: Application of knowledge ] + ]+ ]+
5) The modern eurocurrency market was born shortly after:
]+ ]+ ]+ ]+ ]+ ]+ ]+
A) World War II. ]+ ]+
B) World War I. ]+ ]+
C) Korean War. ]+
D) Bosnian War. ]+ +
]
Answer: A Dif ]+]+] + ]+
f: 1 ]+
L.O.: 1.1 The Global Financial MarketplaceSkil
]+ ]+ ]+ ]+ ]+ +
]
l: Recognition
]+
AACSB: Application of knowledge ] + ]+ ]+
6) The reference rate of interest in the eurocurrency market is the:
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
A) London Interbank Offered Rate. ]+ ]+ ]+
B) Prima rate. ]+
C) Federal funds rate. ]+ ]+
D) Treasury rate ]+
.Answer: A Di
+
] ]+]+] + ]+
ff: 1 ]+
L.O.: 1.1 The Global Financial MarketplaceSkil
]+ ]+ ]+ ]+ ]+ +
]
l: Recognition
]+
AACSB: Application of knowledge ] + ]+ ]+
7) Interest spreads in the eurocurrency market are small for many reasons EXCEPT:
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
A) Eurocurrency loans are secured loans. ]+ ]+ ]+ ]+
B) Eurocurrency deposits and loans are made in amounts of $500,000 or more on an unsecur
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
edbasis. +
]
C) The eurocurrency is a wholesale market.
]+ ]+ ]+ ]+ ]+
D) Borrowers are usually large corporations or government entitie
]+ ]+ ]+ ]+ ]+ ]+ ]+
s.Answer: A
+
] ]+
Diff: 2 ]+
L.O.: 1.1 The Global Financial MarketplaceSkil
]+ ]+ ]+ ]+ ]+ +
]
l: Recognition
]+
AACSB: Application of knowledge ] + ]+ ]+
2
Copyright © 2023 Pearson Education, In
]+ ]+ ]+ ]+ ]+
c.
, 8) Multinational enterprises (MNEs) are firms, both for-profit companies and not-for-
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
profit organizations, that have operations in more than one country, and conduct their business
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
throughforeign subsidiaries, branches, or joint ventures with host country firms.
+
] ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
Answer: TRUEDif ]+ +
]
f: 1
]+
L.O.: 1.1 The Global Financial MarketplaceSkil
]+ ]+ ]+ ]+ ]+ +
]
l: Recognition
]+
AACSB: Application of knowledge ] + ]+ ]+
9) Ownership, control, and governance changes radically across the world. The publicly trade
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
dcompany is not the dominant global business organization—the privately held or family-
+
] ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
ownedbusiness is the prevalent structure—
+
] ]+ ]+ ]+ ]+
and their goals and measures of performance differ dramatically.
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
Answer: TRUEDif ]+ +
]
f: 1
]+
L.O.: 1.1 The Global Financial MarketplaceSkil
]+ ]+ ]+ ]+ ]+ +
]
l: Recognition
]+
AACSB: Application of knowledge ] + ]+ ]+
10) The securities at the heart of the global capital markets are the Mortgage Backed Securiti
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
es(MBS). The health and security of the global financial system rely on the quality of these s
+
] ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
ecurities.
Answer: FALSEDi ]+ +
]
ff: 1 ]+
L.O.: 1.1 The Global Financial MarketplaceSkil
]+ ]+ ]+ ]+ ]+ +
]
l: Recognition
]+
AACSB: Application of knowledge ] + ]+ ]+
11) The U.S. dollar has been the focal point of currency trading since the 1940s. As a resu
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
lt,most of the world's currencies are quoted against the dollar.
+
] ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
Answer: TRUEDif ]+ +
]
f: 1
]+
L.O.: 1.1 The Global Financial MarketplaceSkil
]+ ]+ ]+ ]+ ]+ +
]
l: Recognition
]+
AACSB: Application of knowledge ] + ]+ ]+
12) Several of the world's major currency exchange rates follow a specific quotation conventi
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
onthat is the result of tradition and history. The exchange rate between the U.S. dollar and the
+
] ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
eurois always quoted as "dollars per euro."
