InternationallFinanciallManagementl9thlEdition
,MULTIPLElCHOICEl-
lChooselthelonelalternativelthatlbestlcompleteslthelstatementlorlanswerslthelquestion.
1) Whatlmajorldimensionlsetslapartlinternationallfinancelfromldomesticlfinance?
A) Foreignlexchangelandlpoliticallrisks
B) Marketlimperfections
C) Expandedlopportunitylset
D) alllofltheloptions
2) Anlexample(s)loflalpoliticallrisklis
A) expropriationloflassets.
B) adverselchangelinltaxlrules.
C) theloppositionlpartylbeinglelected.
D) bothlthelexpropriationloflassetslandladverselchangeslinltaxlruleslarelcorrect.
3) Productionloflgoodslandlserviceslhaslbecomelglobalizedltolallargelextentlaslalresultlof
A) naturallresourceslbeingldepletedlinlonelcountrylafterlanother.
B) skilledllaborlbeinglhighlylmobile.
C) multinationallcorporations'leffortsltolsourcelinputslandllocatelproductionlanywh
erelwherelcostslarellowerlandlprofitslhigher.
D) commonltasteslworldwidelforlthelsamelgoodslandlservices.
4) Recently,lfinanciallmarketslhavelbecomelhighlylintegrated.lThisldevelopment
InternationallFinanciallManagementl9thlEdition
, A) allowslinvestorsltoldiversifyltheirlportfolioslinternationally.
B) allowslminoritylinvestorsltolbuylandlselllstocks.
C) haslincreasedlthelcostloflcapitallforlfirms.
D) nonelofltheloptions
5) Japanlhaslexperiencedllargeltradelsurpluses.lJapaneselinvestorslhavelrespondedltolthislb
y
A) liquidatingltheirlpositionslinlstocksltolbuyldollar-denominatedlbonds.
B) investinglheavilylinlU.S.landlotherlforeignlfinanciallmarkets.
C) lobbyinglthelU.S.lgovernmentltoldepreciatelitslcurrency.
D) lobbyinglthelJapaneselgovernmentltolallowlthelyenltolappreciate.
6) Supposelyourlfirmlinvestsl$100,000linlalprojectlinlItaly.lAtltheltimelthelexchangelratelis
$1.25l=l€1.00.lOnelyearllaterlthelexchangelratelislthelsame,lbutlthelItalianlgovernmentlh
aslexpropriatedlyourlfirm'slassetslpayinglonlyl€80,000linlcompensation.lThislislanlexam
plelof
A) exchangelratelrisk.
B) politicallrisk.
C) marketlimperfections.
D)lnonelofltheloptions,lsincel$100,000l=l€80,000l×l$1.25/€1.00.
InternationallFinanciallManagementl9thlEdition
, 7) Supposelyoulstartlwithl$100landlbuylstocklforl£50lwhenlthelexchangelratelisl£1l=l$2.l
Onelyearllater,lthelstocklrisesltol£60.lYoularelhappylwithlyourl20lpercentlreturnlonlthelstock,l
butlwhenlyoulselllthelstocklandlexchangelyourl£60lforldollars,lyoulonlylgetl$45lsincelthelpoun
dlhaslfallenltol£1l=l$0.75.lThisllossloflvaluelislanlexamplelof
A) exchangelratelrisk.
B) politicallrisk.
C) marketlimperfections.
D) weaknesslinltheldollar.
8) SupposelthatlGreatlBritainlislalmajorlexportlmarketlforlyourlfirm,lalU.S.-
basedlMNC.lIflthelBritishlpoundldepreciateslagainstlthelU.S.ldollar,
A) yourlfirmlwilllbelableltolchargelmorelinldollarltermslwhilelkeepinglpoundlprices
stable
.
B) yourlfirmlmaylbelpricedloutloflthelU.K.lmarket,ltolthelextentlthatlyourldollarlcosts
staylconstantlandlyourlpoundlpriceslwilllrise.
C) tolprotectlU.K.lmarketlshare,lyourlfirmlmaylhaveltolcutltheldollarlpriceloflyourlgoo
dsltolkeeplthelpoundlpricelthelsame.
D) yourlfirmlmaylbelpricedloutloflthelU.K.lmarket,ltolthelextentlthatlyourldollarlcos
tslstaylconstantlandlyourlpoundlpriceslwilllrise,landltolprotectlU.K.lmarketlshare,lyourlfirm
lmaylhaveltolcutltheldollarlpriceloflyourlgoodsltolkeeplthelpoundlpricelthelsame.
9) SupposelMexicolislalmajorlexportlmarketlforlyourlU.S.-
basedlcompanylandlthelMexicanlpesolappreciatesldrasticallylagainstlthelU.S.ldollar.lThislmea
ns
InternationallFinanciallManagementl9thlEdition
,MULTIPLElCHOICEl-
lChooselthelonelalternativelthatlbestlcompleteslthelstatementlorlanswerslthelquestion.