+
] ]+ ]+ ]+ ]+ ]+ ]+
Answer: TRUEDif ]+ +
]
f: 1
]+
L.O.: 1.1 The Global Financial MarketplaceSkil
]+ ]+ ]+ ]+ ]+ +
]
l: Recognition
]+
AACSB: Application of knowledge ] + ]+ ]+
3
Copyright © 2023 Pearson Education, In
]+ ]+ ]+ ]+ ]+
c.
,Multinational Business Finance, 16e (Eiteman/Stonehill/Moffett)
]+ ]+ ]+ ]+
Chapter 1 Multinational Financial Management: Opportunities and Challenges
]+ ]+ ]+ ]+ ]+ ]+
1.1 The Global Financial Marketplace
]+ ]+ ]+
1) Financial globalization has NOT resulted in:
]+ ]+ ]+ ]+ ]+
A) continuing imbalances of balance of payments.
]+ ]+ ]+ ]+ ]+
B) an increase in quantity and speed in the flow of capital across the world.
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
C) capital markets less open and a decrease in the availability of capital for many organizations.
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
D) uniform ways of ownership, control, and governance across the worl
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
d.Answer: D
+
] ]+
Diff: 1 ]+
L.O.: 1.1 The Global Financial MarketplaceSkil
]+ ]+ ]+ ]+ ]+ +
]
l: Recognition
]+
AACSB: Application of knowledge
] + ]+ ]+
2) Financial globalization has NOT resulted in:
]+ ]+ ]+ ]+ ]+
A) continuing imbalances of balance of payments.
]+ ]+ ]+ ]+ ]+
B) an increase in quantity and speed in the flow of capital across the world.
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
C) capital markets more open and an increase in the availability of capital for ma
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
nyorganizations.
+
]
D) an increase in the flow of capital into and out of industrialized market
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
s.Answer: C
+
] ]+
Diff: 1 ]+
L.O.: 1.1 The Global Financial MarketplaceSkil
]+ ]+ ]+ ]+ ]+ +
]
l: Recognition
]+
AACSB: Application of knowledge
] + ]+ ]+
3) The institutions of global finance are:
]+ ]+ ]+ ]+ ]+
A) central banks. ]+
B) commercial banks. ]+
C) investment banks. ]+
D) All of the above are institutions of global financ
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
e.Answer: D
+
] ]+
Diff: 1 ]+
L.O.: 1.1 The Global Financial MarketplaceSkil
]+ ]+ ]+ ]+ ]+ +
]
l: Recognition
]+
AACSB: Application of knowledge
] + ]+ ]+
1
Copyright © 2023 Pearson Education, In
]+ ]+ ]+ ]+ ]+
c.
,4) A major cost avoided in the eurocurrency markets is the payment of deposit insurance fee
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
s,such as:
+
] ]+
A) Federal Deposit Insurance Corporation — FDIC.
]+ ]+ ]+ ]+ ]+
B) Office of the Comptroller of the Currency — OCC.
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
C) International Monetary Fund — IMF. ]+ ]+ ]+ ]+
D) World Bank — ]+ ]+
WB.Answer: A
]+ +
] ]+
Diff: 2 ]+
L.O.: 1.1 The Global Financial MarketplaceSkil
]+ ]+ ]+ ]+ ]+ +
]
l: Recognition
]+
AACSB: Application of knowledge ] + ]+ ]+
5) The modern eurocurrency market was born shortly after:
]+ ]+ ]+ ]+ ]+ ]+ ]+
A) World War II. ]+ ]+
B) World War I. ]+ ]+
C) Korean War. ]+
D) Bosnian War. ]+ +
]
Answer: A Dif ]+]+] + ]+
f: 1 ]+
L.O.: 1.1 The Global Financial MarketplaceSkil
]+ ]+ ]+ ]+ ]+ +
]
l: Recognition
]+
AACSB: Application of knowledge ] + ]+ ]+
6) The reference rate of interest in the eurocurrency market is the:
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
A) London Interbank Offered Rate. ]+ ]+ ]+
B) Prima rate. ]+
C) Federal funds rate. ]+ ]+
D) Treasury rate ]+
.Answer: A Di
+
] ]+]+] + ]+
ff: 1 ]+
L.O.: 1.1 The Global Financial MarketplaceSkil
]+ ]+ ]+ ]+ ]+ +
]
l: Recognition
]+
AACSB: Application of knowledge ] + ]+ ]+
7) Interest spreads in the eurocurrency market are small for many reasons EXCEPT:
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
A) Eurocurrency loans are secured loans. ]+ ]+ ]+ ]+
B) Eurocurrency deposits and loans are made in amounts of $500,000 or more on an unsecur
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
edbasis. +
]
C) The eurocurrency is a wholesale market.
]+ ]+ ]+ ]+ ]+
D) Borrowers are usually large corporations or government entitie
]+ ]+ ]+ ]+ ]+ ]+ ]+
s.Answer: A
+
] ]+
Diff: 2 ]+
L.O.: 1.1 The Global Financial MarketplaceSkil
]+ ]+ ]+ ]+ ]+ +
]
l: Recognition
]+
AACSB: Application of knowledge ] + ]+ ]+
2
Copyright © 2023 Pearson Education, In
]+ ]+ ]+ ]+ ]+
c.
, 8) Multinational enterprises (MNEs) are firms, both for-profit companies and not-for-
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
profit organizations, that have operations in more than one country, and conduct their business
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
throughforeign subsidiaries, branches, or joint ventures with host country firms.
+
] ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
Answer: TRUEDif ]+ +
]
f: 1
]+
L.O.: 1.1 The Global Financial MarketplaceSkil
]+ ]+ ]+ ]+ ]+ +
]
l: Recognition
]+
AACSB: Application of knowledge ] + ]+ ]+
9) Ownership, control, and governance changes radically across the world. The publicly trade
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
dcompany is not the dominant global business organization—the privately held or family-
+
] ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
ownedbusiness is the prevalent structure—
+
] ]+ ]+ ]+ ]+
and their goals and measures of performance differ dramatically.
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
Answer: TRUEDif ]+ +
]
f: 1
]+
L.O.: 1.1 The Global Financial MarketplaceSkil
]+ ]+ ]+ ]+ ]+ +
]
l: Recognition
]+
AACSB: Application of knowledge ] + ]+ ]+
10) The securities at the heart of the global capital markets are the Mortgage Backed Securiti
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
es(MBS). The health and security of the global financial system rely on the quality of these s
+
] ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
ecurities.
Answer: FALSEDi ]+ +
]
ff: 1 ]+
L.O.: 1.1 The Global Financial MarketplaceSkil
]+ ]+ ]+ ]+ ]+ +
]
l: Recognition
]+
AACSB: Application of knowledge ] + ]+ ]+
11) The U.S. dollar has been the focal point of currency trading since the 1940s. As a resu
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
lt,most of the world's currencies are quoted against the dollar.
+
] ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
Answer: TRUEDif ]+ +
]
f: 1
]+
L.O.: 1.1 The Global Financial MarketplaceSkil
]+ ]+ ]+ ]+ ]+ +
]
l: Recognition
]+
AACSB: Application of knowledge ] + ]+ ]+
12) Several of the world's major currency exchange rates follow a specific quotation conventi
]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
onthat is the result of tradition and history. The exchange rate between the U.S. dollar and the
+
] ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+ ]+
eurois always quoted as "dollars per euro."
+
] ]+ ]+ ]+ ]+ ]+ ]+
Answer: TRUEDif ]+ +
]
f: 1
]+
L.O.: 1.1 The Global Financial MarketplaceSkil
]+ ]+ ]+ ]+ ]+ +
]
l: Recognition
]+
AACSB: Application of knowledge ] + ]+ ]+
3
Copyright © 2023 Pearson Education, In
]+ ]+ ]+ ]+ ]+
c.