1) Whatlmajorldimensionlsetslapartlinternationallfinancelfromldomesticlfinance?
A) Foreignlexchangelandlpoliticallrisks
B) Marketlimperfections
C) Expandedlopportunitylset
D) alllofltheloptions
2) Anlexample(s)loflalpoliticallrisklis
A) expropriationloflassets.
B) adverselchangelinltaxlrules.
C) theloppositionlpartylbeinglelected.
D) bothlthelexpropriationloflassetslandladverselchangeslinltaxlruleslarelcorrect.
3) Productionloflgoodslandlserviceslhaslbecomelglobalizedltolallargelextentlaslalresultlof
A) naturallresourceslbeingldepletedlinlonelcountrylafterlanother.
B) skilledllaborlbeinglhighlylmobile.
C) multinationallcorporations'leffortsltolsourcelinputslandllocatelproductionlanywh
erelwherelcostslarellowerlandlprofitslhigher.
D) commonltasteslworldwidelforlthelsamelgoodslandlservices.
4) Recently,lfinanciallmarketslhavelbecomelhighlylintegrated.lThisldevelopment
InternationallFinanciallManagementl9thlEdition
, A) allowslinvestorsltoldiversifyltheirlportfolioslinternationally.
B) allowslminoritylinvestorsltolbuylandlselllstocks.
C) haslincreasedlthelcostloflcapitallforlfirms.
D) nonelofltheloptions
5) Japanlhaslexperiencedllargeltradelsurpluses.lJapaneselinvestorslhavelrespondedltolthislb
y
A) liquidatingltheirlpositionslinlstocksltolbuyldollar-denominatedlbonds.
B) investinglheavilylinlU.S.landlotherlforeignlfinanciallmarkets.
C) lobbyinglthelU.S.lgovernmentltoldepreciatelitslcurrency.
D) lobbyinglthelJapaneselgovernmentltolallowlthelyenltolappreciate.
6) Supposelyourlfirmlinvestsl$100,000linlalprojectlinlItaly.lAtltheltimelthelexchangelratelis
$1.25l=l€1.00.lOnelyearllaterlthelexchangelratelislthelsame,lbutlthelItalianlgovernmentlh
aslexpropriatedlyourlfirm'slassetslpayinglonlyl€80,000linlcompensation.lThislislanlexam
plelof
A) exchangelratelrisk.
B) politicallrisk.
C) marketlimperfections.
D)lnonelofltheloptions,lsincel$100,000l=l€80,000l×l$1.25/€1.00.
InternationallFinanciallManagementl9thlEdition
, 7) Supposelyoulstartlwithl$100landlbuylstocklforl£50lwhenlthelexchangelratelisl£1l=l$2.l
Onelyearllater,lthelstocklrisesltol£60.lYoularelhappylwithlyourl20lpercentlreturnlonlthelstock,l
butlwhenlyoulselllthelstocklandlexchangelyourl£60lforldollars,lyoulonlylgetl$45lsincelthelpoun
dlhaslfallenltol£1l=l$0.75.lThisllossloflvaluelislanlexamplelof
A) exchangelratelrisk.
B) politicallrisk.
C) marketlimperfections.
D) weaknesslinltheldollar.
8) SupposelthatlGreatlBritainlislalmajorlexportlmarketlforlyourlfirm,lalU.S.-
basedlMNC.lIflthelBritishlpoundldepreciateslagainstlthelU.S.ldollar,
A) yourlfirmlwilllbelableltolchargelmorelinldollarltermslwhilelkeepinglpoundlprices
stable
.
B) yourlfirmlmaylbelpricedloutloflthelU.K.lmarket,ltolthelextentlthatlyourldollarlcosts
staylconstantlandlyourlpoundlpriceslwilllrise.
C) tolprotectlU.K.lmarketlshare,lyourlfirmlmaylhaveltolcutltheldollarlpriceloflyourlgoo
dsltolkeeplthelpoundlpricelthelsame.
D) yourlfirmlmaylbelpricedloutloflthelU.K.lmarket,ltolthelextentlthatlyourldollarlcos
tslstaylconstantlandlyourlpoundlpriceslwilllrise,landltolprotectlU.K.lmarketlshare,lyourlfirm
lmaylhaveltolcutltheldollarlpriceloflyourlgoodsltolkeeplthelpoundlpricelthelsame.
9) SupposelMexicolislalmajorlexportlmarketlforlyourlU.S.-
basedlcompanylandlthelMexicanlpesolappreciatesldrasticallylagainstlthelU.S.ldollar.lThislmea
ns
InternationallFinanciallManagementl9thlEdition
